GA (General And Administrative Expenses)

What is GA (General And Administrative Expenses)?

General and Administrative (GA) expenses are indirect costs incurred by a business to support its overall operations, rather than being directly attributable to a specific project or service. In the context of government contracting, understanding and accurately accounting for GA expenses is essential for proper cost estimation, pricing, and compliance.

Definition

GA expenses encompass a wide range of costs that support the overall management and administration of a contractor's business. These expenses are essential for operating the company but are not easily or directly linked to specific contracts. GA costs are often allocated across all contracts and activities of the organization, using a consistently applied methodology that adheres to Cost Accounting Standards (CAS) and Federal Acquisition Regulation (FAR) guidelines. Accurate tracking and allocation of GA are critical for ensuring compliance, supporting fair pricing, and avoiding potential audit findings from agencies like the DCAA.

Key Points

• Indirect Nature: GA expenses are inherently indirect and not directly tied to specific contract performance.
• Allocation is Key: Contractors must use a reasonable and consistently applied method to allocate GA expenses to contracts, typically based on a cost pool and allocation base.
• Audit Scrutiny: GA expenses are subject to scrutiny by government auditors (e.g., DCAA) to ensure they are reasonable, allowable, and allocable.
• Impact on Pricing: Accurate GA expense allocation directly impacts the cost basis for pricing proposals and negotiating contract terms.

Practical Examples

1. Preparing a Proposal: When preparing a proposal, a contractor must estimate its GA expenses for the period of performance. This estimate is then allocated to the proposed contract based on the chosen allocation base, directly impacting the proposed price.
2. Cost-Plus Contracts: In cost-plus contracts (e.g., CPFF), the government reimburses the contractor for allowable costs, including allocated GA expenses, plus a fixed fee. Accurate tracking and documentation of GA are essential for reimbursement.
3. DCAA Audit: During a DCAA audit, the auditor will review the contractor's GA expense pool and allocation methodology to ensure compliance with FAR and CAS. Any discrepancies or unallowable costs could result in disallowed costs and penalties.