Provisional Billing Rates

Govcon Accountants can assist you in submitting your annual PBR (provisional billing rates) to your DCAA office, a requirment if you have a cost-reimbursible type contract.

What are Provisional Billing Rates?

Provisional billing rates are estimated indirect rates that you project for the coming year. These estimated rates are used on your interim billings that you submit to your customer during the year. Calculating your provisional rates is similar to how you compute your incurred cost submission at the end of the year.

Step 1: Forecast Revenue

The first step is to forecast your revenue for the upcoming year.  Look at current contracts, new awards that are expected to start, and make assumptions regarding your win rate on opportunities that are in your sales pipeline.  This information will be used to derive the amount of direct labor and materials costs that you will need to incur to obtain this revenue.

Step 2: Estimate Your Fringe Expense

Start by reviewing the fringe expense you incurred last year.  This will most likely be a good basis for projecting this year's expense.  However, also consider whether the composition of your workforce will change over the coming year.  If so, you may want to look at each employee, and caculate their fringe benefits on a case by case basis.

Step 3: Project Your Overhead and G&A Expense

Review last year's expenditures on overhead and G&A.  It is usually a good indicator of the coming year's expenditures.  Consider your projected future revenue and business level.  If business is expected to increase, you can expect an increase in your operating expenses as well. A line item reivew of your actual expenses last year will be productive and revealing.

Step 4: Calculate Your Provisional Billing Rates

The computation of your provisional billing rates will follow the same methodology used to submit your incurred cost proposal.  There are many variations on how to compute your rates but consistency from one year to another is important.  If your methodology changes, include an explanation and compute any cost impacts to current contracts.  Compare your provisional billing rates to your actual rates incurred for the prior year and understand the reason for any large variance from one year to the next.

Step 5: Submit your Provisional Billing Rates

While there is no formal submittal package required by DCAA, you should present your analaysis in sufficient detail to allow your DCAA office to review the adequacy of your submittal.  Include a detailed staffing analysis, showing the allocation of labor costs among direct labor, overhead labor and G&A, as well as any paid leave accounts.  Provide a line item projection based on your chart of accounts for your indirect expenses.  Show your rate calculations.  Submit with a cover letter as early as you can in the fiscal year, usually in January or February at the latest.

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