Professional architectural, engineering, railroad, and utility companies who perform work for government agencies are generally required to have an independently audited overhead rate. You calculate this rate by dividing total allowable indirect expenses over direct labor but getting to this step and optimizing this result involves some effort.
It might seem as you're jumping through hoops to satisfy a regulatory body, but that's only partially true. If you're working in this space, your livelihood and success depend on your ability to be fully reimbursed for your eligible costs and make the right decisions on future contracts. These are just a few of the reasons why understanding and optimizing your overhead rate are vital.
Professional Consultants seeking to provide services to the Florida Department of Transportation must be certified as “qualified” annually in accordance with Chapter 14-75 of the Florida Administrative Code.
The First & Primary Requirement
Regardless of whether the “Request for Qualification Package for Professional Consultants” is the initial submission or an annual renewal, the package must include evidence that you (the Consultant) maintains an accounting system adequate to separate and accumulate direct and indirect costs and to support billings to the FDOT Department and other clients.
The capability to identify and separately report direct and indirect costs is the first and primary Departmental requirement for your accounting systems.
When you (the Consultant) has the expectation of billing for direct labor by the hour, a job cost accounting system is required in order to “support billings to the FDOT Department.”
The Florida Department of Transportation requires consultants requesting professional services prequalification at the unlimited level (greater than $500,000 in fees) to certify the establishment of an accounting system that separates and accumulates direct and indirect costs, and identifies and records labor charges and expenditures for specific projects or jobs.
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