Q.  Our prime contractor keeps asking us for “DCAA approved rates.”  What are they?

A.  Its not clear what they mean.  Large and even some smaller contractors used to submit yearly or multiple- year proposals to establish forward pricing rates to be used on proposals for that year.  These rates were based upon budgeted or projected data for the period and DCAA would usually conduct a detailed review of the budgeted data and underlying assumptions and once completed, issue a rate letter approving the rates for proposal purposes.  This practice is now rare.  Now, DCAA will usually audit the first proposal (these days usually limited to direct labor and indirect labor rates) ensuring there is reasonable budget data if new rates are proposed or if prior year actuals are used, there are no significant changes.  The results of the audit of the first proposal become the “audited rates” cited when government agency requestors ask about proposed rates used on subsequent proposals.  These “audited rates” are the closest thing to “DCAA approved rates” these days.  If an audit of proposed rates has not been conducted recently or if proposed rates differ significantly from the result of the latest audit then the closest thing to “approved rates” would be the provisional rates provided to DCAA for billing cost type work.  They will usually send a letter approving these rates for billing purposes so you may want to assert these are your “approved rates.”

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