Provisional Billing Rates for your Cost Reimbursable Contracts are due 90 days after your company’s fiscal year end, which for most companies, is March 31st. That date is fast approaching.

What are Provisional Billing Rates?

As part of holding a cost reimbursable type or time & materials contract, a contractor will be required to establish temporary indirect billing rates, also known as Provisional Billing Rates, which are to be used as interim rates until final actual rates can be established for each contract year. FAR 42.7 Indirect Cost Rates discusses the policy regarding Indirect Cost Rates. Specifically 42.701 states, ““Billing Rate”, as used in this subpart, means an indirect cost rate –
(1) Established temporarily for interim reimbursement of incurred indirect costs: and (2) Adjusted as necessary pending establishment of final indirect cost rates.”

To satisfy part (2) of 42.701, a contractor must calculate, on a regular basis (typically monthly), it’s year to date actual indirect rates and provide a comparison against the forecasted Provisional Billing Rates to determine if significant variances exist necessitating the establishment of revised Provisional Billing Rates. This is typically called an Indirect Rate Variance Report/Analysis. The government will request that a contractor submit for revised rates if the dollar value of the variances become significant enough to prevent overbilling to the government that is material in nature.

These indirect rate variances need to be identifiable to the job level in order to determine the specific impact to a given contract and/or CLIN.

If you need help putting together your PBRs, we are always here to help! If you are currently a McNew client, please contact us to get the process started.

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