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Slide #1 Basics about Billing Rates for Personal Services Contracts Basics about Billing Rates for Personal Services Contracts Presented by ODOT Procurement.

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Presentation on theme: "Slide #1 Basics about Billing Rates for Personal Services Contracts Basics about Billing Rates for Personal Services Contracts Presented by ODOT Procurement."— Presentation transcript:

1 Slide #1 Basics about Billing Rates for Personal Services Contracts Basics about Billing Rates for Personal Services Contracts Presented by ODOT Procurement Office Updated January 28, 2010

2 Slide #2 Tutorial Overview This tutorial is a self-paced PowerPoint presentation. There are several ways to progress through the tutorial: To Move ForwardTo Move Back Press Page Down on keyboardPress Page Up on keyboard Click right arrow on keyboardClick left arrow on keyboard Click left mouse button Click right mouse button- click reverse on pop-up menu Links Underlined text are links. Click on the link to go to documents or other websites. To return to the tutorial, move the cursor off the open window and right click for a pop-up menu. Select Back on the pop-up menu. Click Open on the pop-up message box to return to the tutorial. To Leave the Tutorial Click Exit on the bottom of the tutorial slide. Read message in pop-up box and select accordingly; either selection will exit the tutorial. Print this page for reference as you progress through the tutorial. Right click for a pop-up menu and select Print. For print range, select Current slide.

3 Slide #3 Tutorial Outline This tutorial covers basic information about two types of billing rates that ODOT uses for personal services contracts, especially contracts for Architectural, Engineering, Land Surveying (A&E) and Related Services. The target audience for this tutorial is ODOT staff who work with personal services contracts. This tutorial covers the following topics: Reasons for changes to methodology Types of billing rates Escalated Billing Rates Negotiated Billing Rates What are billing rates used for Where to find approved billing rates Where to obtain more information

4 Slide #4 Why the ODOT Procurement Office changed the billing rate structure ProblemOPOs Response Billing rates used for cost estimating were generally not reflective of consultants actual costs. Approved average and maximum billing rates are derived from actual salary rates submitted by consultant. Time consuming process for reviewing and approving annual requests for billing rate increases. New rate schedules include two or three years of rates with escalation to reduce number of requests and amendments for rate increases. Consultants with several contracts have different billing rate schedules in each of their contracts. The billing rate schedules are more consistent from contract to contract. This is helpful when reviewing consultant billing invoices. Over the past several years, ODOT Procurement Office (OPO) has been evaluating and making adjustments to the billing rate structure for personal services contracts. The current methodology was developed to address several problems that were not in ODOTs best interest.

5 Slide #5 Types of Billing Rates Under ODOTs current billing rate methodology for personal services contracts, a consultant will either have escalated billing rates which consist of four different components, or a fully burdened negotiated billing rate. Escalated Billing RatesNegotiated Billing Rates Direct Salary Rate Overhead and FCCM Rate Escalation Profit Negotiated Billing Rate

6 Slide #6 Types of Billing Rates Typically, consultants have escalated billing rates. These consultants track their actual business costs and have an annual audit of their overhead expenses. Escalated Billing Rates Direct Salary Rate Overhead and FCCM Rate Escalation Profit

7 Slide #7 Types of Billing Rates Small firms, such as sole proprietors, often do not track their business expenses in detail, do not have an overhead rate, and typically charge their customers a flat hourly billing rate to cover their business expenses and profit. These firms use negotiated billing rates. Negotiated Billing Rates Negotiated Billing Rate

8 Slide #8 Components of Escalated Billing Rates Direct Salary Rate Overhead and FCCM Rate Escalation Profit

9 Slide #9 Direct Salary Rate The consultant submits a Direct Salary Rate Schedule (DSR) to the ODOT Procurement Office (OPO) to report name, job classification and actual salary rate for each member of their staff. The OPO Billing Rate Action Team (BRAT) uses this confidential information to calculate average and maximum salary rates for each job classification. Average and maximum rates for each job classification are documented on the consultants Escalated Salary Rate Schedule (ESR). Approved ESR forms are included in Standard Contracts, Project Specific Contracts, Price Agreements, and Work Order Contracts. Click link to view the DSR form that consultants complete.DSR form Click link to view a sample ESR form that OPO uses to document approved rates.ESR form Components of Escalated Salary Rates

