The cost-plus fixed fee is a payment method whereby the consultant is compensated for their services on actual cost plus a negotiated fixed fee amount. Contracting agencies can maintain eligibility for federal-aid reimbursement by ensuring costs incurred or cost estimates from contract negotiation are allowable per the cost principles in 48 CFR part 31. When an objective assessment of the reasonableness of proposed rates in accordance with the cost principles has not been performed, it is acceptable that the contracting agencies use the consultant’s actual direct salary or wage rates in the negotiation, administration, and payment of the contract.
In these circumstances, the consultants should be able to bill for their actual labor rates, including after the first year subject to reasonableness criteria of 48 CFR part 31.201-3. This meets 23 CFR 172 and is acceptable even when the rates are different from the approved cost proposal.
The Local Assistance Procedures Manual (LAPM) Exhibit 10-H1 form provides a methodology to calculate the anticipated salary increases. The anticipated salary increases are estimates that factor into the specific total contract amount or the not-to-exceed amount. Exhibit 10-H1 is one acceptable method. Other methods could be used. The purpose of calculating/estimating the anticipated salary increase is to estimate the total direct labor cost that can be billed on the project.
The negotiated fixed fee amount determined at the inception of the contract is nonadjustable for the term of the contract agreement. The contract shall specify a maximum amount payable, which shall not be exceeded. Contracting agencies must maintain adequate financial records, supporting documents, and other pertinent records for a minimum of 3 years after the contracting agency makes the final payment. For further clarification, contact your A&E Oversight Engineer at: https://www.localassistanceblog.com/wp-content/uploads/2019/10/AE-Coverage-1.pdf
