Facilities Capital Cost of Money (FCCOM) Calculator
An essential tool for government contractors to determine the imputed cost of capital for facilities as defined by Cost Accounting Standard (CAS) 414. This calculator helps in understanding the factors used in calculating fccom amount for contract pricing and final settlements.
Intermediate Values
Total Capital Cost of Money: $0.00
FCCOM Factor (per unit of base): 0.00000
What is the Facilities Capital Cost of Money (FCCOM)?
Facilities Capital Cost of Money (FCCOM) is an imputed cost that government contractors can include in federal contract pricing. It is not a direct, out-of-pocket expense like labor or materials. Instead, FCCOM represents the theoretical cost of using a contractor’s own capital to invest in facilities and equipment necessary for contract performance. The core idea is to compensate contractors for the opportunity cost of tying up their funds in facilities, rather than using that money for other investments that could generate a return. The calculation and application of FCCOM are governed by the U.S. Cost Accounting Standard (CAS) 414. This makes understanding the factors used in calculating fccom amount crucial for any business involved in government contracting. It is a key element in both preaward cost objectives and postaward final cost settlements.
FCCOM Formula and Explanation
The core calculation for the factors used in calculating fccom amount is straightforward, though it is part of a more complex allocation process. The primary formula is:
Total Cost of Money = Net Book Value (NBV) of Facilities × Cost of Money Rate
This “Total Cost of Money” is then allocated to contracts. To derive the factor applied to a specific contract’s costs, another step is taken:
FCCOM Factor = Total Cost of Money / Overhead Allocation Base
| Variable | Meaning | Unit | Typical Range |
|---|---|---|---|
| Net Book Value (NBV) | The depreciated value of a company’s tangible capital assets and amortizable intangible assets. | Currency ($) | Varies widely, from thousands to billions. |
| Cost of Money Rate | The interest rate determined semi-annually by the U.S. Treasury Secretary for this purpose. | Percentage (%) | Typically 1% – 8%, fluctuates with federal rates. |
| Overhead Allocation Base | The base used to allocate the indirect costs of a facility (e.g., total direct labor hours, machine hours, or direct labor cost). | Varies (Hours, $, etc.) | Dependent on the contractor’s accounting structure. |
| FCCOM Amount | The final, allocable cost of money for a specific contract or period. | Currency ($) | Directly proportional to the other factors. |
Practical Examples
Example 1: Mid-Sized Manufacturing Contractor
A contractor has a facility with a Net Book Value of $10,000,000. The current Treasury rate for FCCOM is 4.2%. The facility’s costs are allocated via a direct labor cost base, which is projected to be $25,000,000 for the year.
- Inputs:
- NBV: $10,000,000
- Cost of Money Rate: 4.2%
- Allocation Base: $25,000,000
- Calculation:
- Total Cost of Money = $10,000,000 * 0.042 = $420,000
- FCCOM Factor = $420,000 / $25,000,000 = 0.0168
- Result: For every dollar of direct labor cost on a contract, the contractor can add $0.0168 as FCCOM.
Example 2: Small IT Services Contractor
An IT services firm leases its office space (a capital lease) with an NBV of $500,000. The Cost of Money Rate is 3.5%. The allocation base is total direct labor hours, estimated at 80,000 hours for the year.
- Inputs:
- NBV: $500,000
- Cost of Money Rate: 3.5%
- Allocation Base: 80,000 hours
- Calculation:
- Total Cost of Money = $500,000 * 0.035 = $17,500
- FCCOM Factor = $17,500 / 80,000 hours = 0.21875
- Result: For every direct labor hour charged to a contract, the firm can add approximately $0.22 as FCCOM.
How to Use This FCCOM Calculator
This calculator simplifies estimating your annual Facilities Capital Cost of Money. Follow these steps:
- Enter Net Book Value: Input the total NBV for the facilities associated with the relevant overhead pool.
- Enter Cost of Money Rate: Find the current semi-annual rate published by the Treasury Department and enter it as a percentage.
- Enter Allocation Base: Input the total estimated base (e.g., labor dollars, hours) for the corresponding accounting period.
- Review Results: The calculator instantly shows the total estimated annual FCCOM amount and the resulting FCCOM factor. These are the primary factors used in calculating fccom amount for your proposals.
Key Factors That Affect FCCOM Amount
- Capital Investment Strategy: The more a contractor invests in its own facilities (higher NBV), the higher the potential FCCOM.
- Treasury Interest Rates: As the Treasury rate fluctuates, so does the FCCOM. Rising rates increase the imputed cost, while falling rates decrease it.
- Depreciation Schedules: As assets depreciate, their NBV decreases, which in turn reduces the calculated FCCOM over time.
- Lease vs. Buy Decisions: Capital leases are included in the NBV, while operating leases are not. This decision significantly impacts the FCCOM calculation.
- Overhead Pool Structure: How a contractor structures its indirect cost pools and allocation bases determines how the Total Cost of Money is distributed across different contracts.
- Accuracy of Allocation Base Projections: The FCCOM factor is sensitive to the accuracy of the estimated allocation base. Over- or under-estimating the base will lead to an incorrect factor.
Frequently Asked Questions (FAQ)
1. Is FCCOM the same as interest?
No. FCCOM is an imputed cost, not a direct cash expense like interest paid on a loan. In fact, interest expense is generally unallowable on government contracts, whereas FCCOM is an allowable cost.
2. Is calculating FCCOM mandatory?
No, a contractor is not required to propose or claim FCCOM. However, if it is not included in the initial contract proposal, the right to claim it later is typically waived.
3. Where do I find the official Cost of Money rate?
The rate is set by the Secretary of the Treasury and published semi-annually in the Federal Register, usually in December and June.
4. Can FCCOM be included in progress payments?
Yes, contractors can include estimated FCCOM in interim cost reimbursement and progress payment invoices. These are interim estimates subject to final adjustment.
5. Does FCCOM affect the profit calculation?
FCCOM is included in the total cost base for pricing, but it is excluded from the cost base when calculating the pre-negotiation profit or fee objective.
6. What is a “Form CASB-CMF”?
The “Cost Accounting Standards Board – Cost of Money Form” is the official form used to document the calculation of FCCOM for a given accounting period.
7. What if my facility is still under construction?
There is a separate but related standard, CAS 417, for calculating the cost of money as an element of the cost of capital assets under construction. This calculator focuses on CAS 414 for facilities in use.
8. Why are there so many factors used in calculating fccom amount?
The multiple factors ensure that the imputed cost is fairly allocated and reflects the actual capital investment supporting government work, aligning with the principles of cost accounting standards.