10 Slide #10 Overhead and FCCM Consultant submits an annual Overhead Schedule to report their breakdown of overhead costs. A cognizant or independent audit of their overhead is preferred or may be required. Consultant is required to complete a Cost Disclosure Questionnaire (CDQ) to provide additional financial information about their firm. Facilities Capital Cost of Money (FCCM) is a component of overhead costs that is separated from the overhead rate because ODOT calculates profit on overhead, but not on FCCM. The OPO Billing Rate Action Team works with ODOTs External Audits section to review and approve consultants overhead and FCCM rates. Current approved overhead and FCCM rates can be obtained from the ODOT Procurement Office. Click link to view a sample Overhead Schedule.sample Overhead Schedule Click link to view the Cost Disclosure Questionnaire.Cost Disclosure Questionnaire Click link to view a sample list of approved Overhead and FCCM RatesOverhead and FCCM Rates Components of Escalated Salary Rates

11 Slide #11 Rate Escalation To reduce the number of amendments for consultant rate increases, ODOT currently adds 4.5 percent annual escalation to consultant billing rates. This applies to escalated billing rates only; not to negotiated billing rates. Generally, the Escalated Salary Rate Schedule includes escalated rates for two or three years. Consult with an OPO Procurement Specialist about using rate escalation on older contracts and price agreements. Click link to view a sample ESR form.ESR form Components of Escalated Salary Rates

12 Slide #12 Profit The ODOT project manager or designee negotiates a mutually agreeable profit rate with the prime consultant for their specific contract. The final negotiated profit rate applies to the prime consultant and all subconsultants assigned to the contract, except for those with Negotiated Billing Rates (Negotiated Billing Rates already include profit). Project Managers should use the Profit (Fee) Worksheet (designed primarily for A&E and Related Services contracts) to determine an initial profit rate that is reasonable for the specific contract. ODOT staff completes a worksheet to determine ODOTs starting point for negotiating fair and reasonable profit for the contract. Consultant may also complete a worksheet on their behalf. Click link to view the Profit (Fee) WorksheetProfit (Fee) Worksheet Components of Escalated Salary Rates

13 Slide #13 Escalated Salary Rate Schedule The Escalated Salary Rate Schedule is prepared by the ODOT Billing Rate Action Team to document a consultants approved Escalated Salary Rates.

14 Direct Salary Rate Rate Escalation Overhead and FCCM Profit

15 Slide #15 Escalated Salary Rate Schedule Average and maximum rates for each job classification Job classifications The Escalated Salary Rate Schedule includes: Escalated direct salary rates for two or three years

16 Slide #16 Escalated Salary Rate Schedule Average and maximum rates for each job classification Average and maximum escalated direct salary rates for two or three years Enter applicable overhead, FCCM and profit rates here… Job classifications The Escalated Salary Rate Schedule includes: Formulas calculate the escalated burdened rates here

17 Slide #17 Escalated Salary Rate Schedule When preparing a contract cost estimate: Use the same job classifications as listed on the ESR.

18 Slide #18 Escalated Salary Rate Schedule When preparing a contract cost estimate: Use the same job classifications as listed on the ESR. Use the escalated salary rates listed for the current year.

19 Slide #19 Escalated Salary Rate Schedule When preparing a contract cost estimate: Use the same job classifications as listed on the ESR. Use the escalated salary rates listed on the ESR for the current year. Use either the average escalated direct salary rates or actual salary rates; whichever is in ODOTs best interest. (Obtain actual salary rates from the consultant. Averages are on the ESR.)

20 Slide #20 Escalated Salary Rate Schedule When preparing a contract cost estimate: Use the same job classifications as listed on the ESR. Use the escalated salary rates listed on the ESR for the current year. Use either the average escalated direct salary rates or actual salary rates; whichever is in ODOTs best interest. Avoid using maximum escalated direct salary rates when estimating costs.

