DCAA AFOPO Proposal Presentation AFCEE

AFOPO & DCAAPREPARING PROPOSALSAPRIL 23, 2003: 

AFOPO & DCAA PREPARING PROPOSALS APRIL 23, 2003 PRESENTED BY PETE M. GONZALES, JR., CPA, CFE FINANCIAL LIAISON ADVISOR

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DEFENSE CONTRACT AUDIT AGENCY AGENDA Vital Elements of A Proposal Common Deficiencies Found in Proposals Example of Submitted Proposal, including Cost Elements Overhead Rate Calculation G&A Rate Calculation Preparing for An Audit

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VITAL ELEMENTS OF A PROPOSAL Summary - Total Cost Elements Consolidated Price Bill of Materials Types, Quantities, Cost FAR 15.408, Table 15-2 II.A. Breakdown of Labor (FAR 15.408, Table 15-2 II.B.) Hours Rates, and Costs by Appropriate Category

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VITAL ELEMENTS OF A PROPOSAL Details: How Indirect Costs Are Computed How Indirect Costs Are Applied, Cost Breakdowns, Trends, and Budgetary Data (FAR 15.408, Table 15-2 II.C.) Identification of All Other Costs by Category and Basis for Pricing (FAR 15.408, Table 15-2 II.C.) Rationale for Proposed Profit

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COMMON DEFICIENCIES Lack of A Consolidated Bill of Materials Lack of Data to Evaluate Indirect Rates Failure to: Conform to the Specifications-Buying Activity Identify Places or Periods of Performance Disclose Basis for Pricing Other Direct Costs

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COMMON DEFICIENCIES (Con’t) Failure To: Provide The Basis for Proposed Material, Labor and Indirect Costs. Comply With The Requirements Set Forth in FAR 15. 408, Table 15-2

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Element of Cost Amount Reference Engineering Labor $452,151 Schedule 1 Manufacturing Labor 26,412 Schedule 1 Direct Labor Overhead @ 56.7% 271,345 Schedule 2 Material 113,175 Schedule 3 Material Handling Overhead @ 5.0% 5,659 Schedule 4 Subtotal $868,742 G&A @ 8.0% 69,499 Schedule 5 Estimated Cost $938,241 Profit @ 10.0% 93,824* Total Price $1,032,065 ======== *Contractors can negotiate profit with the contracting officer. Typically, contracting officers use criteria in FAR 15.404-4 for establishing a profit objective. DoD contracting officers may use the weighted guidelines policy described in DFARS 215.404-4.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Element of Cost Amount Reference Engineering Labor $452,151 Schedule 1 Manufacturing Labor 26,412 Schedule 1 Direct Labor Overhead @ 56.7% 271,345 Schedule 2 Material 113,175 Schedule 3 Material Handling Overhead @ 5.0% 5,659 Schedule 4 Subtotal $868,742 G&A @ 8.0% 69,499 Schedule 5 Estimated Cost $938,241 Profit @ 10.0% 93,824* Total Price $1,032,065 ======== *Contractors can negotiate profit with the contracting officer. Typically, contracting officers use criteria in FAR 15.404-4 for establishing a profit objective. DoD contracting officers may use the weighted guidelines policy described in DFARS 215.404-4.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 1 Engineering Labor Cost Labor Category 2002 2003 2004 Total Program Manager $23,174 $27,079 $18,967 $69,220 Senior Engineer 31,668 24,939 20,370 76,977 Junior Engineer 39,816 34,845 21,951 96,612 Engineering Aide 26,100 8,377 800 35,277 Technical Writer - - 15,876 15,876 Metallurgist 35,815 23,748 14,546 74,109 Draftsman 41,690 29,850 12,540 84,080 Total D/L – Eng $198,263 $148,838 $105,050 $452,151 (Sched 1A) (Sched 1B) (Sched 1C) Manufacturing Labor Cost Labor Category 2002 2003 2004 Total Fabrication $4,340 $6,834 $7,176 $18,350 Assembly - 1,942 6,120 8,062 Total D/L – Mfg $4,340 $8,776 $13,296 $26,412 (Sched 1A) (Sched 1B) (Sched 1C) Total Direct Labor $202,603 $157,614 $118,340 $478,563 =========== =========== =========== ==========

