Gaining a Competitive Edge: Indirect Rates

Gaining a

Competitive Edge:

Indirect Rates

2© Aronson LLC | aronsonllc.com

Anne Bromet-Jagodits is a Managing Consultant in Aronson LLC’s Government Contract Services Group.

Anne began her career with Raytheon Technical Services (RTSC) starting as a Financial Analyst developing functional Indirect Budgets and preparing Forward Pricing Rate Proposals (FPRP) for the $2B division. Anne then moved to a $500M RTSC Business Unit where she was responsible for the Business Unit’s financial planning and reporting, including developing the annual operating plan, strategic five-year plan, monthly forecasting of bookings, revenue, operating profit, cash flow, working capital and monthly variance analyses.

During her tenure with RTSC she was a critical team member of the company’s Restructuring Team to re-organize the division into a Cross Business Team structure and developed a new Overhead and G&A Rate Structure to accommodate a cross business team organizational structure for the company. Anne also was a team member of the conversion team to transfer Inception To Date data from several accounting systems in the company’s SAP system.After 15 years at Raytheon, Anne accepted a position with Amentum as a Compliance Manager, applying her FPRP, Indirect Rates and Financial analysis skills. Anne was able to further develop her Government Compliance skills by developing and assisting in CASB Disclosure Statements (including managing DCAA/DCMA adequacy reviews), Incurred Cost Submissions (including managing DCAA Audits), Forward Pricing Rate Proposals and DCMA final rate negotiations. Anne was also responsible for keeping the Company’s Accounting and Finance Policies and Procedures (P&P) up to date and ensure that all department employees reviewed the P&Ps annually. At Amentum, Anne was a super user of the company’s Cost Point accounting system and is experienced in the Cognos Query and Report Studio tools. She is also a Certified Information Professional (CIP).

Anne brings more than 24 years of experience and knowledge of the Federal Acquisition Regulations (FAR) and government contract accounting with her to share with her clients at Aronson.

Anne earned her bachelor’s degree in Management and International Business from the University of Texas, Austin and her Master in Business Economics from the University of California, Santa Barbara.

Managing Consultant, Government Contract Services Group

240.364.2592

Anne Bromet-Jagodits

[email protected]

http://www.aronsonllc.com/


Tram Vo is a Managing Consultant in Aronson LLC’s Government Contract Services Group. Tram began her career with the Defense Contract Audit Agency (DCAA) working with contractors on Incurred Cost Submission audits, Forward Pricing Proposals, Defective Pricing, Cost Accounting Standard Review, Floor checks and more. After obtaining a solid foundation of knowledge within the government agency she transitioned to working for the contracting community. She has experience with both small and large contractors and understands the critical compliance issues and needs for each. On the contracting side she expanded her knowledge and expertise into monthly accounting & billings, provisional bill rates, adequate accounting systems, estimating systems and contract administration.

Tram brings more than 15 years of experience and knowledge of the Federal Acquisition Regulations (FAR), government contract accounting and DCAA best practices with her to share with her clients at Aronson.

Tram earned her bachelor’s degree in accounting from the Maryville University of St. Louis and her Master in Strategic Management from University of the Southwest.

Managing Consultant, Government Contract Services Group

240.364.2616

Tram Vo

[email protected]



Shirley is the previous owner of her own management consultancy, Present

Hope Consulting, LLC. She has experience helping Fortune 500 companies

unlock millions of dollars in shareholder value through deep customer and

financial analytics. She has over 30 years working with Deltek products

working with everything from technical aspects of conversions to functional end

user training. She is a Certified Public Accountant in the state of Virginia, a

Certified Information Technology Professional and a Certified Global

Management Accountant. She also holds a Bachelor of Science in Accounting

from Louisiana State University in Shreveport, a Masters in Taxation from

George Mason, a Certificate in Government Accounting from George Mason

and a Masters in Counseling from East Texas Baptist University.

Principal Consultant, Infotek

888.717.2753

Shirley McNeel, CPA, CGMA, CITP

[email protected]



Session Agenda

• About Aronson & Infotek

• Indirect Rate Strategies:

– What to consider

– Periodic Review of Indirect Rates

– Review of your Rate Structure

– Discounted vs Impact G&A Rate

– Facilities

• Tips

• Infotek

• Q&A



About Aronson LLC

FOUNDED 1962

1980: Creation of Formal

Government Contract

Services Group

280

2016

INDUSTRIES SERVEDGovernment Contracting,

Technology, Nonprofit, Real

Estate, & Construction

SERVICES PROVIDEDAssurance, Tax, Consulting &

Benefit Plans

TOP 100 Nationally Ranked Firm

#1Full-Service CPA Firm

Headquartered in Capital

Region (DC, VA, MD, WV & DE)TOTAL TEAM


About Infotek Consulting LLC

Founded in 2006, we are an award winning Deltek Premier Partner with a

team of experts that has over 20 years of Deltek software experience as end

users, consultants, and subject matter experts in the government accounting

industry. We have delivered over 600 successful Deltek implementations,

200 cloud migrations and many other wins for our customers.

As a Deltek® and Microsoft® Services Provider we deliver unique, high

performance, simplified, and cost-effective solutions for organizations with

our primary goal to reduce time spent on maintaining back-office related

products, thus allowing organizations to concentrate on your customers.