21 Slide #21 Escalated Salary Rate Schedule When submitting invoices, consultants are required to: Invoice labor costs at their employees actual salary rates which must not exceed the maximum rate listed on the ESR for their job classification.

22 Slide #22 Escalated Salary Rate Schedule When submitting invoices, consultants are required to: Invoice labor costs at their employees actual salary rates which must not exceed the maximum rate listed on the ESR for their job classification. Invoice at their approved overhead, FCCM and profit rates that were in effect during the billing period.

23 Slide #23 Negotiated Billing Rates Negotiated Billing Rate

24 Slide #24 Negotiated Billing Rates Negotiated billing rates are typically used by small firms. Negotiated billing rates are fully burdened hourly rates which include direct labor, indirect costs (overhead) and profit. The consultant submits a Direct Salary Rate Schedule (DSR), a Negotiated Billing Rate Schedule (NBR), and a Financial Questionnaire to the ODOT Procurement Office. They may be required to provide additional information to substantiate their rates. The OPO Billing Rate Action Team reviews the DSR, NBR, Financial Questionnaire and additional information to determine reasonability of the rates. Adjustments are negotiated as needed, and the NBR is approved for use in ODOT contracts. When preparing cost estimates, do not add overhead, FCCM, escalation or profit to Negotiated Billing Rates. If a consultant wants a rate increase, they must submit their request to the ODOT Procurement Office.

25 Slide #25 Negotiated Billing Rate Schedule NEGOTIATED BILLING RATES Consultant XYZ Effective February 2009 DIRECT LABOR COSTS Project RoleBilling Rate/hr Project Manager $ Landscape Architect $ CADD Technician $90.00 The Negotiated Billing Rate Schedule is prepared by the ODOT Billing Rate Action Team to document a consultants approved Negotiated Billing Rates.

26 Slide #26 Negotiated Billing Rate Schedule NEGOTIATED BILLING RATES Consultant XYZ Effective February 2009 DIRECT LABOR COSTS Project RoleBilling Rate/hr Project Manager $ Landscape Architect $ CADD Technician $90.00 Job Classifications Fully burdened hourly rates Do not add escalation, overhead, FCCM, or profit to Negotiated Billing Rates The Negotiated Billing Rate Schedule includes:

27 Slide #27 What are ESR and NBR billing rate schedules used for? Use ESR and NBR when preparing ODOTs internal cost estimate: For consultants with approved ESR: Use the job classifications that are listed on the consultants ESR. Use either average escalated direct salary rates or actual salary rates; whichever is in ODOTs best interest. If using actual escalated direct salary rates, they must not exceed the maximum escalated direct salary rate approved on the ESR for that year and for the job classification. Use the currently approved overhead and FCCM rates for the consultant. Use the initial profit rate derived from completing the Profit (Fee) Worksheet for the project. For consultants with approved NBR: Use the job classifications that are listed on the consultants NBR. Use the billing rate per hour on the NBR for that job classification. Do not add escalation, overhead, FCCM or profit to the billing rate.

28 Slide #28 What are ESR and NBR billing rate schedules used for? Use ESR and NBR when evaluating and negotiating consultants cost estimate: For consultants with approved ESR: Job classifications should match those listed on the consultants ESR. Negotiate for use of either average escalated direct salary rates or actual salary rates; whichever is in ODOTs best interest. Actual escalated direct salary rates must not exceed the maximum escalated direct salary rate approved on the ESR for that year and for the job classification. Check to make sure proposed overhead, FCCM and profit are the currently approved or agreed-to rates. For consultants with approved NBR: Job classifications should match those listed on the consultants NBR. Billing rate must be the billing rate per hour on the NBR for that job classification. Do not add escalation, overhead, FCCM or profit to the billing rate.

29 Slide #29 What are ESR and NBR billing rate schedules used for? Use ESR and NBR when reviewing consultant invoices on cost reimbursement contracts: For consultants with approved ESR: Labor costs on the invoice must be based on the employees actual direct salary rates at the time the services were performed. The actual direct salary rate must not exceed the maximum escalated direct salary rate approved on the ESR for that year and for the job classification. Overhead and FCCM must be at the approved rates in effect when the services were performed. Profit must be at the negotiated rate in effect for the services performed. (Often a different profit rates is negotiated for the construction engineering phase of a contract.) For consultants with approved NBR: Labor costs on the invoice must be at the billing rate per hour on the NBR for that job classification. Do not add escalation, overhead, FCCM or profit to the billing rate.

