ODCOTHER (Direct Cost)

What is ODCOTHER (Direct Cost)?

ODCOTHER, or Other Direct Costs, is a category within direct costs used in government contracting to capture expenses beyond direct labor, direct materials, and travel that are specifically and demonstrably tied to the performance of a particular contract. These are allocable costs that benefit a specific project. Proper management of ODCOTHER is crucial for accurate cost accounting and compliance.

Definition

ODCOTHER encompasses any direct costs incurred for a specific government contract that don't fall under standard categories like labor, materials, or travel. These costs must be directly attributable to the performance of the contract and allocable based on the benefit received. The FAR (Federal Acquisition Regulation) emphasizes the importance of properly identifying and allocating all costs, direct and indirect, to ensure fair pricing and accurate contract performance evaluation. Contractors must maintain adequate documentation to support all ODCOTHER charges, demonstrating the direct benefit to the contract and compliance with Cost Accounting Standards (CAS) where applicable. Incurring and billing ODCOTHER costs requires a robust cost accounting system.

Key Points

• Direct Traceability: All costs classified as ODCOTHER must have a clear and documented link to the specific government contract.
• Allocability: The cost must be allocable to the contract, meaning the contract directly benefits from the expense.
• Reasonableness: Costs must be reasonable and consistent with what a prudent person would incur under similar circumstances.
• Documentation is Key: Maintaining detailed records, including invoices, agreements, and justifications, is crucial for audit purposes.

Practical Examples

1. Specialized Software: A contract requires the use of a specific software only used for that contract. The license fee for that software would be classified as ODCOTHER.
2. Subcontractor Services (Specific Task): A subcontractor is hired to perform a highly specialized task unique to the contract. The fees for this specific work are ODCOTHER.
3. Equipment Rental (Contract-Specific): Specialized testing equipment is rented solely for use on a government contract. The rental costs are classified as ODCOTHER.