Indirect Cost(IDC)
Costs that cannot be traced to a single contract but are allocated across projects via indirect rates.
Overview
Indirect costs are expenses that benefit multiple contracts or the organization as a whole — facilities, administrative salaries, depreciation, and support functions. They are pooled and allocated to contracts using predetermined rates (overhead, G&A, etc.).
Why It Matters in GovCon
Indirect cost accounting is central to government contracting. Rates are negotiated with the government, and misapplication can lead to unallowable costs, audit findings, and contract disputes. FAR Part 31 and Cost Accounting Standards govern.
Key Details
- Pools: Common pools include overhead (OH) and General and Administrative (G&A).
- Base: Allocation bases (e.g., direct labor, total cost input) determine how pools are applied.
- Forward Pricing: Rates are proposed and negotiated for future periods (FPRA/FPCE).
- Audit: DCAA and other auditors review indirect cost proposals and incurred cost submissions.
Related Terms
- Overhead
- General and Administrative (G&A)
- Forward Pricing Rate Agreement (FPRA)
- Cost Accounting Standards (CAS)
More Finance Terms
A guarantee submitted with a bid that ensures the bidder will enter into a contract if selected and provide required performance and payment bonds.
The government's internal estimate of what a procurement should cost, used to evaluate the reasonableness of contractor proposals.
The projected cost to finish remaining work on a contract or project based on current status.
Overhead costs that support the overall organization rather than direct contract performance.
The total cost of owning, operating, maintaining, and disposing of a system or product over its entire useful life.
Costs that can be identified specifically with a contract or project but are not labor or materials — such as travel, subcontracts, or specialized services.
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