Certain contracts allow for direct charging of costs commonly considered to be indirect costs (e.g. vehicles, IT expenses, subcontract administration, miscellaneous equipment). Accumulating these costs into service centers and allocating them on a representative base (e.g. miles driven, computer time, number of subcontracts, unit costs of multiple pieces of equipment, respectively) to direct contracts and other indirect cost pools represent an appealing way to quantify the costs of these services.  However, auditors often become quite picky in evaluating both the service center costs and especially allocation bases when such costs are charged direct. Contractors are quite vulnerable to being accused of using inaccurate units – e.g. incomplete miles driven, computer time or incomplete number of computers, number of subcontracts, pieces of equipment.  We have seen such assertions used to disallow the costs that were charged as ODCs on cost reimbursable contracts (CPFF, T&M) and even worse, assertions made that the contractor’s accounting system is inadequate. Rather than charging these types of ODCs on a cost basis we would strongly recommend negotiating unit prices commonly found in the commercial or government markets to avoid the possibility of going back and justifying charges on a cost basis.

{TAG_FORM_TITLE}