A common question that I field is: “Does this mean that we have to pay the Government back?” Let’s go through the situations where a contractor will be in a payback position to the Government. First, the obvious:
- The Government overpaid you; such as paying an invoice twice.
- A contract that you have has disincentive clauses that you activated.
Other overbillings need to be viewed from the prism of the contract type.
Fixed Price:
- You billed the Government and got paid, but you did not provide the goods or services required. Or the goods or services did not meet the Government standards.
- The goods and services were provided but delivery was outside of the terms and conditions of the contract; for example, the period of performance.
Time and Material: 1) and 2) under Fixed Price plus:
- You billed more hours to the Government than you incurred.
- You billed higher rates than contained in the contract.
- Some of your employees did not meet the minimum education and experience prescribed for the labor categories in the contract.
Cost Plus Fixed Fee: 1) and 2) under Fixed Price plus:
- You billed more direct costs to the Government than you incurred;
- You billed more indirect costs to the Government than you incurred;
- You final actual indirect rates were lower than billed
- You final indirect pools contained costs which were unallowable
- You were unable to support some of your indirect costs incurred; i.e. unable to produce source documents during the audit.
Please note that most of the items causing payback under Time and Material and Cost Plus Fixed Fee contracts would be uncovered during an incurred cost audit.
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