New Year’s Resolution #2: I will correctly account for my overhead costs

January 6, 2023

At a glance

  • Contractors who win FAR Part 15 Negotiated Contracts must distinguish and segregate direct costs from indirect costs.
  • Indirect costs are those not readily identifiable with a specific project.
  • Indirect costs must also be organized into subgroups. One such group is overhead costs.

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The full story:

Doing business with the government requires contractors who bid and win FAR Part 15 Negotiated Contracts to distinguish and segregate direct costs from indirect costs.

Indirect costs represent those expenses not readily identifiable with a particular project. Common practice is to further categorize indirect costs into subgroups or “pools.” Some common types of pools are fringe benefits, overhead costs and G&A costs.

Here, we explain what overhead costs are and provide examples of some common types of overhead costs.

What are overhead costs?

Overhead costs support the efforts of the direct labor workforce, not necessarily related to a specific contract.

Common examples of overhead cost include:

  • Labor for managing staff on multiple projects that require meeting with various customers.
  • Travel (perhaps in support of the meeting).
  • Computers and cell phones for people who primarily charge their time to overhead.
  • Fees and costs associated with hiring direct employees.

Fees could include the labor time for your HR person to do interviews, the costs of obtaining security clearances, outside recruitment fees, and the cost of job advertising.

The bottom line

As you can imagine, this is not a definitive list of all potential overhead costs. For more guidance, contact Aprio’s Government Contract Consulting Services team.

Related Resources/Assets/Aprio.com articles/pages

Aprio Government Contracting
Aprio Government Contracting Compliance

This is not a definitive list of all potential indirect costs. For more guidance, contact Aprio’s Government Contract Consulting Services team.