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 1A 2002 Engineering Labor Cost Labor Category Rate/Hr Hours Total . Program Manager $33.93 683 $23,174 Senior Engineer 26.39 1,200 31,668 Junior Engineer 22.12 1,800 39,816 Engineering Aide 14.50 1,800 26,100 Technical Writer 16.00 - - Metallurgist 18.85 1,900 35,815 Draftsman 18.95 2,200 41,690 Total D/L – Eng 9,583 $198,263 2002 Manufacturing Labor Cost Labor Category Rate/Hr Hours Total . Fabrication $10.85 400 $4,340 Assembly 9.25 - - . Total D/Labor – Mfg 400 $4,340 . Total Direct Labor $202,603 ========== All hours proposed are based on historical costs, reference contract DAAH01-99-C-0001, account 9271. The supporting data showing the historical hours and the development of the proposed hours are in file “DAAH01-02-R-0001, Hours” and is available immediately upon request. The direct labor rates are based on actual average rates as of 31 October 2001. The supporting data and rate calculation are located in file “DAAH01-02-R-0001, Direct Labor Rates” and is available immediately upon request.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 1B 2003 Engineering Labor Cost Labor Category Rate/Hr Hours Total . Program Manager $35.63 760 $27,079 Senior Engineer 27.71 900 24,939 Junior Engineer 23.23 1,500 34,845 Engineering Aide 15.23 550 8,377 Technical Writer 16.80 - - Metallurgist 19.79 1,200 23,748 Draftsman 19.90 1,500 29,850 Total D/L – Eng 6,410 $148,838 2003 Manufacturing Labor Cost Labor Category Rate/Hr Hours Total . Fabrication $11.39 600 $6,834 Assembly 9.71 200 1,942 Total D/Labor – Mfg 800 $8,776 . Total Direct Labor $157,614 ========== All hours proposed are based on historical costs, reference contract DAAH01-99-C-0001, account 9271. The supporting data showing the historical hours and the development of the proposed hours are in file “DAAH01-02-R-0001, Hours” and is available immediately upon request. The direct labor rates are based on actual average rates as of 31 October 2001 and escalated 5 percent each year. The supporting data and rate calculation are located in file “DAAH01-02-R-0001, Direct Labor Rates” and is available immediately upon request.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 1C 2004 Engineering Labor Cost Labor Category Rate/Hr Hours Total . Program Manager $37.41 507 $18,967 Senior Engineer 29.10 700 20,370 Junior Engineer 24.39 900 21,951 Engineering Aide 15.99 50 800 Technical Writer 17.64 900 15,876 Metallurgist 20.78 700 14,546 Draftsman 20.90 600 12,540 Total D/L – Eng 4,357 $105,050 2004 Manufacturing Labor Cost Labor Category Rate/Hr Hours Total . Fabrication $11.96 600 $7,176 Assembly 10.20 600 6,120 Total D/Labor – Mfg 1,200 $13,296 . Total Direct Labor $118,346 ========== All hours proposed are based on historical costs, reference contract DAAH01-99-C-0001, account 9271. The supporting data showing the historical hours and the development of the proposed hours are in file “DAAH01-02-R-0001, Hours” and is available immediately upon request. The direct labor rates are based on actual average rates as of 31 October 2001 and escalated 5 percent each year. The supporting data and rate calculation are located in file “DAAH01-02-R-0001, Direct Labor Rates” and is available immediately upon request.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Element of Cost Amount Reference Engineering Labor $452,151 Schedule 1 Manufacturing Labor 26,412 Schedule 1 Direct Labor Overhead @ 56.7% 271,345 Schedule 2 Material 113,175 Schedule 3 Material Handling Overhead @ 5.0% 5,659 Schedule 4 Subtotal $868,742 G&A @ 8.0% 69,499 Schedule 5 Estimated Cost $938,241 Profit @ 10.0% 93,824* Total Price $1,032,065 ======== *Contractors can negotiate profit with the contracting officer. Typically, contracting officers use criteria in FAR 15.404-4 for establishing a profit objective. DoD contracting officers may use the weighted guidelines policy described in DFARS 215.404-4.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 2 Cost Element 2002 2003 2004 Total . D/L – Engineering $198,263 $148,838 $105,050 $452,151 D/L – Manufacturing 4,340 8,776 13,296 26,412 Total Direct Labor $202,603 $157,614 $118,340 $478,563 (Sched 1A) (Sched 1B) (Sched 1C) D/L Overhead Rate 56.7% 56.7% 56.7% 56.7% (Schedule 2A) . Direct Labor O/H $114,876 $89,367 $67,102 $271,345 ========= ======== ======== =========

