GovCon Compliance
Indirect Cost Rate
The ratio used to allocate indirect costs (overhead, fringe, general and administrative) to cost objectives in proportion to a chosen base. A contractor typically maintains separate indirect rate pools for fringe (benefits as a percent of labor), overhead (engineering or manufacturing support as a percent of direct labor), and G&A (executive and corporate functions as a percent of total cost input or value-added base). Provisional billing rates are used during the year and reconciled to actual rates in the Incurred Cost Submission. Final indirect cost rate agreements with DCMA close out the year and lock the rates for retroactive billing adjustment.