I am often asked about indirect costs and how to calculate
indirect cost rates that are DCAA compliant or compliant with FAR 31.2. Indirect costs is a highly complex and often
heavily debated subject with auditors. It is probably the most contentious subject under accounting for government
contracts.
I hope to answer those questions on this page.
For starters, please fine below tables of indirect cost rate calculations for a typical business using the three
rate system, Fringe, Overhead and G&A. Keep in mind the number and structure of indirect rates can vary from
contractor to contractor depending on specific circumstances. The tables below are not reflective of any contractor
or client. They are simplified illustrations to show the concept of compliant indirect rate calculations.
Actual indirect rate computations will vary and will include many more accounts and may be a bit more complex. The tables
below are illustrations only, the figures are ficticious. The rate calculations are both DCAA and FAR compliant.
Table 1 – Fringe Rate Calculation Example (Illustrative Purposes Only)
Fringe Pool:
Table 2 – Overhead Rate (Illustrative Purposes Only)
Overhead Pool
Table 3 – General And Administrative (G&A) (Illustrative Purposes Only)
G&A Pool