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Advanced Tank Technologies Washington, DC Schedule 2A Budget for FY 2002 Labor Overhead Actual Overhead Expenses for FY 1999 - 2001 (Note 2) Budget Actual Expenses (Note 1) . Overhead Expenses 2002 2001 2000 1999 Indirect Payroll $260,000 Payroll Taxes 228,000 Vacation 120,000 Holiday 110,000 Sick Leave 50,000 Pensions 171,000 Employee Morale 5,000 Entertainment 50,000 Office Equipment 7,000 Depreciation 5,000 Subscriptions 1,500 Travel 22,000 Miscellaneous 2,000 Stationery 6,000 Reproduction 17,000 Maintenance 5,000 Rent 202,000 Telephone 11,000 Insurance 102,000 Total Pool $1,374,500 Less Unallowable Costs Entertainment 50,000 Net Allowable Expenses $1,324,500

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Advanced Tank Technologies Washington, DC Schedule 2A Budget for FY 2002 Labor Overhead Actual Overhead Expenses for FY 1999 - 2001 (Note 2) Budget Actual Expenses (Note 1) Overhead Expenses 2002 2001 2000 1999 Net Allowable Expenses $1,324,500 Allocation Base Direct Labor $2,336,000 (Note 3) Rate 56.7% (Note 4) ============= Explanatory Notes (1) Provide the prior three years’ actual overhead expense and allocation base in the same format as the budget for 2002. For the year 2001, actuals to date are provided. (2) The projected overhead expenses are based on the company’s operating budget for 2002. The operating budget supporting data is located in file "DAAH01-02-R-0001, Overhead Operating Budget" and is immediately available upon request. (3) Includes Bid and Proposal Labor of $5,000. (4) The same rate is estimated for fiscal years 2003 and 2004. We anticipate minimal inflation and a stable business base. The data and analysis supporting this assertion is located in file "DAAH01-02-R-0001, Overhead Forecast" and is immediately available upon request.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Element of Cost Amount Reference Engineering Labor $452,151 Schedule 1 Manufacturing Labor 26,412 Schedule 1 Direct Labor Overhead @ 56.7% 271,345 Schedule 2 Material 113,175 Schedule 3 Material Handling Overhead @ 5.0% 5,659 Schedule 4 Subtotal $868,742 G&A @ 8.0% 69,499 Schedule 5 Estimated Cost $938,241 Profit @ 10.0% 93,824* Total Price $1,032,065 ======== *Contractors can negotiate profit with the contracting officer. Typically, contracting officers use criteria in FAR 15.404-4 for establishing a profit objective. DoD contracting officers may use the weighted guidelines policy described in DFARS 215.404-4.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 3 Shock Absorber Bill of Material (Note 3) Support Qty Unit Price Total Notes Sheet Metal 1,600 sq. yd $25.00 $40,000 (1) Casings 750 pcs. 8.50 6,375 (2) Plastic 7,500 pcs. 5.75 43,125 (1) Springs 1,700 pcs. 4.00 6,800 (2) Bolts 7,500 pcs. 2.25 16,875 (2) Total Material $113,175 ============ Explanatory Notes (1) These prices are supported by multiple vendor quotes. The proposed prices are those provided by the low bidder who was the ACME Corporation in their quotation dated October 21, 2001. The quotations are included in file "DAAH01-02-R-0001, Vendor Quotations" that are available immediately upon request. (2) These prices are supported by the Halloween edition of the Springs R Us Catalog. This catalog is available for audit in the pricing office. (3) The proposed quantities are from the engineering drawings for the shock absorber. This drawing is located in file "DAAH01-02-R-0001, Engineering Drawing" and is immediately available upon request.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Element of Cost Amount Reference Engineering Labor $452,151 Schedule 1 Manufacturing Labor 26,412 Schedule 1 Direct Labor Overhead @ 56.7% 271,345 Schedule 2 Material 113,175 Schedule 3 Material Handling Overhead @ 5.0% 5,659 Schedule 4 Subtotal $868,742 G&A @ 8.0% 69,499 Schedule 5 Estimated Cost $938,241 Profit @ 10.0% 93,824* Total Price $1,032,065 ======== *Contractors can negotiate profit with the contracting officer. Typically, contracting officers use criteria in FAR 15.404-4 for establishing a profit objective. DoD contracting officers may use the weighted guidelines policy described in DFARS 215.404-4.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 4 Total Material $113,175 Sched 3 Matl O/H Rate 5.0% Sched 4A Material Overhead $5,659 =======

