Specific Requirements

SPECIFIC REQUIREMENTS

A. CONSULTING ENGINEERS – INDIRECT COST RATES

1. Background History

ConnDOT has contracted or is proposing to contract with a Consulting Engineering firm to perform highway or bridge design work, construction engineering and inspection or other consultant services. Many of these projects are federally funded.

2. Purpose of the Audit

a. To examine the firm’s indirect cost (formerly burden, fringe and overhead -BF&O) rate for use in negotiating the price of a proposed contract with ConnDOT and/or for current cost plus contract pricing purposes. Costs presented are examined for overstatement, proper segregation into direct and indirect categories and allowability per State and Federal Regulations. The audited Indirect Cost rate is used to negotiate the contract price as shown in the example below:

The negotiated contract price may be a lump sum or based upon cost plus a fixed fee.

b. To analyze the consultant’s proposal to determine if it is consistent with the firm’s accounting system.

c. To evaluate the firm’s accounting system for adequacy to segregate and accumulate reasonable, allocable and allowable costs.

d. To test labor and direct costs billed to the State for allowability.

3. Criteria Used in Determining Allowable Costs

Criteria for determining allowable costs are the Federal Acquisition Regulations System (Subparts #31.0, 31.1 and 31.2), the State of Connecticut, Office of Policy and Management General Letter No. 97-1 and the terms of the agreement(s).

 4. Office (Party) Responsible for Requesting Audit

Audits of Indirect Costs (Burden, Fringe and Overhead) are submitted directly of the Office of External Audits from the company.

It is the Contract Administrator’s responsibility to ensure any contractually required audits are submitted by the Consultant to the State.

5. Reports

Indirect Cost Rate (BF&O) reports are sent directly to the company.

6. Other Considerations

Application of Indirect Cost (BF&O) Rates

The Indirect Costs (BF&O) rates billed by consultants should be the provisional or the latest approved rate (subject to the maximum allowable) by the Office of External Audits. The maximum allowable rates (with a 10% profit) are as follows under the OPM General Letters:

OPM General Letter 80-5 -- 22.72% for both home office and construction inspection (field) and environmental projects

OPM General Letter 97-1 --127.27% for home office; 104.55% for construction inspection(field) projects; and 140.91% for environmental projects

When a new Indirect Cost (BF&O) rate is approved, the consultant can use that rate only to adjust costs billed for the specific fiscal year for which the rate was approved.

For any cost billed beyond the fiscal year of the latest approved Indirect Cost (BF&O) rate and before the approval of the new rate, no adjustment should be made until there is an approved rate for the time period involved.

i.e. The BF&O rate for FYE 12/31/01 is approved in July 2002. The costs billed during FYE 2001 can be adjusted to the approved rate and invoices starting August 2001 can use the latest approved Indirect Cost (BF&O) rate. The costs billed for January through July 2002 will not be adjusted. Fiscal Year 2002 costs billed will be adjusted when the FYE 12/31/02 Indirect Cost rate is approved. This will reduce the possibility of clerical errors by both the consultant and ConnDOT through multiple changes to the amounts previously billed.