52.216-15 Predetermined Indirect Cost Rates
Source: FAR 52.216-15 on acquisition.gov
FAR 52.216-15 requires contractors and the government to agree in advance on indirect cost rates, which are then used to determine allowable indirect costs for the contract period.
Overview
FAR 52.216-15, Predetermined Indirect Cost Rates, establishes the procedures and requirements for applying predetermined indirect cost rates to allowable costs under certain government contracts. Instead of using provisional or final rates, this clause requires that indirect costs be reimbursed using rates agreed upon in advance by the contractor and the government, as specified in the contract schedule. The clause outlines the process for submitting and supporting final indirect cost rate proposals, negotiating and documenting rate agreements, and handling situations where agreement cannot be reached. It also clarifies that cost allowability and allocation methods are governed by FAR subpart 31.3, and that predetermined rate agreements are incorporated into the contract upon execution. Pending new rates, prior rates or acceptable billing rates may be used, subject to adjustment. Disagreements over rates do not constitute disputes under the contract's Disputes clause.
Key Rules
- Use of Predetermined Indirect Cost Rates
- Indirect costs are reimbursed using predetermined rates agreed upon by both parties and specified in the contract schedule.
- Submission of Final Indirect Cost Rate Proposal
- Contractors must submit a final indirect cost rate proposal with supporting data within six months after the end of each fiscal year, unless an extension is granted.
- Negotiation and Documentation of Rates
- The government and contractor must negotiate and execute a written agreement specifying the rates, bases, period of applicability, and treatment of direct costs.
- Cost Allowability and Allocation
- Determined in accordance with FAR subpart 31.3 as of the contract date.
- Interim Reimbursement
- Pending new rates, reimbursement is at prior year rates or billing rates acceptable to the government, subject to later adjustment.
- Dispute Resolution
- Failure to agree on rates is not a dispute under the Disputes clause; if no agreement, final rates per the Allowable Cost and Payment clause apply.
Responsibilities
- Contracting Officers: Negotiate, document, and incorporate predetermined indirect cost rate agreements; approve extensions; ensure compliance with FAR 31.3.
- Contractors: Submit timely, adequate proposals with supporting data; negotiate in good faith; comply with agreed rates and bases; maintain proper records.
- Agencies: Oversee negotiation and execution of rate agreements; audit proposals as needed.
Practical Implications
- This clause provides predictability for both parties by fixing indirect cost rates in advance, reducing administrative burden and uncertainty.
- Contractors must be diligent in preparing and supporting their rate proposals and in understanding which costs are treated as direct or indirect.
- Failure to submit timely proposals or reach agreement can result in application of final rates under other contract clauses, potentially impacting reimbursement.
As prescribed in 16.307(g), insert the following clause:
Predetermined Indirect Cost Rates (Apr 1998)
(a) Notwithstanding the Allowable Cost and Payment clause of this contract, the allowable indirect costs under this contract shall be obtained by applying predetermined indirect cost rates to bases agreed upon by the parties, as specified below.
(b)
(1) The Contractor shall submit an adequate final indirect cost rate proposal to the Contracting Officer (or cognizant Federal agency official) and auditor within the 6-month period following the expiration of each of its fiscal years. Reasonable extensions, for exceptional circumstances only, may be requested in writing by the Contractor and granted in writing by the Contracting Officer. The Contractor shall support its proposal with adequate supporting data.
(2) The proposed rates shall be based on the Contractor’s actual cost experience for that period. The appropriate Government representative and the Contractor shall establish the final indirect cost rates as promptly as practical after receipt of the Contractor’s proposal.
(c) Allowability of costs and acceptability of cost allocation methods shall be determined in accordance with FAR subpart 31.3 in effect on the date of this contract.
(d) Predetermined rate agreements in effect on the date of this contract shall be incorporated into the contract Schedule. The Contracting Officer (or cognizant Federal agency official) and Contractor shall negotiate rates for subsequent periods and execute a written indirect cost rate agreement setting forth the results. The agreement shall specify (1) the agreed-upon predetermined indirect cost rates, (2) the bases to which the rates apply, (3) the period for which the rates apply, and (4) the specific items treated as direct costs or any changes in the items previously agreed to be direct costs. The indirect cost rate agreement shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. The agreement is incorporated into this contract upon execution.
(e) Pending establishment of predetermined indirect cost rates for any fiscal year (or other period agreed to by the parties), the Contractor shall be reimbursed either at the rates fixed for the previous fiscal year (or other period) or at billing rates acceptable to the Contracting Officer (or cognizant Federal agency official), subject to appropriate adjustment when the final rates for that period are established.
(f) Any failure by the parties to agree on any predetermined indirect cost rates under this clause shall not be considered a dispute within the meaning of the Disputes clause. If for any fiscal year (or other period specified in the Schedule) the parties fail to agree to predetermined indirect cost rates, the allowable indirect costs shall be obtained by applying final indirect cost rates established in accordance with the Allowable Cost and Payment clause.
(g) Allowable indirect costs for the period from the beginning of performance until the end of the Contractor’s fiscal year (or other period specified in the Schedule) shall be obtained using the predetermined indirect cost rates and the bases shown in the Schedule.
(End of clause)