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Plain-language definitions of every Pricing & Cost Management term that shows up in government contracting work.
An allocable cost in government contracting is a cost that is assignable to a specific contract or cost objective because it directly benefits that contract or is incurred specifically for it, meeting the allocability test of FAR 31.201-4.
Read definitionAn allowable cost in government contracting is a cost that the government will reimburse on a cost-type contract, meeting the tests of reasonableness, allocability, compliance with CAS and GAAP, and not being specifically prohibited by FAR Part 31.
Read definitionA CAS exemption is a statutory or regulatory exclusion that removes a contract from Cost Accounting Standards compliance requirements, most commonly applied to small businesses, commercial items, and sealed-bid contracts.
Read definitionA CAS-covered contract is a negotiated government contract that meets the dollar thresholds triggering Cost Accounting Standards compliance requirements, subjecting the contractor's accounting practices to CASB rules.
Read definitionCertified cost or pricing data is factual cost information a contractor submits and formally certifies as current, accurate, and complete before award of large negotiated government contracts above the TINA threshold.
Read definitionA Contract Line Item Number (CLIN) is the individually priced unit in a federal contract's pricing structure, each representing a distinct deliverable, service period, or cost element to be separately tracked and paid.
Read definitionCost Accounting Standards are 19 accounting standards issued by the CAS Board that govern how defense and other large contractors consistently measure, assign, and allocate costs to government contracts.
Read definitionThe cost or pricing data threshold is the contract dollar value above which TINA certified cost or pricing data is required, currently $2 million for prime contracts and applicable subcontracts.
Read definitionCost realism analysis is the government's evaluation of whether a contractor's proposed costs on a cost-type contract are realistic, complete, and consistent with the technical approach, used to identify proposals that underestimate true performance costs.
Read definitionThe Davis-Bacon Act requires federal construction contractors to pay workers no less than the locally prevailing wages and benefits established by the Department of Labor for the type of construction work being performed at the site.
Read definitionA direct labor rate is the base hourly compensation paid to an employee for work directly charged to a contract, before any fringe benefits, overhead, or G&A costs are applied.
Read definitionAn Economic Price Adjustment is a contract provision that allows the contract price to be adjusted up or down based on defined economic indices or market conditions, protecting both parties from material cost fluctuations on long-term contracts.
Read definitionAn escalation clause is a contract provision that automatically increases option-year prices by a predetermined percentage or index-linked rate, accounting for anticipated cost increases on multi-year government service contracts.
Read definitionA Forward Pricing Rate Agreement is a written agreement between a contractor and the government establishing predetermined indirect cost rates for use in pricing future contract actions, eliminating rate negotiations on each new award.
Read definitionA Forward Pricing Rate Proposal is the contractor's detailed submission of projected indirect cost rates to DCAA and the ACO, initiating the audit and negotiation process that results in a Forward Pricing Rate Agreement.
Read definitionA fringe benefits rate is the indirect cost pool rate that recovers employer-paid benefits costs, payroll taxes, health insurance, retirement contributions, as a percentage of direct labor costs.
Read definitionA fully burdened labor rate is the total cost per labor hour billed to a government contract, combining an employee's base pay with fringe benefits, overhead, G&A costs, and contractor fee.
Read definitionA G&A rate is the indirect cost pool rate that recovers enterprise-wide overhead costs, executive management, finance, HR, legal, and business development, allocated across all contracts as a percentage of total cost.
Read definitionAn Incurred Cost Submission is the annual report a cost-type government contractor files with DCAA documenting actual indirect costs incurred during the fiscal year, used to settle the difference between provisional billing rates and final actual rates.
Read definitionAn Independent Government Cost Estimate is the contracting officer's internal estimate of the total cost of a procurement, used to establish the price negotiation objective, budget appropriation, and price reasonableness benchmark.
Read definitionGovernment contract invoice requirements specify the mandatory data elements, submission format, and electronic system (typically WAWF) that a contractor's invoice must satisfy to trigger the Prompt Payment Act clock and receive timely payment.
Read definitionMost Favored Customer pricing is a commitment that the government will receive pricing no higher than what the contractor offers its best commercial customer for comparable quantities and conditions, most commonly required in GSA Schedule negotiations.
Read definitionAn overhead rate is an indirect cost pool rate applied to direct labor or other direct costs to recover costs that benefit contracts but cannot be directly traced to a single one, such as facilities, equipment, and direct supervision.
Read definitionA prevailing wage rate is the minimum hourly wage established by DOL for a specific labor classification and location on federally funded construction or service contracts, reflecting the locally prevailing wage for that type of work.
Read definitionA pricing schedule is the complete structured table of CLINs, quantities, unit prices, and total values in a government contract's Section B, forming the contractual basis for all invoicing and payment.
Read definitionProfit or fee in government contracting is the contractor's return above allowable costs, either a fixed fee negotiated at contract award or a profit margin embedded in a firm-fixed-price, reflecting risk taken, complexity performed, and capital invested.
Read definitionThe Prompt Payment Act requires federal agencies to pay contractors within specified timeframes, generally 30 days after receiving a proper invoice, and to pay interest penalties automatically when payments are late.
Read definitionService Contract Labor Standards (formerly the Service Contract Act) require federal service contractors to pay covered workers no less than the prevailing wages and fringe benefits established by DOL wage determinations for the specific service occupation and work location.
Read definitionShould-cost analysis is a rigorous government evaluation technique that assesses what a contract should cost through independent examination of a contractor's workforce, methods, materials, and business practices, rather than accepting the contractor's proposed costs.
Read definitionA Sub-CLIN (SLIN) is a subordinate line item within a parent CLIN that breaks down a contract's pricing into more granular components, most commonly individual labor categories within a service period.
Read definitionThe Truth in Negotiations Act requires contractors on large negotiated awards to submit certified cost or pricing data, verifiable facts about costs at the time of negotiation, giving the government a basis to negotiate a fair price.
Read definitionAn unallowable cost is a cost that the government will not reimburse on a cost-type contract, either because FAR Part 31 specifically prohibits it or because it fails the tests of reasonableness, allocability, or accounting consistency.
Read definitionA wage determination is a DOL document incorporated into federal contracts that establishes the minimum wage rates and fringe benefits required for covered workers under the Davis-Bacon Act or Service Contract Labor Standards for a specific location and work type.
Read definitionA wrap rate is the multiplier applied to an employee's direct labor cost to arrive at the fully burdened billing rate, expressed as a single number that captures fringe, overhead, G&A, and fee loading.
Read definitionSee how Bidovate turns these government contracting terms into pipeline. Explore the platform or book a 15-minute demo.
