Factors Used In Calculating Fccom Amount

This calculator helps government contractors determine the Facilities Capital Cost of Money (FCCOM) amount, an imputed cost that can be included in contract pricing and invoicing. The calculation adheres to the principles outlined in the Cost Accounting Standards (CAS) 414. Understanding the factors used in calculating the FCCOM amount is crucial for accurate cost proposals.

FCCOM Calculator

Example FCCOM Calculation Across Multiple Contracts

Contract	Allocation Base	FCCOM Allocation

A table showing how the total business unit cost of money is distributed across different contracts based on their allocation base.

What is the Facilities Capital Cost of Money (FCCOM) Amount?

The Facilities Capital Cost of Money (FCCOM) amount is an imputed cost that government contractors can include in proposals and billings. It is not a direct out-of-pocket expense but rather a calculated amount intended to compensate a contractor for the opportunity cost of investing in facilities to perform government contracts. This concept is defined under Federal Acquisition Regulation (FAR) 31.205-10 and Cost Accounting Standard (CAS) 414. Recognizing the factors used in calculating the FCCOM amount is essential for any contractor working with the U.S. government.

Essentially, the government acknowledges that when a contractor uses its capital to buy buildings and equipment, it forgoes the opportunity to invest that same capital elsewhere (e.g., in interest-bearing securities). FCCOM provides a mechanism to recover this “cost of capital.” It is a critical component of ensuring fair and reasonable contract pricing. This is distinct from other financial metrics and should not be confused with profit or direct costs.

Who Should Calculate the FCCOM Amount?

Any contractor with U.S. government contracts that are subject to full CAS coverage must calculate their FCCOM. It is particularly relevant for contractors with significant capital investments in their facilities. Failing to properly calculate and propose this amount means leaving allowable cost recovery on the table. The calculation process requires a detailed understanding of the factors used in calculating the FCCOM amount and how they apply to the contractor’s specific financial structure.

FCCOM Amount Formula and Mathematical Explanation

The calculation of the Facilities Capital Cost of Money (FCCOM) amount is a multi-step process designed to allocate the cost of capital to individual contracts in a fair and consistent manner. Here is the step-by-step derivation:

1. Determine Business Unit Cost of Money: The process starts by calculating the total imputed cost for the entire business unit.
   
   Formula: Total Business Unit Cost of Money = Total Facilities Capital Investment × Cost of Money Rate
2. Calculate the FCCOM Factor: This factor represents the cost of money per dollar of the allocation base. It creates a rate that can be applied across all contracts within the business unit.
   
   Formula: FCCOM Factor = Total Business Unit Cost of Money ÷ Total Business Unit Allocation Base
3. Allocate to the Contract: Finally, the FCCOM factor is applied to the specific contract’s portion of the allocation base to determine the final FCCOM amount for that contract.
   
   Formula: Contract FCCOM Amount = FCCOM Factor × Contract’s Overhead Allocation Base

Variables Table

Variable	Meaning	Unit	Typical Range
Total Facilities Capital Investment	Net book value of the contractor’s facilities.	Dollars ($)	Varies widely
Cost of Money Rate	Treasury-published rate (P.L. 92-41).	Percentage (%)	0.5% – 5.0%
Total Business Unit Allocation Base	The base used to allocate the business unit’s indirect costs.	Dollars ($)	Varies widely
Contract’s Allocation Base	The portion of the allocation base attributable to the specific contract.	Dollars ($)	Varies widely

Practical Examples of Calculating the FCCOM Amount

Example 1: Aerospace Manufacturer

An aerospace company has a total facilities investment of $50,000,000. Their total business unit G&A base is $200,000,000 for the year. The applicable Cost of Money Rate is 2.0%. They are pricing a contract with an estimated G&A base of $5,000,000.

• Business Unit Cost of Money: $50,000,000 × 2.0% = $1,000,000
• FCCOM Factor: $1,000,000 ÷ $200,000,000 = 0.005
• Contract FCCOM Amount: 0.005 × $5,000,000 = $25,000

In this case, the contractor can add $25,000 to their proposed cost for this contract. A solid grasp of the factors used in calculating the FCCOM amount leads to this allowable cost.

Example 2: Small IT Services Contractor

An IT services firm has a smaller facilities investment of $800,000. Their total overhead base is $10,000,000. The Cost of Money Rate is 1.5%. They are pricing a contract with a projected overhead base of $750,000.

