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Cost-Based Pricing by Darrell J. Oyer

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CHAPTER 4

Indirect Costs

As defined in the Federal Acquisition Regulation (FAR), after all direct costs have been identified, all remaining costs are indirect. Indirect costs must be allowable per FAR Part 31. One of the five elements of allowability is allocability—whether the indirect-cost pools are properly allocating costs to the cost objectives that cause the cost or benefit from the cost incurrence. If a contractor has an established indirect cost structure, this structure must be used for pricing indirect costs. If no structure exists, a cost structure must be established in support of the proposal.

Other aspects of cost allowability are: (1) reasonableness of the cost, (2) compliance with generally accepted accounting practices (GAAP) ...

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