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Advanced Tank Technologies Washington, DC Schedule 4A Budget for FY 2002 Mat’l Overhead Actual Overhead Expenses for FY 1996 - 2001 (Note 2) Budget Actual Expenses (Note 1) Material Handling Expenses 2002 2001 2000 1999 Purchasing Department $10,000 Receiving Department 2,500 Total Expenses $12,500 Less Unallowable Costs - . Net Allowable Expenses $12,500 Allocation Base Materials $250,000 Material Overhead Rate 5.0% (Note 3) =========== Explanatory Notes (1) Provide the prior three years’ actual material overhead expenses and allocation base in the same format as the budget for 2002. For the year 2001, actuals are provided to date. (2) The projected material overhead expenses are based on the company’s operating budget for 2002. The operating budget supporting data is located in file "DAAH01-02-R-0001, Material Overhead- Operating Budget" and is immediately available upon request. (3) The same rate is estimated for fiscal years 2003 and 2004. We anticipate minimal inflation and a stable business base. The data and analysis supporting this assertion is located in file "DAAH01-02-R-0001, Material Overhead-Forecast" and is available immediately upon request.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Element of Cost Amount Reference Engineering Labor $452,151 Schedule 1 Manufacturing Labor 26,412 Schedule 1 Direct Labor Overhead @ 56.7% 271,345 Schedule 2 Material 113,175 Schedule 3 Material Handling Overhead @ 5.0% 5,659 Schedule 4 Subtotal $868,742 G&A @ 8.0% 69,499 Schedule 5 Estimated Cost $938,241 Profit @ 10.0% 93,824* Total Price $1,032,065 ======== *Contractors can negotiate profit with the contracting officer. Typically, contracting officers use criteria in FAR 15.404-4 for establishing a profit objective. DoD contracting officers may use the weighted guidelines policy described in DFARS 215.404-4.

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Advanced Tank Technologies Washington, DC Proposal Submitted in Response to RFP DAAH01-02-R-0001 Schedule 5 Engineering Labor $452,151 Schedule 1 Manufacturing Labor 26,412 Schedule 1 Direct Labor Overhead @ 56.7% 271,345 Schedule 2 Material 113,175 Schedule 3 Material Handling Overhead @ 5.0% 5,659 Schedule 4 Total Cost Input $868,742 G&A Rate 8.0% Schedule 5A G&A $69,499 ========

