PROCUREMENT
OPPORTUNITIES

SBIR

FOIA

HOW TO
START WORK

UNDERSTANDING
PROJECT COSTS
AND CHARGES

Understanding Project Costs and Charges

Introduction

The Volpe Center is a U.S. Department of Transportation resource for innovation in transportation and related activities. It develops integrated, multimodal approaches to critical transportation initiatives throughout the federal government, as well as for state, local, and foreign governments, and private organizations. We receive no federal appropriation; our funding is derived entirely from our project work for customers. Volpe's federal role and information on how work is initiated at Volpe are available in other brochures¹. This brochure explains how Volpe Center costs are charged to projects.

Return to Top

Charges Cover Only Cost

We charge customers only for the cost of the work we perform; i.e., no profit or fee.

All customers are charged in the same manner, using generally accepted federal accounting practices and a sophisticated project accounting system.

Direct and Indirect Costs

About 89% of Volpe expenditures are directly tied to specific projects: 87% for direct project charges and 2% for project acquisition support. The remaining 11% is for essential indirect support not directly attributed to individual projects.

Labor Costs and Charges

• The core resource Volpe brings to every project is our federal staff. A project's labor charges are the sum of all costs-direct and indirect-for each hour of work on the project by individual Volpe employees.

• Our labor cost per hour charged, as in any business, is determined by: employee compensation - salary, leave benefits (national holidays, vacation, and sick leave) and other benefits (retirement, insurance, etc.); and indirect costs - heat, light, administrative services (excluding project acquisition), management, and non-project-specific training and travel.

Combining employee compensation and indirect costs gives the fully loaded hourly labor cost as shown.

Labor Cost for a Representative Employee*

*Volpe federal employee at GS-13, Step 6 level.
*Amounts do not add due to rounding.

Project Costs and Charges

• Project costs usually include not only Volpe labor, but also travel, project acquisitions, and acquisition overhead, as seen in the example below.

Overall Costs for a Representative Project

Return to Top

Costs Are Reasonable

Labor - With both reasonable compensation and indirect costs, with no fee or profit, the Volpe Center labor costs are usually far less than charged for comparable talent elsewhere.²

• Compensation - Our federal staff receives standard federal salaries, retirement, insurance, and leave. This compensation package is below that of federally funded research and development centers³ and the private sector for similar talent.
• Indirect - In a study of R&D; organizations,⁴ our indirect cost rates were the lowest.

Travel - Volpe benefits from the mass purchasing power of the federal government, and enjoys negotiated air travel and hotel rates that are 20% to 70% below normal rates.

Project Acquisitions - We are skilled at competitively selecting and employing cost effective contractor support. More than 90% of our acquisitions are competitively awarded.

Acquisition Overhead - Our cost to let and administer project contracts is no more than 3.9% of the contracts' cost.

Return to Top

Financial Status Reports

Our financial division regularly sends project cost summary reports to each customer's financial and accounting office. More customized project status reports are sent to customers by Volpe's project managers, as needed.

Return to Top

Best Value Most Important ⁵

• While our costs are relatively low, our reputation is built on providing the best value to our customers.
• Our experience in performing technical work and in buying expertise shows that good quality rather than least cost, is most important for success in complex problem-solving and system implementation. Best value is realized when project benefits far exceed costs.

Return to Top

Questions & Answers

When do customers pay for Volpe support?
Customers must advance spending authority and cash before work begins. Both spending authority and cash may be advanced incrementally (see Volpe's "How to Start Work" brochure).

How does Volpe ensure its indirect and acquisition pool rates never go up during a fiscal year?
We start each year with advertised indirect rates slightly higher than would be needed if our direct work actuals meet expectations. During the fiscal year, we keep indirect expenditures below the actual revenues. At the year-end we return any excess in revenues to each project on a pro-rated basis by lowering the indirect and acquisition pool rates.

Is training charged to a specific project or to indirect?
In general, employees' time, travel, and tuition for training are charged to Volpe's indirect training account. Project-focused training is charged directly to projects.

Does Volpe have any preferential pricing practices?
No...all customers are charged in the same manner. We have no "discounts" or other special pricing arrangements.

Are funds tied to specific projects?
Yes...a project's funds may be used only for that project to ensure compliance with appropriation law and the intent of Congress.

Does Volpe guarantee its cost estimates?
No...initial project cost estimates are typically revised after work is initiated and defined in more detail. Work is performed on a best effort (not fixed price) basis. Since Volpe has no funds of its own, we are required to stop work if funds run out.

What happens to unexpended funds on completed projects?
Funds are returned to the customer. Projects are reviewed annually to ensure funds on completed projects are returned.

Can customers terminate projects and have funds returned to them?
Yes...Volpe will return all unexpended funds (after project close-out costs have been covered).

How can customers be confident Volpe is charging them appropriately?
In addition to regularly sending our customers financial status reports, Volpe is audited regularly by DOT's Office of the Inspector General.

Return to Top

To receive our annual financial report, please contact:
Chief, Financial Management Division/DTS-82
Volpe National Transportation Systems Center
55 Broadway, Cambridge, MA 02142
Phone: 617/494-2602
Fax: 617/494-3630
E-mail: flahertyd@volpe.dot.gov

For additional information, call your project manager, or Volpe's Chief, Communications and Technology Outreach Division, at 617/494-2224, or visit Volpe via the Internet, at http://www.volpe.dot.gov

Return to Top

1. "How to Start Work" - Working with the Volpe National Transportation Systems Center. December 2001
2. "The Costs of Research: Examining Patterns of Expenditures Across Research Sectors,": (Arthur Anderson & Co., S.C. for The Government-University-Industry Research Roundtable) March 1996
3. "Federal Centers' 1993 Compensation in Relation to Federal Levels," (U.S. General Accounting Office, GAO/NSIAD-96-140) July 1996
4. "Competition: Information on Federally Funded Research and Development Centers," (U.S. General Accounting Office, GAO/NSIAD-96-54) April 1996
5. Volpe Center Customer Satisfaction Monitoring System Round 2. May 2000

Return to Top

Research and Special Programs Administration