PROCUREMENT
OPPORTUNITIES
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HOW TO
START WORK
UNDERSTANDING
PROJECT COSTS
AND CHARGES
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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.
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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*
|
$ per hour worked |
$ per staff year (1,750hrs) |
|
Compensation |
|
Salary (for hours worked) |
38 |
66K |
|
Leave benefits @ 20.4% of salary (national holidays, sick, vacation) |
8 |
13K |
|
Other benefits @ 30.6% of salary (retirement, insurance, awards, etc.) |
11 ____ |
20K ____ |
|
Total Compensation |
57 |
99K |
|
Indirect @ 67% of compensation (facilities, training, management, all non-acquisition administrative services) |
38 ____ |
67K ____ |
|
Total (2.52 of salary or 1.67 of compensation) |
$95 |
$166K |
*Volpe federal employee at GS-13, Step 6 level.
*Amounts do not add due to rounding.
Project Costs and Charges
- Project costs usually include not only Volpe labor, but also travel, project acquisitions, and acquisition overhead, as seen in the example below.
Overall Costs for a Representative Project
Cost ($K) |
|
Labor (1,750hrs x $95/hr) |
166 |
|
Travel |
8 |
|
Project Acquisitions |
437 |
|
Acquisition Overhead @ 3.9% of project acquisitions |
17 ____ |
|
Total |
$628 |
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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.
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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.
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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.
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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.
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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
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- "How to Start Work" - Working with the Volpe National Transportation Systems Center. December 2001
- "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
- "Federal Centers' 1993 Compensation in Relation to Federal Levels," (U.S. General Accounting Office, GAO/NSIAD-96-140) July 1996
- "Competition: Information on Federally Funded Research and Development Centers," (U.S. General Accounting Office, GAO/NSIAD-96-54) April 1996
- Volpe Center Customer Satisfaction Monitoring System Round 2. May 2000
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