30 Slide #30 What billing rates schedules to use for Project Specific Contracts For a new Project Specific Contract Use the most currently approved rate schedules, which are located at \\Scdata2\OPOBillingRateData\AcceptedRates\Firm ESR-NBR \\Scdata2\OPOBillingRateData\AcceptedRates\Firm ESR-NBR or contact the ODOT Procurement Office for assistance. For new amendments to existing Project Specific Contracts Use the billing rate schedules in the Contract and previous amendments, or contact the ODOT Procurement Office about amending the currently approved rates into the Contract. Overhead and FCCM rates Use the currently accepted rates, which are located at: \\Scdata2\OPOBillingRateData\AcceptedRates\Accepted Overhead Rates\OHRates.xls, or \\Scdata2\OPOBillingRateData\AcceptedRates\Accepted Overhead Rates\OHRates.xls contact the ODOT Procurement Office for assistance.

31 Slide #31 What billing rates schedules to use for Work Order Contracts For a new Work Order Contract Use the billing rate schedules in the Price Agreement and amendments, or contact the ODOT Procurement Office about amending the currently approved rates into the Price Agreement to use them in the new Work Order Contract. For amendments to an existing Work Order Contract Use the billing rate schedules in the Work Order Contract, or the Price Agreement and amendments, or contact the ODOT Procurement Office about amending the currently approved rates into the Work Order Contract or Price Agreement. Overhead and FCCM rates Use the currently accepted rates at: \\Scdata2\OPOBillingRateData\AcceptedRates\Accepted Overhead Rates\OHRates.xls, or \\Scdata2\OPOBillingRateData\AcceptedRates\Accepted Overhead Rates\OHRates.xls contact the ODOT Procurement Office for assistance.

32 Slide #32 Where to find billing rate forms on the ODOT Intranet Direct Salary Rate Schedule Negotiated Billing Rate Schedule Profit (Fee) Worksheet The following slides will take you through the ODOT Intranet to find these forms:

33 Slide #33 Start at ODOTs Intranet home page

34 Slide #34 Start at ODOTs Intranet home page Select Topics A-I

35 Slide #35 Start at ODOTs Intranet home page Select Topics A-I Then select Contracts

36 Slide #36 On the Procurement Office web site, click on Forms & Documents

37 Slide #37 On the Forms & Documents page, click on the View button for Personal/Professional Services (PSK)

38 Slide #38 Then click on the View button for PSK Compensation Related Forms

39 Slide #39 Scroll down the page to find the DSR and NBR forms.

40 Slide #40 Click on the View button for PSK Negotiations Related Forms...

41 Slide #41 …to find the Profit (Fee) Worksheet.

42 Slide #42 For additional information and assistance: Contact the OPO Procurement Specialist assigned to your contract Contact the Procurement Team Lead for your area: Highway Division, Region 1 - Bob McKibben Highway Division, Region 2 and Tech Services Branch - Doug Peetz Highway Division, Regions 3, 4 and 5 - Kevin Cassidy All other business sections within ODOT - Tara Anderson Contact the OPO Billing Rate Action Team (BRAT): BRAT address: Chaye Bookey or Refer to ODOT Negotiations Guide in the ODOT Procurement Manual, Section N located on OPOs Intranet site at the following link: Refer to List of related forms and guidelinesList of related forms and guidelines

43 Slide #43 Questions? If you have questions or comments related to this tutorial, please contact: Mary Wandell Procurement Training Coordinator

44 Slide #44 Acknowledgements I would like to thank the following people for their assistance in developing this tutorial: Chaye Bookey, ODOT Procurement Office Mike Jenkins, ODOT Procurement Office Kim Leeker, ODOT Procurement Office Jai Maddox, ODOT Procurement Office Debra-Jean Murdock, ODOT Procurement Office


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