Industrial Funding Fee
Allowable or Unallowable: Unallowable
Source: Other
Background
Industrial Funding Fee (IFF) is an administration charge by GSA against contractors who are awarded and charging Federal Supply Schedule contracts. IFF is a percentage of each orders value (ie. 1%). This type of contracting is very unique in that a contractor bills for services provided on a contract, and portion of the amounts received are paid to GSA. For example Company A bills the Army for services provided, and company A pays 1% of that amount as an admistration fee to the GSA.
A contractor will experience this both on GSA contracts and a Government Wide Acquisition Contract.
Allowable or Unallowable?
Not a cost; Unallowable
Explanation
Contractors need to be very careful in the treatment of this expense.
It needs to be excluded from the indirect rate structure of a contractor. It is not an indirect expense, that gets other indirect expenses or fees added to it.
It is not a direct costs which gets indirect burdens and fee.
It is a cost that a contractor pays GSA for the use of that agencies contract vehicles. The correct treatment of the costs is it is added to the final total costs (including fee) of a product, service or hourly rate.
Cost and Price Buildup of GSA contract with IFF
A sample buildup of an hourly rate would be:
Direct Labor $10
- Fringe @ 30% $ 3
Subtotal $13
- OH @ 40% $ 5.2
Subtotal $18.2
- G&A @ 10% $ 1.8
Subtotal $20
- Fee @ 10% $ 2
Grand Total $22
- IFF @ .75% $ .65
Total Hourly Rate $22.65
Summary
Contractors should be very careful to exclude this type of costs from their cost recovery methods and models to the extent those models represent cost buildups and recoveries from the US Government. Contractors should also be aware that this amount could be significant (1% of Sales) and affect their financial statements and financial ratios. This costs is unusual, and Accounting Systems may not be set-up to automatically handle the treatment of this kind of costs.
Contractors need to establish the treatment of these costs, and ensure those treatments are consistent.