CIB 92-17


CIB 92-17: Indirect Cost Rates

Subject Category: Acquisition Management, OCC

This Contract Information Bulletin supersedes and cancels CIBs 90-21 and 84-11 as well as OPAM 84-3 which applied to the Office of Procurement, AID/W.

1. What Are Indirect Costs:

Indirect costs are costs which cannot be directly identified with a single contract or grant. The indirect costs are applied equitably across all of the business activities of the organization, according to the benefits each gains from them. Some examples of indirect costs are office space rental, utilities, and clerical and managerial staff salaries. To the extent that indirect costs are reasonable, allowable and allocable they are a legitimate cost of doing business payable under a U.S. Government contract.

2. How Indirect Cost Rates Are Established:

Responsibility for negotiating indirect cost rates with organizations doing business with the U.S. government is specifically assigned. Each organization negotiates its indirect cost rates with one government agency which has been assigned cognizance. Usually the cognizant government agency is that agency which has the largest dollar volume of contracts with the firm or organization. The resulting Negotiated Indirect Cost Rate Agreement (NICRA) is binding on the entire government. The NICRA contains both final rates for past periods and provisional, or billing rates, for current and future periods. A procurement office may not negotiate a different rate or base of application for an individual cost reimbursement contract or program. The provisional (billing) rate is established for use in reimbursing indirect costs under cost-reimbursement contracts and grants until a final rate can be established. The billing rate may be revised by the cognizant agency to prevent substantial overpayment or underpayment in the event of a significant change in the firm's business volume. A final indirect cost rate is established after the close of the contractor's fiscal year and once established is not subject to change.

Predetermined (final) indirect cost rates may be used in contracts and grants with educational institutions. See FAR subpart 42.7 and AIDAR 731.370 and 742.770.

Saturday, October 31, 1992 - 10:00am

Last updated: January 07, 2014