GCS-301Factors to Consider when Restructuring Indirect Rates

Presented byNeoSystems Corp

Jerry Falvey, IV

Vice President

April 13, 20232 ©2011 Deltek, Inc. All Rights Reserved

Project Manufacturing

Human Resources

Project Management

Financial Management

Enabling Success

Winning More Business

Reducing the Cost of Compliance

Increasing Project Visibility

Improving Cash Flow

CRM and Capture Management

Teaming Solutions

Market Intelligence

Business Performance Management

Know More

Win More

Do More

April 13, 20233 ©2011 Deltek, Inc. All Rights Reserved

Project Manufacturing

Human Resources

Financial Management

Project Management

Do More

CRM and Capture Management

Teaming Solutions

Market IntelligenceWin More

Do More

Project Execution & Management

Reporting, GRC & Compliance

Project & Corp Accounting

Time, Expense, Labor, Payroll

Business Performance Management

Know More

April 13, 20234 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Agenda

Key Concepts and Terms

GCS Mechanics

Managing Indirect Rates

April 13, 20235

Factors to Consider when Restructuring Indirect Rates

©2011 Deltek, Inc. All Rights Reserved

Defining Pools (FAR 31.203(c) - Indirect Costs)

Logical cost groupings with due consideration of reasons for incurring costs

Grouping based to permit allocation by a common basis Allocations based on benefits received by intermediate & final cost

objectives Number and composition of groupings governed by practical

considerations and should not unduly complicate allocation process Costs incurred for the same purpose and in like circumstances must

be treated consistently After determination of base – it can not be fragmented (i.e. include

allowable and unallowable cost in base)

April 13, 20236 ©2011 Deltek, Inc. All Rights Reserved

Pools

Fringe Benefits Overhead pools

Function (Eng, Mfg, etc) Business lines Locations (client/company site)

Material & Subcontracts General & Administrative

Service Centers

Facilities Computer/Network Copier Service Centers Bid and Proposal Service Centers Equipment Service Centers

Factors to Consider when Restructuring Indirect Rates

April 13, 20237 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Defining/redefining a cost structure

Maximize recovery of allowable costs Manage and control costs Competitive advantage Compliance with regulations Impact on existing cost reimbursable contracts Single vs. multiple divisions

April 13, 20238 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Defining/redefining a cost structure

Government approval of system changes should be documented in writing

CAS covered contractors need to up date disclosure statement Non CAS covered contracts need to obtain approval from their ACO Submit request at least 60 days in advance

Cost Impact Summary Detailed Cost Impact Analysis on reimbursable contracts Indirect rate budgets Pro forma Statement of Indirect Expenses

April 13, 20239 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates

Why go through approval process Consistency in bidding and accounting for award Method remain consistent for life of award Review of cost impact on other government awards

Client approval does not mean acceptance/approval of change Multiple contract administrators DCAA audit/review could identify non-compliant issues

April 13, 202310 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates GCS and Indirect Rates

Components of a pool GL Indirect cost accounts Division (99 user defined) Pool number ( 7 per division) Pool Tier (3 tiers) Base (18 options) Variance, WIP, Inter-pool and

Inter-divisional accounts Tier Settings

April 13, 202311 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates

GCS Indirect Tiers and Pool numbers Tiering - allocation of indirect costs between intermediate costs

objectives

Fringe Benefits

Service Centers

Overhead Pools

M&S Pools

General & Administrative Pool

Tier 1

Tier 2

Tier 3

April 13, 202312 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Numbering pools

Fringe (Tier 1)

Overhead (Tier 2)

M&S Pool (Tier 2)

G&A Pool (Tier 3)

Not a Smart Set up Best Practice

1

2

3

4

1 - 2

3 - 5

5- 6

7

April 13, 202313 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Tier Settings Impacting Rates

Uncheck if more than one Fringe pool

Uncheck if more than one ringe pool

Don’t double burden labor

Enter Fringe Credit Account

M&S pool settingsA – M&S pool costs

included in G/A base

B – M&S Excluded from base

April 13, 202314 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates

Tier 2 settings

Includes Fringe in pool base = lower rate

Includes Fringe on DL

in pool

Option when using hours as base

Options for burdening B&P and IR&D

Y =Full, P =Partial, N -None

M&S pool settingsA – M&S pool costs included in G/A base

B – M&S Excluded from base

April 13, 202315 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Tier 3 Settings

April 13, 202316 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Utilizing Divisions to Maximize Indirect Cost Recovery

693 Potential Pools 26 Service Centers per division System generated inter-pool entries System generated inter-divisional entries P&L visibility of indirect costs by business units/services/region

April 13, 202317 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Sample Company

Pool Corporate Engineering Manufacturing

Fringe Co-Wide Co-Wide Co-Wide

Corporate Site OH Divisional Divisional

G&A Co-Wide Co-Wide Co-Wide

Pool Corporate Engineering Manufacturing

Fringe Co-Wide Co-Wide Co-Wide

Corporate Site OH Co-Wide Co-Wide Co-Wide

G&A Co-Wide Co-Wide Co-Wide

April 13, 202318 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Inter-pool and Inter-divisional rate process

April 13, 202319 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates Process Overview

Corporate Engineering Manufacturing

Fringe

Overhead

G&A

Fringe Fringe

Overhead Overhead

G&A G&A

INTERPOOL

INTERDIVISIONAL

11

3 3

55

2

4 4 4

2 2

April 13, 202320 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates

April 13, 202321 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect Rates

April 13, 202322 ©2011 Deltek, Inc. All Rights Reserved

Factors to Consider when Restructuring Indirect RatesQuestions/Comments

www.twitter.com/deltek

www.facebook.com/deltekinc

www.linkedin.com/company/163414

www.youtube.com/user/deltekinc