Government Contractor Indirect Rate Calculator (FAR Part 31, CAS 410)

The method

Three pools, three bases, computed in order:

Fringe rate = fringe costs ÷ total labor = $2,955,000 ÷ $9,850,000 = 30.00%. Fringe is an intermediate pool: the 30% that lands on overhead and G&A staff goes into those pools, $315,000 into overhead and $390,000 into G&A.

Overhead rate = (overhead labor + its fringe + other overhead) ÷ direct labor = $3,765,000 ÷ $7,500,000 = 50.20%.

G&A rate = allowable G&A pool ÷ cost input base. The pool is $2,690,000 under either base. Total cost input is every cost except G&A, $23,455,000, giving 11.47%. Value-added strips out materials and subcontracts, $14,205,000, giving 18.94%.

Wrap rate = (1 + fringe + overhead) × (1 + G&A) = 2.01 on total cost input, 2.14 on value-added. Every dollar of direct labor costs about two dollars once burdened.

The worked company has four cost objectives: cost-plus services, cost-plus integration, a material-heavy fixed-price hardware line, and commercial work. Commercial work sits in the base like everything else, because the base measures the whole business unit, not just what you bill the government.

This spreadsheet is the form above: every rate on this page is a formula in it, with nothing typed in by hand. Your own version could become a rate model your contracts team fills in each month, or an API that feeds provisional billing rates straight into your ERP.

Total cost input vs value-added G&A base: which one is cheaper?

Neither. The G&A pool is $2,690,000 under both bases; the base only decides which contracts pay it. Total cost input gives the lower rate, 11.47% against 18.94%, and that number is what people anchor on. It is the wrong thing to compare.

Total cost input charges G&A on materials and subcontracts. The fixed-price hardware line passes $7,400,000 of material through the business, so it soaks up $1,088,639 of G&A on that material. Value-added stops charging G&A on purchased material and moves the cost onto labor. Here that means onto cost-plus work.

That is the decision this changes. A low headline G&A rate can make your labor-heavy proposals look competitive while quietly pricing your material-heavy bids out of the market. CAS 410-50(d) treats total cost input as generally acceptable, and value-added as the right base when material and subcontract costs would significantly distort the allocation relative to the benefit each contract gets.

Can a government contractor change its G&A allocation base?

It can, but at these defaults a move to value-added shifts $678,302 a year onto cost-plus work, and that is exactly the increase the government will not pay for after a unilateral change.

Cost-plus work carries 48.99% of the G&A pool on total cost input and 74.21% on value-added. Under FAR 30.603-2, a contractor with CAS-covered contracts may change a disclosed or established practice unilaterally. The government then pays no increased cost in the aggregate from that change, and the contracting officer adjusts prices to make sure of it.

So a base change justified on equity grounds is fine. A base change whose real effect is moving $678,302 from fixed-price work you absorb to cost-plus work the government reimburses is not going to stick. The calculator puts that figure in front of you before your auditor does.

Two practical points:

• Not CAS-covered? FAR 31.203(c) still requires the base to allocate on the basis of benefits received, so the distortion argument applies to you too.
• No numeric test exists. CAS 410 sets no threshold for "significant distortion". The material mix panel shows the facts that argument rests on. Here the hardware line runs 77.96% material on its cost input, cost-plus services 4.32%.

Do unallowable costs stay in the G&A base?

Yes. They leave the pool, but they stay in the base and absorb their share of G&A. That share is G&A you can never recover.

FAR 31.203(d) says an accepted base cannot be fragmented by pulling out individual elements, and that base items bear their pro rata share whether allowable or unallowable. CAS 405-40(e) says the same for CAS-covered work.

At the defaults, $260,000 of unallowable overhead sits in the base and absorbs $29,819 of G&A. Strip it out of the base as well as the pool and the G&A rate rises from 11.47% to 11.60%. That overstates cost-plus claims by $14,773 a year.

The amount looks small at the defaults, but it scales with what you exclude. At $2,000,000 of unallowable overhead the same error overstates cost-plus claims by $105,790. It is a classic incurred cost audit finding precisely because it is easy to make: excluding unallowables "everywhere" feels like the conservative choice. It isn't. Excluding them from the base increases what the government pays.

How do you calculate a wrap rate for government contracts?

Build it from the pools and it carries your G&A base choice inside it. Typed-in rates hide that choice.

Wrap rate is the fully burdened cost of a dollar of direct labor, before fee. With overhead allocated on direct labor dollars it is (1 + fringe rate + overhead rate) × (1 + G&A rate). At the defaults that is (1 + 30.00% + 50.20%) × (1 + 11.47%) = 2.01 on total cost input, and 2.14 on value-added.

Most wrap rate calculators ask you to type in your fringe, overhead and G&A percentages. That skips the part that matters: where the rates come from. Here the G&A rate in use follows the disclosed base, so the wrap rate on your next labor proposal moves from 2.01 to 2.14 the moment you change it.

The labor wrap is also only half the story. Value-added raises the wrap on labor and drops G&A on material-heavy work to zero for every purchased dollar. Price a materials-heavy bid with a labor wrap and you will misprice it under either base.

If your overhead is allocated on direct labor plus fringe, the formula becomes (1 + fringe) × (1 + overhead) × (1 + G&A). That is a different structure, not a different answer to the same question. See the limits below.

What this calculator does not do

Stated plainly, so you know when to reach for something heavier:

• One pool of each kind. No on-site and off-site overhead, no material handling pool, no separate engineering and manufacturing overhead. Many contractors have several, and each one needs its own base.
• Overhead on direct labor dollars only. Not on labor hours, not on labor plus fringe.
• Single-element bases are not modelled. CAS 410 also allows a single-element base such as direct labor, which this model leaves out.
• No IR&D or B&P. Independent research and development and bid and proposal costs follow CAS 420 and are not separated out.
• No screening of what is unallowable. The model takes your unallowable overhead as a single figure. It does not apply the FAR 31.205 cost principles or the executive compensation cap for you, and unallowable G&A is simply left out of the G&A pool you enter.
• One year, actual costs, before fee. No provisional-versus-final true-up, no forward pricing projection, no multi-year rate history.
• Four cost objectives. Group your contracts into these four buckets by billing type and mix. Two contracts with very different material content belong in different buckets.
• Not a cost impact proposal. The $678,302 shift is an order-of-magnitude signal. A real CAS cost impact under FAR 30.6 works contract by contract over the remaining performance period.

Sources

• FAR 31.203 Indirect costs
• FAR 30.603-2 Unilateral and desirable changes
• 48 CFR 9904.405-40, CAS 405 fundamental requirement
• 48 CFR 9904.410-50, CAS 410 techniques for application
• Public Contracting Institute: CAS 410, part 2 of 3
• Redstone GCI: CAS 410 allocation of business unit G&A expenses