DoD Interpreting Labor Rate Cap Too Strictly, Group Claims

September 19, 2012

An industry group complained Sept. 19 that the Defense Department is misinterpreting the law in setting the labor and overhead rates they pay contractors for services.

The fiscal 2012 National Defense Authorization Act (H.R. 1540) tells defense officials to establish a “negotiation objective” to cap how much a company can charge the department for labor and overhead. The law (read the text here) requires DOD to make its objective to not exceed the rates it or another military department paid the company in fiscal 2010. The cap is related to contracts or task or delivery orders for services worth more than $10 million. On July 31, defense officials issued guidance to implement that section of the bill.

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