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Advanced Tank Technologies Washington, DC Schedule 5A Budget for FY 2002 G&A Actual G&A Expenses for FY 1999 – 2001 (Note 2) Less Net Allow Actual Expenses (Note 1) 2002 Projected G&A Expenses Unallow Expenses 2001 2000 1999 Payroll Taxes $16,000 $16,000 Officers’ Salaries 165,000 165,000 Indirect Salaries 21,000 21,000 Interest 14,000 $14,000 - Vacation 11,000 11,000 Holiday 9,000 9,000 Sick Leave 5,000 5,000 Contributions 8,000 8,000 - Pensions 12,000 12,000 Office Equipment 1,000 1,000 Depreciation 2,500 2,500 Travel 10,000 10,000 Miscellaneous 2,000 2,000 Legal Fees 7,000 7,000 Accounting Fees 7,000 7,000 Computer 17,500 17,500 Rent 15,000 15,000 Advertising 8,500 8,500 - Telephone 3,000 3,000 Insurance ___7,000 ___7,000 Total Pool $341,500 $30,500 $311,000 B&P ___8,500 ___8,500 (Note 3) Total G&A and B&P $350,000 $30,500 $319,500

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Advanced Tank Technologies Washington, DC Schedule 5A Budget for FY 2002 G&A Actual G&A Expenses for FY 1999 – 2001 (Note 2) Less Net Allow Actual Expenses (Note 1) 2002 Projected G&A Expenses Unallow Expenses 2001 2000 1999 Total G&A and B&P $350,000 $30,500 $319,500 Allocation Base Labor $2,331,000 Overhead 1,371,665 (Note 4) Other Direct Costs 29,000 Materials 250,000 Material Overhead 12,500 Total Base $3,994,165 ----------------------- G&A Rate 8.0% (Note 5) =========== Explanatory Notes (1) Provide the prior three years’ actual G&A expenses and the allocation base in the same format as the 2002 budget. For the year 2001, actuals are provided to date. (2) The projected G&A expenses are based on the company’s operating budget for 2002. The operating budget supporting data is located in file "DAAH01-02-R-0001, G&A Operating Budget" and is available immediately upon request. (3) Includes $665 B&P Travel ($5,000 + $2,835 + $665). (4) Total Pool, excluding $2,835 allocated to B&P Labor ($5,000 x .567) [$1,374,500 -- $2,835]. (5) The same rate is estimated for fiscal years 2003 and 2004. We anticipate minimal inflation and a stable business base. The data and analysis supporting this assertion is included in file "DAAH01-02-R-0001, G&A" and is available immediately upon request.

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UNALLOWABLE COSTS Accounting for Unallowable Costs (FAR 31.201-6) Expressly Unallowable Costs & Directly Associated Costs must be: Identified Excluded from Billings Claims Proposals

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PREPARING FOR AN AUDIT Reasonably Available for The Audit Personnel Familiar Readily Available An Adequate Accounting System Detailed Schedules Used Available

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PREPARING FOR AN AUDIT Data Related to the Proposed Costs (Supporting Documentation) Readily Available Provide the Proposal and Supporting Data in Electronic Format Financial Statements of the Company

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DEFENSE CONTRACT AUDIT AGENCY SUMMARY Elements of A Proposal Common Deficiencies Example of A Submitted Proposal Preparation for An Audit

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210-536-8756 210-603-1851(VP) 210-602-4829 (Cell) pete.gonzales@dcaa.mil pete.gonzales@brooks.af.mil PETE M. GONZALES, JR., CPA, CFE Presenter’s Information

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William H. Reed Director Defense Contract Audit Agency 8725 John J. Kingman Road Suite 2135 Fort Belvoir, VA 22060-6219 william.reed@dcaa.mil DIRECTOR OF DCAA

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Joseph G. Diamond SAF/SB Attn: Mr. Joseph Diamond, director AF OSADBU 901 N. Stuart Street, Suite 802 Arlington, VA 22203 joseph.diamond@pentagon.af.mil Director, Air Force Office of Small and Disadvantaged Business Utilization