Forward Pricing Rate Proposal (FPRP)

A Forward Pricing Rate Proposal (FPRP) is the contractor's formal submission to the Defense Contract Audit Agency (DCAA) and Administrative Contracting Officer (ACO) that presents projected indirect cost rates for future periods, the starting point for the audit and negotiation process that culminates in a Forward Pricing Rate Agreement (FPRA) or establishes the contractor's negotiated billing rates.

What is a Forward Pricing Rate Proposal?

The FPRP is the contractor's detailed bottom-up forecast of its indirect cost pools and allocation bases for the upcoming fiscal year or multi-year period. It is the primary document DCAA audits before establishing agreed rates with the contractor. The FPRP covers each indirect pool (fringe, overhead, G&A, material handling, and any other pools), the projected costs in each pool, the projected allocation base for each pool, and the resulting proposed rate.

A well-prepared FPRP includes: a pool-by-pool cost analysis showing current-year actuals, the basis for each projected change, and the supporting data for each line (e.g., insurance premium renewal quotes for benefit costs, executed lease agreements for facility costs, staffing plans for projected salary costs); base projections by direct labor category and revenue line; and a reconciliation from prior-year actuals to current-year projections explaining material variances.

FAR 42.1701(a) requires that contractors receiving negotiated contracts expected to exceed $45M annually submit an FPRP. Contractors below this threshold may voluntarily submit an FPRP to obtain FPRA rates, which streamlines proposal preparation. The FPRP is submitted annually, typically 90-120 days before the beginning of the fiscal year it covers, to allow time for DCAA audit and ACO negotiation before the new year begins.

DCAA's audit of the FPRP evaluates the reasonableness of projected cost trends, the consistency between projected costs and the contractor's accounting practices, the adequacy of the allocation bases, and compliance with FAR Part 31 allowability requirements. DCAA issues an audit report with recommended rates; the ACO then negotiates the final agreed rates with the contractor.

Why the FPRP Matters for Government Contractors

A timely, well-documented FPRP is a prerequisite for an active FPRA. Contractors who submit FPRPs late (or not at all) delay their FPRA, forcing them to use unaudited rates in proposals and creating rate uncertainty for contracting officers. The quality of FPRP documentation directly affects how quickly DCAA can complete its audit, a comprehensive, well-organized FPRP with clear variance explanations can be audited in months; an incomplete submission may take a year or more, during which the contractor operates without agreed rates.

Example

A defense consulting firm with $75M annual revenue submits its FY 2027 FPRP in September 2026. The proposal projects: fringe at 33.8% (based on known insurance premium renewals, FICA rates, and 401(k) match), overhead at 19.2% (based on executed Herndon facility lease, IT infrastructure depreciation schedule, and supervisory staff plan), and G&A at 14.1% (executive comp allocated to G&A, DCAA-agreed B&P estimate, and HR/finance headcount plan). DCAA audits the submission over four months, identifying a questioned assumption in the overhead projection (a planned IT upgrade that may not be allowable under FAR 31.205-26). The firm revises that line, and the ACO negotiates final rates of fringe 33.8%, overhead 18.7%, G&A 13.9%, resulting in an FPRA signed in January 2027.

Frequently Asked Questions

What level of detail is required in an FPRP?

DCAA's FPRP guidance (DCAM Chapter 9) specifies that the submission should include: a description of the contractor's organizational structure, cost accounting practices, and accounting system; projected cost pools by element with explanations of significant changes from prior periods; projected allocation bases with supporting rationale; reconciliation of projected rates to prior-year actuals and to any audited rates currently in effect; and supporting schedules for significant cost elements (insurance quotes, lease agreements, salary surveys). The more detailed and well-supported the submission, the faster the DCAA audit can be completed.

Can a contractor use proposed rates in a proposal before the FPRA is executed?

Yes. Contractors frequently submit proposals during the FPRA negotiation period using their FPRP-proposed rates, with a disclosure in the proposal that rates are proposed and subject to DCAA audit and ACO negotiation. Contracting officers accept this approach for procurements that cannot wait for the FPRA to be finalized, typically noting in the contract that final indirect rates will be based on the eventual FPRA or audited rates. The contractor and government then reconcile the difference between proposed and agreed rates through the contract modification process.

How does the FPRP differ from the incurred cost submission (ICS)?

The FPRP is forward-looking, it projects rates for future periods. The ICS is backward-looking, it reports actual indirect costs incurred during a completed fiscal year, establishing the final actual rates for that period. The ICS is used to reconcile the provisional billing rates (from the FPRP or BRA) that were used for billing during the year against the actual costs incurred. Together, the FPRP and ICS form the annual cycle of rate estimation, billing, and settlement for cost-type contractors.

What if DCAA's audit of the FPRP identifies unallowable costs?

DCAA questions costs in the FPRP that it believes do not meet FAR Part 31 allowability requirements. Common questioned costs include executive compensation above the OFPP cap, entertainment expenses, certain advertising costs, and costs that DCAA believes benefit commercial work more than government work. Questioned costs are removed from the pool when calculating DCAA's recommended rates. The contractor may accept DCAA's recommendations, or it may dispute specific questioned costs in negotiations with the ACO. Unresolved disputes may ultimately be addressed through the claims process.