when facility capital cost of money is allowed and not allowed.
Facility capital cost of money
refers to cost that is accepted and can be charged to governments and
contractors. It allows contractors to claim certain amount of interest for
capital costs used when performing a government contract. This cost becomes
allowable if the contractor proposes it in the contract after it has been
estimated. That is, the contractor should include it in the contract and not
claim it after the offer of the contract.
It also becomes allowable under the
condition that the capital investments of the contractor are measured and allocated
to contracts and cost calculated according to CAS 414. CAS 414 accepts that
cost of facility capital is cost that is part of the contract and that provides
the right method for measuring the appropriate share for the cost of money of
each facility used in the time of the contract.
Facility capital cost of money can
also be allowed under the condition that the contractor maintains records to
show that he complies with the requirements of CAS 414.
Before the introduction of the
clause on unallowability of facility cost of money, contractors would not
include cost of money in the contract but would later claim it after the
contract was awarded. This results in the government paying more than the
estimated budget because the cost was included after the contract offer. It is
now an advantage to the government since the contractor has to include the cost
in the contract.
FCCM can be unallowed if the
government realizes that the contractor is claiming cost of money yet the
clause in FAR 52.215-17 is in the contract. The clause provides that contractor
shall only claim the cost of money if they have included it in the contract. In
Such a case the contract specialist will decline the claim by disallowing the
costs in invoices...