Indirect Rates

Indirect rates that win work and survive audit.

Your rate structure decides whether you are competitive on price and whether you keep the margin you bid. We design pools and bases that do both, and we monitor them so the year-end true-up holds no surprises.

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12 years inside DCAA
100+ DoD contractors audited
CPA led
QuickBooks, Costpoint, SAP & NetSuite
Remote, nationwide

Why rate structure is a competitive decision, not just a compliance one

Indirect rates are where a lot of contractors quietly lose money. Set them too high and you lose bids. Set them too low and you win work you cannot deliver profitably, then absorb the difference. Structure them carelessly and you spend years arguing with auditors about allocation bases.

A well-designed structure does three things at once: it allocates cost on a basis that reflects how the cost is actually caused, it produces rates competitive for the work you are pursuing, and it is simple enough to explain and defend. Those goals pull against each other, and the balance depends on your contract mix.

Most small contractors run a three-pool structure of fringe, overhead, and G&A. That is often right, but not always. Contractors with meaningful on-site and off-site work, multiple business segments, or heavy material and subcontract pass-through frequently need something different to price competitively.

What we handle

Pool and base design

Structuring fringe, overhead, and G&A, including whether you need separate on-site and off-site rates or a value-added G&A base, driven by your contract mix rather than convention.

Provisional billing rates

Establishing and negotiating the provisional rates you bill at during the year under FAR 42.704, set realistically so you neither underbill nor build a repayment.

Rate monitoring

Periodic comparison of actual to provisional. Rates drift as headcount and revenue mix change, and catching it in month four is a conversation while catching it at year end is a cheque.

Forward pricing rates

Forward pricing rate proposals and agreements where your volume justifies them, so pricing is faster and less contentious on every subsequent bid.

Rate impact modeling

What happens to your rates if you win the large recompete, hire twenty people, or open a second location. Better answered before you commit than after.

Restructuring

Changing an established rate structure has cost accounting consequences and has to be handled deliberately. We assess the impact before anything moves.

How we approach it

Understand the contract mix

On-site versus off-site, cost-type versus FFP versus T&M, material and subcontract intensity. The right structure follows from this.

Model the alternatives

We build the realistic options and show you what each does to your competitive position and to your compliance burden.

Implement in the accounting system

Pools and bases have to exist in the general ledger, not in a spreadsheet beside it.

Set provisional rates

Established on a supportable basis and submitted for approval.

Monitor and true up

Ongoing comparison against actuals through the year, so the annual true-up is a formality.

Price

What an indirect rate build costs

An indirect rate structure and build starts at $3,000: pools and bases designed for your contract mix, set up in your general ledger, and provisional billing rates calculated and documented.

Monthly rate tracking against actuals is part of our GovCon Cost-Type tier, from $1,500 a month. Rate work outside a defined project bills at $160 an hour. We reply to every inquiry within one business day and send a written proposal within two business days after the intro call. Project work starts within five business days of a signed engagement. All GovCon prices are on our pricing page.

Questions

Frequently asked

How many indirect pools should we have?

Enough to allocate cost fairly, and no more. Three is common and often correct for a small contractor. Additional pools make sense when a group of cost genuinely benefits one portion of the business differently, and each additional pool adds administrative burden you have to sustain.

What are provisional billing rates?

The interim rates you bill at during the year before final rates are known, established under FAR 42.704. They should be set close to your realistic expected actuals. Setting them high creates a repayment; setting them low is an interest-free loan to the government.

What happens if our actual rates come in higher than provisional?

On cost-type work you can generally recover the difference through the incurred cost process, subject to funding and ceilings. The exposure is that the money arrives much later than you spent it, which is a cash flow problem even when it is not a compliance one.

Can we change our rate structure?

Yes, but deliberately. Consistency in cost accounting practice matters, and changes can trigger cost impact analysis, particularly under CAS coverage. We assess the impact before implementing.

Our rates are not competitive. What can we do?

Sometimes the answer is genuine cost reduction. Often it is that cost sits in the wrong pool or the base is wrong for the work being bid. That is a structural problem with a structural fix, and it is worth looking at before you cut anything.

How much does it cost to set up indirect rates?

An indirect rate structure and build starts at $3,000, including pools and bases set up in your general ledger and documented provisional billing rates. Monthly rate tracking is part of our Cost-Type tier, from $1,500 a month.