Dcaa Indirect Rate Calculation

Accurate indirect rate calculation is the cornerstone of compliant government contracting. Use this calculator to determine your Fringe Benefit, Overhead, and General & Administrative (G&A) rates based on your expense pools and allocation bases, following DCAA (Defense Contract Audit Agency) guidelines.

Indirect Rate Calculation Engine

Enter your fiscal year pools and bases below.

function calculateDCAARates() { // Get Input Values var fringePool = parseFloat(document.getElementById('fringePool').value); var laborBase = parseFloat(document.getElementById('laborBase').value); var overheadPool = parseFloat(document.getElementById('overheadPool').value); var overheadBase = parseFloat(document.getElementById('overheadBase').value); var gaPool = parseFloat(document.getElementById('gaPool').value); var tciBase = parseFloat(document.getElementById('tciBase').value); // Validation check if (isNaN(fringePool) || isNaN(laborBase) || isNaN(overheadPool) || isNaN(overheadBase) || isNaN(gaPool) || isNaN(tciBase)) { alert("Please enter valid numbers for all Pool and Base fields."); return; } // Avoid division by zero var fringeRate = (laborBase > 0) ? (fringePool / laborBase) : 0; var overheadRate = (overheadBase > 0) ? (overheadPool / overheadBase) : 0; var gaRate = (tciBase > 0) ? (gaPool / tciBase) : 0; // Display Percentages document.getElementById('fringeResult').innerHTML = (fringeRate * 100).toFixed(2) + "%"; document.getElementById('overheadResult').innerHTML = (overheadRate * 100).toFixed(2) + "%"; document.getElementById('gaResult').innerHTML = (gaRate * 100).toFixed(2) + "%"; // Calculate Sample Multiplier (Simplified Logic for Visualization) // Logic: $1 Direct Labor + Fringe on that $1 + Overhead on that $1 + G&A on Subtotal // Note: This assumes specific allocation bases. // 1. DL = $1.00 // 2. Fringe = $1.00 * FringeRate // 3. Overhead = $1.00 * OverheadRate (Assuming OH Base is DL) // 4. Subtotal = DL + Fringe + Overhead // 5. G&A = Subtotal * GaRate (Assuming G&A Base is TCI) var sampleDL = 1.00; var sampleFringe = sampleDL * fringeRate; var sampleOverhead = sampleDL * overheadRate; var subtotal = sampleDL + sampleFringe + sampleOverhead; var sampleGA = subtotal * gaRate; var totalLoaded = subtotal + sampleGA; document.getElementById('multiplierResult').innerHTML = "$" + totalLoaded.toFixed(2); // Show results document.getElementById('resultsArea').style.display = 'block'; }

Understanding DCAA Indirect Rates

For government contractors, understanding the mechanics of indirect rate calculation is not just accounting—it's survival. The Defense Contract Audit Agency (DCAA) enforces strict guidelines (under FAR Part 31) on how costs must be segregated and allocated to ensure the government pays only its fair share of a contractor's expenses.

Unlike commercial pricing, where you set a price based on market value, government Cost-Plus and T&M contracts rely on a "build-up" methodology: Direct Costs + Indirect Rates + Fee.

Key Concept: An Indirect Rate is simply a percentage derived from dividing a "Pool" of related expenses by an allocation "Base" that benefits from those expenses.

The Three Major Indirect Pools

While small businesses may start with a single rate, DCAA compliant systems typically evolve into a three-tier structure:

Rate Type	What Goes in the Pool? (Numerator)	Typical Allocation Base (Denominator)
Fringe Benefits	Employer taxes, health insurance, vacation pay, 401(k) match, holiday pay.	Total Labor Dollars (Direct + Indirect Labor).
Overhead	Costs related to production but not a specific contract: Rent, facility costs, software, depreciation, manufacturing management.	Direct Labor Dollars.
G&A (General & Admin)	Expenses for running the business as a whole: Executive salaries, legal, accounting, business development, HQ rent.	Total Cost Input (TCI) or Value Added Base.

How to Calculate Your Rates

The calculation logic used in the tool above follows the standard formula:

Rate % = (Expense Pool / Allocation Base) × 100

1. Calculating Fringe Rate

To calculate your Fringe rate, sum all costs related to employing your staff. This includes the employer portion of FICA, unemployment taxes, and all benefits. Divide this by your total payroll (the labor base). A healthy fringe rate often ranges between 25% and 35%, though this varies by industry.

2. Calculating Overhead Rate

Overhead supports your client-facing work. If you have an office where engineers work on contracts, the rent for that office is Overhead. Divide your total Overhead pool by your Direct Labor costs. This rate fluctuates significantly based on facility costs and utilization.

3. Calculating G&A Rate

G&A represents the cost of doing business regardless of contract volume. The most common base is Total Cost Input (TCI), which represents all other costs incurred (Direct Labor + Fringe + Overhead + Materials + ODCs). Because the base is so large, G&A rates are typically lower than Overhead rates, often 10% to 20%.

Why Compliance Matters

When submitting a "Provisional Billing Rate" proposal or an "Incurred Cost Submission" (ICS) to the DCAA, your math must be traceable to your General Ledger (GL). Mixing unallowable costs (like alcohol, bad debts, or lobbying) into your pools will result in audit findings and potential penalties.

Use this calculator to model your Forward Pricing Rates (FPR) for proposals or to true-up your actual rates at year-end.