Posted: July 9th, 2016

What is the total operation cost?

January 5, 2000. Conrad submitted a request for equitable adjustment

Proposed Equitable Adjustment
Material 95,000 yards@ $10/yard $950,000
Material Overhead 5% of material Cost $ 47,500
Other Direct Cost Estimation of cost impact of $ 500
the change ________

Total Manufacturing $998,000
G&A Expense 10% of Total Mfg Cost $ 99,800
Total Cost $1,097,800
Profit 15% of Total Cost $ 164,670
Requested Adjustment $1,262,470

February 1, 2000. The Contracting Officer requested assistance from the ACO cognizant auditor and technical personnel.

February 28, 2000. Technical personnel found that:

? Conrad purchased a reasonable amount of material.
? The proposed Material Overhead was excessive for the effort involved, issuing and administering a single purchase order. Estimated actual cost was $250.

February 28, 2000. The cognizant auditor did not question any of the proposed cost. The auditor did comment that the proposed indirect rates complied with the current Forward Pricing Rate Agreement (FPRA)

March 5, 2000. The contracting officer developed a negotiation position based on the audit and technical reports.

Equitable Adjustment Negotiation Objective

Material Accepted Conrad proposed amount $ 950,000
Material Overhead Accepted Technical recommentation $ 250
Other Direct Cost Accepted Conrad Proposed amount $ 500
Total Mfg Cost $ 950,750
G&A Expense Accepted proposed 10% rate $ 95,075
Total Cost $1,045,825
Profit 5% of Total Cost because costs all
incurred $ 52,291
Adjustment objective $1,098,116

March 31, 2000. After weeks of negotiation, the contracting officer and the contractor could not reach agreement on an equitable adjustment. The major areas of difference were Material Overhead and Profit. As a result, the contractor submitted a claim seeking payment under the disputes clause of the contract. (See attached file for data)

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