What is considered a reasonable escalation factor for direct labor and other direct costs?
Annual escalation factors for direct labor which are within 1% point of the projected weighted average annual change in the Consumer Price Index (CPI) for the contract period are considered reasonable for estimating /funding purposes. For increases exceeding 1% point of the projected weighted average annual change in the CPI, the organizations historical salary increases should be analyzed and compared to the proposed increase to determine reasonableness. For costs other than labor, the proposed escalation factor should be compared to the projected weighted average annual change in the CPI for the contract period. Proposed increases that exceed the projected weighted average annual change in CPI would require additional documentation to support reasonableness. DFAS subscribes to a service that provides CPI projections. For more information contact Lorraine Trexler, Director, Division of Financial Advisory Services, phone (301) 496-4401 or email lt156e@nih.
Annual escalation factors for direct labor which are within 1% point of the projected weighted average annual change in the Consumer Price Index (CPI) for the contract period are considered reasonable for estimating /funding purposes. For increases exceeding 1% point of the projected weighted average annual change in the CPI, the organizations historical salary increases should be analyzed and compared to the proposed increase to determine reasonableness. For costs other than labor, the proposed escalation factor should be compared to the projected weighted average annual change in the CPI for the contract period. Proposed increases that exceed the projected weighted average annual change in CPI would require additional documentation to support reasonableness. DFAS subscribes to a service that provides CPI projections.
