Indirect_Rate_Limitation.pdf

LIMITATIONS ON INDIRECT COST RATES

(a) Pursuant to FAR 42.707, indirect cost rate ceilings are incorporated into the contract.

"Indirect cost" and “indirect cost rate” is defined as set forth at FAR 2.101. Further information on indirect costs is available at FAR 31.203.

(b) Notwithstanding the clause of this contract entitled "ALLOWABLE COST AND PAYMENT" (FAR 52.216-7), the allowable indirect costs under this contract shall be obtained by applying limitations on indirect cost rates to bases agreed upon by the parties, as specified below.

(c) For the Contractor fiscal years that apply to the time period covered by the base year, all option years, and the FAR 52.217-8 extension period of Task Order 0002 of this contract, the indirect cost rates contained in the Contractor's final contract proposal submitted in response to Solicitation XXX shall be incorporated into the contract schedule as limitations on indirect cost rates for each Contractor fiscal year of contract performance. The allocation bases to which the indirect cost rates apply shall be those contained in the Contractor's aforementioned contract proposal and hereby incorporated into the contract schedule, in accordance with the Contractor's accounting system upon which its proposal was based.

(d) Indirect cost rates used to calculate indirect costs in billings under this contract prior to establishment of final annual indirect cost rates shall be the lesser of the indirect cost rate ceiling rates, or the then current billing rates.

(e) The Government will not be obligated to pay any additional amount should any final indirect cost rates for any Contractor fiscal year of contract performance exceed the indirect rates incorporated into the contract schedule. In the event any of the Contractor's final indirect cost rates are less than the indirect cost rates incorporated into the contract schedule, the incorporated rates shall be reduced to conform with the lower rates.

(f) The limitations on indirect cost rate shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. If facilities capital cost of money is proposed as an allowable cost, the rates proposed shall be subject to the limitations imposed by this requirement.

(g) The limitations on the indirect cost rate shall apply to all work performed under the contract, and to all change orders and supplemental agreements, including changes due to growth, supplemental, emergent and new work (including any task orders subsequent to Task Order 0002).

(h) Notwithstanding any of the terms of this requirement, should the Contractor initiate a change to its accounting systems which would alter the composition of any overhead base or pool effected by this requirement, the Contracting Officer and Contractor shall negotiate to determine the rate ceilings to be applied to the new overhead pools, provided that no agreement shall be made which would increase the costs paid by the

United States under this contract as if the change had never been made. For each such change in the accounting system, the contractor’s notice to the Contracting Officer shall provide, at a minimum, all of the following:

(1) A complete description of the changes in the pool(s) and base(s), along with a list that specifically identifies each type of cost incurred under this contract (or anticipated to be incurred under this contract) whose classification is being changed from direct to indirect, and vice versa.

(2) Schedules showing the composition and elements of the pool(s) and base(s) before and after the change.

(3) Schedules showing the before and after impact to the then current incurred and estimated to complete costs to the Government. These schedules shall ensure that unallowable costs have been excluded from all direct costs, and from the pools of the indirect rates. The bases shall still retain all applicable unallowable costs.

(i) In the event the parties are unable to agree to new rate ceilings for any changes made by the contractor, the contracting officer may establish appropriate rate ceilings, subject to the Disputes clause of this contract.

(j) The limitation on indirect cost rates specified in the Contractor's cost proposal shall be the rates used to compute the costs in the Contractor's cost proposal, including any most probable cost adjustments, upon which the award is based.