CGS was retained by a Top 10 Engineering & Construction (E&C) firm with annual revenues in excess of $15B to design and implement a new allocation methodology for its Corporate Office. The annual costs of the Corporate Office exceed $300M, and the E&C firm is a significant Federal and state contractor.
CGS prepared several alternative allocation methodologies balancing a mix of direct allocations to the government contracting segments with a simplified allocation pool structure. We also analyzed various potential allocation bases to determine which rate structure optimized cost recovery on an equitable basis. Finally, we analyzed the proposed new Corporate Office allocation structure with CGS’ proprietary data to ensure that the new approach would be competitive in the marketplace.
Ultimately, the new allocation methodology improved cost recovery by over $20M per year on government contracts – all with less administrative burden. The new methodology has successfully undergone numerous government audits.
CGS also drafted the new CAS Disclosure Statement to disclose the new allocation methodology including the pools, bases, etc. We also prepared the cost-impact analysis to demonstrate to the government the effect of the new methodology on the CAS-covered contracts and how it was in the government’s interests to approve the new methodology – which it ultimately did along with the related cost-impact analysis.
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