SAFE HARBOR ELIGIBILITY REQUIREMENTS
Consulting firms who use the safe harbor rate will still be required to have an accounting system capable of accumulating and tracking direct labor and other direct costs by contract and segregating indirect costs. The expectation will be for the firm to establish a cost history for the development of an indirect cost rate for the firm in accordance with the federal cost principles based on the actual costs of the firm.
New or start-up A/E firms:
A new or start-up consulting firm who does not have a relevant contract cost history to use as a base for development of an indirect cost rate may choose to use the safe harbor indirect cost rate. These firms will generally have been in operation a year or less and have limited direct contract cost history to develop a representative indirect cost rate.
Small A/E consulting firms:
A small consulting firm who lacks either the financial sophistication to develop an indirect cost rate or the resources to hire a Certified Public Accountant (CPA) to develop an indirect cost rate compliant with federal requirements may choose to use the safe harbor indirect cost rate.
- As a result of limited or no federal contracting experience, the accounting structure of a small firm may be such that development of an indirect cost rate in accordance with the federal cost principles would be challenging and likely not result in a representative rate with a high degree of confidence.
- A small firm with limited or no federal contracting experience may lack the resources to hire a CPA to conduct an audit to develop a federally compliant indirect cost rate.
- For firms without a relatively consistent contract workload over multiple years, any resultant indirect cost rate would likely shift substantially in the early years of a firm’s operation due to fluctuations in the indirect costs incurred and contracts to which the rates would be charged.
• The safe harbor indirect cost rate is not intended for field-based contracts.
• Consulting firms with an audited or otherwise calculated indirect cost rate.
Safe harbor rate consultants are required to complete the following: