DBE Next Steps: Overhead Schedules & Unallowable Costs-DBE Next Steps Overhead Schedules & Unallowable Costs Recording

Video Transcription

Video Summary

In this comprehensive online class, Robert Jones, Director of Government Contracting Advisory at Stanbaugh Ness and a CPA/CPCM, covers the key topics of overhead schedules and unallowable costs pertinent to government contractors, focusing primarily on state Department of Transportation (DOT) contractors but also touching on federal regulations. He begins by emphasizing recent updates to the Federal Acquisition Regulation (FAR) overhaul, urging participants to review changes on acquisition.gov. <br /><br />Jones systematically defines critical cost pools: direct labor (primarily W-2 employees, excluding subcontractors), fringe benefits (costs to maintain employees such as employer taxes, health insurance, retirement, and paid absences), and general overhead (costs supporting multiple contracts or the business as a whole like facilities, training, accounting, legal, and IT). He explains indirect rate calculations, typically based on direct labor, highlighting that rates reflect organizational policies and procedures rather than efficiency or correctness. Factors influencing rates include company size, service offerings, entity structure, benefits, bonuses, and geography.<br /><br />He then discusses common pitfalls in indirect rate calculations, such as using inappropriate general ledger accounts, commingled labor and non-labor expenses, and misaligned cost pools and bases. Jones stresses meticulous attention to allowability per FAR Part 31 and contract terms, noting that costs must be reasonable, allocable, compliant with cost accounting standards, and allowable under contract terms.<br /><br />He reviews specific unallowable costs including general advertising, alcohol, charitable contributions, entertainment, executive compensation beyond limits, fines and penalties, interest expenses, lobbying, related-party rent exceeding effective ownership costs, certain taxes, and trade shows. Warning against mistaken assumptions about tax deductibility, he distinguishes tax treatment from allowability in government contracts.<br /><br />Jones also addresses questions about bonuses for principals under C-Corps, personal use of company vehicles, and health benefits for partners in LLCs, explaining the importance of compliance with compensation limits and careful cost segregation.<br /><br />Finally, he offers his firm’s services for indirect rate strategy, FAR readiness, and compliance. He encourages ongoing learning through additional training and invites follow-up questions to ensure contractors optimize their overhead structures and meet regulatory requirements effectively.

Keywords

Government Contracting

Overhead Schedules

Unallowable Costs

Federal Acquisition Regulation (FAR)

Indirect Rate Calculations

Cost Pools

Allowability Compliance

State Department of Transportation Contractors

Cost Accounting Standards

Contractor Overhead Management