• Business Unit Cost of Money: $800,000 × 1.5% = $12,000
• FCCOM Factor: $12,000 ÷ $10,000,000 = 0.0012
• Contract FCCOM Amount: 0.0012 × $750,000 = $900

Even for a smaller contractor, understanding how to calculate the FCCOM amount ensures they are pricing their services correctly and recovering all allowable costs.

How to Use This FCCOM Amount Calculator

This calculator simplifies the process of determining the Facilities Capital Cost of Money (FCCOM) amount. Follow these steps for an accurate calculation:

1. Enter Facilities Investment: Input the total net book value of your business unit’s capital assets in the first field.
2. Enter Allocation Bases: Provide the specific contract’s overhead or G&A allocation base and the corresponding total base for the entire business unit.
3. Enter Cost of Money Rate: Input the current semi-annual rate published by the Treasury.
4. Review Results: The calculator instantly displays the final FCCOM amount for the contract, along with key intermediate values like the total business unit cost of money and the calculated FCCOM factor.

The results can be used to support your cost proposals and ensure you are in compliance with CAS 414. For more complex scenarios, consider consulting our guide on Advanced Cost Analysis Techniques.

Key Factors That Affect the FCCOM Amount

Several critical inputs influence the final calculated figure. Understanding these factors used in calculating the FCCOM amount is key to accurate cost management.

1. Size of Facilities Investment: This is the most significant driver. A larger investment in buildings, machinery, and equipment directly increases the total cost of money pool.
2. Cost of Money Rate (Treasury Rate): This rate is non-negotiable and set by the government. Fluctuations in this rate will directly impact the FCCOM amount. A higher rate leads to a higher amount.
3. Choice of Allocation Base: The method used to allocate indirect costs (e.g., direct labor hours, direct labor dollars, total cost input) determines how the cost of money pool is distributed among contracts. You must use the same base for FCCOM as you do for the corresponding indirect cost pool. Learn more about indirect cost rate structures.
4. Contract Size and Mix: A contract with a large allocation base relative to the business unit’s total base will receive a proportionally larger share of the total FCCOM.
5. Asset Depreciation: Since the calculation is based on the *net book value* of assets, your company’s depreciation schedule plays an indirect role. As assets depreciate, their value decreases, which in turn lowers the total investment base and the resulting FCCOM amount.
6. CAS 417 Compliance: For facilities under construction, CAS 417 governs how the cost of money is capitalized. Proper implementation is crucial for an accurate calculation. This is one of the more complex factors used in calculating the FCCOM amount. Explore our CAS compliance checklist for more details.

Frequently Asked Questions (FAQ)

1. Is FCCOM the same as profit?

No. The FCCOM amount is an allowable imputed cost, intended to compensate for capital investment. Profit (or fee) is a separate amount negotiated with the government to reward the contractor for performance, risk, and effort.

2. Do I have to claim the FCCOM amount?

It is not mandatory, but if you do not include it in your contract proposal, you waive the right to claim it later. It is highly recommended to calculate and include it to ensure full cost recovery.

3. Where can I find the official Cost of Money rates?

The rates are published semi-annually by the Department of the Treasury and can be found on the Treasury’s website and in the Federal Register. These rates are key factors used in calculating the FCCOM amount.

4. Can I use a different allocation base for FCCOM than for my overhead?

No. CAS 414 requires that the FCCOM be allocated using the same base as the indirect costs with which the facilities are identified. Consistency is mandatory. For help, see our guide to allocation bases.

5. What happens if the Treasury rate changes during my contract?

For interim billing purposes, you use the latest available rate. For final settlements, an adjustment is made based on the actual, finalized rates for the performance period. This ensures the final FCCOM amount is accurate.

6. Does land get included in the facilities capital investment base?

No. Under CAS, land is not a depreciable asset and is excluded from the capital investment base used for the FCCOM calculation.

7. How is the FCCOM amount for facilities under construction handled?

That is covered by CAS 417. It involves capitalizing the cost of money during the construction period and adding it to the asset’s acquisition cost. It’s a different but related calculation.

8. Does this calculator work for both fixed-price and cost-reimbursement contracts?

Yes. The principle of calculating the FCCOM amount applies to cost buildup for both flexibly-priced and fixed-price contract proposals. Understanding the factors used in calculating the FCCOM amount is vital for all CAS-covered contracts.