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Why is unallowable labor included in the fringe labor base but excluded from the OH labor base?

This relates to a DCAA audit; They are asking why we treat our unallowable labor this way. I inherited this and not sure there is a right or wrong way to do this. Interested to learn more how other treat this.

Answers

Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

The inclusion in the fringe labor base ensures that all payroll dollars - allowable and unallowable - are assigned a share of fringe benefit costs, avoiding assigning those costs solely to allowable labor and thus allowing the fringes costs for unallowable labor. The unallowable costs can be thus "fully loaded". If the OH labor costs are assigned as indirect costs, excluding the unallowable labor ensures that it is not inadvertently "converted" to allowable by assignment/allocation as OH. The intent is to not allow such costs at all in developing contract costs.

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