Is a General Engineering Contractor required to use projected or audited overhead rates?
A. We interpret the question as pertaining to rates in the contractors initial price proposal for negotiating the contract. We know of no requirement for contractors to use audited rates in their proposals, or to make projections of rates, but there is a requirement that the grantee perform a cost analysis of a contractors proposal whenever the contract is being negotiated without adequate price competition. Since A&E contracts are always awarded under qualifications-based procurement procedures without price competition, the requirement of doing a cost analysis would prevail. Such a cost analysis must include a determination of the reasonableness of the proposed indirect rates, and this determination must take into account the latest audited rates as well as projections based on business prospects over the term of the contract. If the indirect rates have not been audited recently, an audit should be performed prior to price negotiations. If the contract award is so urgent that there i
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