For more information: www.infotekconsulting.net |

[email protected]

http://www.infotekconsulting.net/


The many colors of Aronson compliance support!

CAS

Compliance

Disclosure

StatementsIncurred Cost

Submissions

Adequate

Accounting

Systems (1408)

CPSR

SupportFAR

Compliance

Indirect

Rate

Strategy

DCAA/

Gov’t Audit

Support

Budgeted

Indirect

Rates

Contract

Novation



Indirect Rate Strategies – Gaining a Competitive Edge




Questions to consider and Today’s Discussion Topics!

• When is the last time you reviewed your indirect rates?

• Who is watching your bottom line?

• Who is managing the project(s)

• Do you need to have a value added or total cost input G&A base?

• When can I offer discounts and how does that impact the bottom

line & billings?

• Can I change how I record certain costs and how will that impact my

rates?

• How losing Facilities can impact or effect your indirect rates?




Today’s Objectives:

• Understanding your market space

• Aligning future goals with your indirect rates

• Wrap rates that are competitive

• Coming to the right Indirect Rate Structure

• When is the time to offer discount pricing




Evaluating your indirect rates on a regular basis is

necessary to ensure that your indirect rates reflect the

company’s strategic plan and that your business is

recovering all the costs that are allowable.

Understanding your market space and aligning future goals and

resources with your provisional budgeted rates.

Who is responsible to monitor, measure and report?




Overall, to be competitive you want a lower WRAP rate.

How often to you rethink how your rates are being calculated?

• Do you review the costs in the pools?

• What about looking at service centers (intermediate pools)

• Is it time to go from total cost input to value add?

• Do I have the right number of Overheads or have I over

complicated my rates?

• Is profitability measured at the project level? Who’s

responsible for monitoring that?

Investment in growth will pause your WRAP Rate…

… Win more work to lower your WRAP rates!




How do you know what is the right rate structure for you?

Single Rate

2 Tier Rate Structure

3 Tier Rate Structure

How many Overheads should I have?

What is a reasonable G&A rate?

Aronson One Survey

Let’s talk about SM&H rate or

Sub handling and Material handling


https://aronsonllc.com/about/aronson-one-survey/



Discounted G&A

• Is great when you have a higher G&A rate and do not want

to apply the full amount onto your subcontractor &

consultant costs. For bidding and pricing strategy would

be to discount the G&A on the subs when you have a TCI

(Total Cost Input) G&A base

• This means you are self imposing a ceiling on your G&A

rate for that award when you bill your subcontractor costs

• You can offer discounted G&A rate on any pass-through

item or cost.




Impacted G&A

• Begin with your original budgeted indirect rates and alter

or update for this one effort/RFP. It was not considered in

the original budgeted costs

• This could yield lower and higher rates depending on what

is added in.

• Maybe this is what would trigger the need to go to a value

added G&A base and create a Subcontract & Material

Handling (SM&H) rate.




Tips

• Allocation of service centers – For those companies

where people wear many hats – Think Labor Hours!

Second preference might be Labor Dollars but it depends.

• Look at what costs are going in the G&A Pool – what can

be reclassified?

• Who is charging to G&A and is that correct? BD time

for Overhead personnel – where are you booking those

costs?




Tips

• SM&H Pools often struggle to meet the budgeted number

– is there Facility, IT and bonus dollars that could follow

that labor into the pool?

• CAS Covered is a consideration – may lead to cost

impact analysis but doesn’t mean you can’t revisit your

structure

• Joint Venture has a different rate than your entity and

likely G&A pool costs coming out of your entity for the JV




Tips

• Performanced based Bonus dollars – Following the labor

or in the Fringe pool?

• Recruiting Costs – Follow the labor. This will likely lead

to most of the cost in the Overhead Pool(s)

• Be consistent when applying like costs! Office supplies

and having Facility Service Center



Review Pools – Rates Detail or Summary



Review Pools - SIE



Pool / Allocations in Costpoint

Rate or %

Account/Orgs containing COSTs to be

allocated

Option 1: Account/Orgs forming the BASIS

(i.e. Direct Labor)

Other Options: Manual or Units

• Costpoint does NOT care about the project number when calculating a pool. Costpoint only cares about unique Account – Organization combinations.

• When reconciling why a particular pool hit your project, focus not on your project, but on the Account –Organization numbers that charged your project.

Basic Formula



Changes to Pools

• Easiest

– Beginning of New Year

– Mid Year with all new set of Account/Organization combinations

– Addition of Intermediate Pool (just must make sure to adjust cost of

final pools)

• Harder

– Mid-Year changes

• Care must be taken on retroactive rate adjustments

• Best to make changes in TEST/Sandbox database first

• Be sure to trace and edit all account/organization defaults especially for

Labor charges



Tips

• Allocation groups 2-9

– Create “what if” scenarios

– Easily consolidate multiple Overheads to research a consolidated rate

– They do not post to general ledger or show up on project reporting

• Add your GL Budgets to

show budget amounts

on Statement of Indirect Expenses

• Statistical Accounts for Basis

– Improved Audit Trail


Q&A

Documents

Gaining a Competitive Edge: Indirect Rates