Overview
This section defines the term "billing rate" as a temporary indirect cost rate used for the interim reimbursement of costs until final indirect cost rates are formally established.
Key Rules
- Temporary Nature: Billing rates are provisional and specifically intended for interim use during the performance of a contract.
- Interim Reimbursement: The primary purpose of these rates is to provide a mechanism for contractors to recover incurred indirect costs (such as overhead or G&A) before a final audit or settlement.
- Adjustability: Billing rates are not static; they must be adjusted as necessary to ensure they remain as close as possible to the anticipated final indirect cost rates.
- Subordination to Final Rates: These rates serve only as placeholders and are superseded once final indirect cost rates are negotiated and established for a given fiscal period.
Practical Implications
- Cash Flow Management: Billing rates allow contractors to maintain steady cash flow by recouping overhead costs throughout the year rather than waiting for a final year-end audit.
- Risk Mitigation: Regular adjustments to billing rates help prevent significant overpayments or underpayments, reducing the likelihood of large "true-up" settlements or debt collections at the end of the contract period.