Preaward Audit of Indirect Costs

Overview

A preaward audit, or proposal audit should only look at the direct labor costs and the application of indirect costs. Unless it is the first proposal of a contractors fiscal year and the contractor does not have a separate indirect rate audit (Forward Pricing), or circumstances and rates have changed, the audit of indirect costs should not be audited. Rather the application of indirect rates to direct costs should be the only review or audit regarding indirect rates.

FAR Guidance

(2) The contracting officer shall not request a separate preaward audit of indirect costs unless the information already available from an existing audit, completed within the preceding 12 months, is considered inadequate for determining the reasonableness of the proposed indirect costs (41 U.S.C. 4706 and 10 U.S.C. 2313).