1993-138-Adopting The State Of California Uniform Public Construction Cost Accounting ProceduresRESOLUTION 1993 -138
RESOI -UTION OF TI IE TOWN COUNCIL
OF THE TOWN OF LOS GATOS
ADOPTING OF THE STATE OF CALIFORNIA
UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING PROCEDURES
WHEREAS, prior to the passage of Assembly Bill No. 1666, Chapter 1054 Stats.
1953, which added Chapter 2 commencing with Section 22000 to Part 3 of Division 2 of the
Public Contracts Code, existing law did not provide a uniform cost accounting standard for
construction of work performed or contracted by local public agencies; and
WHEREAS, Public Contracts Code Section 22000 et seq., the Uniform public
Construction Cost Accounting standard; and
WHEREAS, The Commission established under the Act has developed uniform
Public construction cost accounting procedures for implementation by local agencies in the
performance of or in the contracting for construction of public projects, and
BE IT RESOLVED, by the Town Council of the Town of Los Gatos, County of Santa
Clara, State of California, hereby elects under Public Contracts Code Section 22030 to
become subject to the uniform public construction cost accounting procedures set forth in
the Act and to the Commission's policies and procedures manual and cost accounting
review procedures, as they may each from time to time be amended, and directs that the
Town Clerk notify the State Controller forthwith of this election.
BE IT FURTHER RESOLVED, that the Town Clerk will retain on file with the
Clerk's Office a recent manual available to the Town.
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town
of Los Gatos, California, held on the 20th clay of September, 1993, by the following vote.
COUNCIL MEMBERS:
AYES: Rancy Attaway, Steven Blanton, Linda Lubeck, Patrick O'Laughlin
Mayor Joanne Benjamin
NAYS: None
ABSENT: None
ABSTAIN: None
SIGNEDJOR
1` OF THE TOWN F LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK OF THE TOWN OF ;'LOS GATOS
LOS GATOS, CALIFORNIA'
ca
COST ACCOUNTING COMMISSION
COST ACCOUNTING POLICIES AND
TABLE OF CONTENTS
PART I
INFORMATION FOR ADOPTION AND IMPLEMENTATION OF THE CALIFORNIA UNIFORM
PUBLIC CONSTRUCTION COST ACCOUNTING ACT
Instructions For Adoption and Implementation Of the Uniform Construction Cost
Accounting Procedures By Loral A encies .. ............................... 2
Sample Election Resolution ................... ............................... 3
Sample Informal Bidding Ordinance ............. ............................... 5
Procedure For Establishment And Maintenance Of List Of Qualified Contractors Per Section
22034 Of The Public Contract Code ....... ............................... 7
Section 22036 Of The Public Contract Code) ............................... 8
List Of Construction Trade Journals ............ ............................... 10
Accounting Procedures Review ................ ............................... 19
Uniform Public Construction Cost Accounting Act . ............................... 21
PART II
UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING POLICIES AND PROCEDURES
Introduction.............................. ............................... 31
Uniform Public Construction Cost Accounting Act .......................... 32
Uniform Public Construction Cost Accounting Policies And Procedures ................ 35
CUCCAC Philosophy ................. ............................... 36
Applicable Projects ................... ............................... 36
Definitions ......................... ............................... 36
Public Agency Organization Structure ..... ............................... 38
i Revised: 7/18/90
Classification Of Costs ................ ............................... 39
Direct Costs .................. ............................... 39
Labor................ ............................... 39
Equipment............. ............................... 40
Permanent Materials and Supplies .......................... 40
Subcontracts ........... ............................... 40
Nonpermanent Materials and Supplies/Miscellaneous Costs ....... 41
Indirect Costs ................. ............................... 41
Labor................ ............................... 41
Other Project Expenses ... ............................... 41
Overhead Costs ......................................... I.... 41
Project Identification ................. ............................... 42
Project Tracking ..................... ............................... 42
Examples of Project Tracking Systems ............................. 43
Discussion of Example .......... ............................... 43
Estimated vs. Actual Costs ............. ............................... 46
Discussion of Example .......... ............................... 46
Identification Reporting And Computation Of Personnel Costs ....................... 49
Tracking Personnel Time .............. ............................... 50
Timekeeping System ............ ............................... 50
Examples of Timekeeping Systems .......................... 50
Application of Timekeeping Systems ............................... 51
Public Project Unit ...... ............................... 51
Other Organizations Units Performing Work on Public Projects .... 52
Recording Time to Public Projects .......................... 52
Computing Personnel Costs ............ ............................... 55
Productive Hourly Rate ......... ............................... 55
Annual Personnel Cost ... ............................... 55
Productive Hours ........ ............................... 57
Unit Overhead Rate ............ ............................... 57
Public Project Unit ...... ............................... 57
Organizational Unit Performing Public Project Work ............ 57
Government -wide Overhead Rate .. ............................... 58
Discussion of Example .......... ............................... 60
Identification Reporting And Costing Of Materials Supplies And Subcontracts .......... 63
Tracking Materials And Supplies ......... ............................... 64
Direct Purchases ............... ............................... 64
Inventory .................... ............................... 64
Revised: 7/18/90 ii
Costing Materials And Supplies ................ ............................... 66
Direct Purchase ......................... ............................... 66
Inventory............................. ............................... 66
Discussion of Example ................... ............................... 66
Handling/Carrying Costs ..................... ............................... 67
Subcontracts.............................. ............................... 71
Identification. Repotting And Costing Equipment ..... ............................... 73
Equipment Tracking System .................. ............................... 74
Equipment Tracking System ............... ............................... 74
Examples of Equipment Tracking Systems .. ............................... 74
Equipment Tracking of Agency Owned/Operated Equipment ...................... 74
Internal Rates ....................... ............................... 74
Equipment Rate Book Rates ............ ............................... 75
Equipment Usage Rates ..................... ............................... 78
Internal Rates (Equipment Owned by Public Agency) ........................... 78
Equipment Rate Books (Equipment Owned by Public Agency) .................... 81
Rental or Lease Rates .................... ............................... 84
Discussion of Example ................... ............................... 84
Identification, Rate Development And Allocation Of Overhead .......................... 87
Commission Adopted Overhead Rate ........... ............................... 88
APPENDIXES
APPENDIX A
FEDERAL CIRCULAR #A -87 PRINCIPLES FOR DETERMINING COSTS APPLICABLE TO
GRANTS AND CONTRACTS WITH STATE, LOCAL, AND FEDERALLY RECOGNIZED INDIAN
TRIBAL GOVERNMENTS PRINCIPLES FOR DETERMINING COSTS APPLICABLE
Principles For Determining Costs Applicable To Grants And Contracts With State, Local And Federally
Recognized Indian Tribal Governments .......... ............................... 97
Purposeand scope ........................... ............................... 98
Objectives.............................. ............................... 98
Policyguides ............................ ............................... 98
Application............................. ............................... 98
iii Revised: 7/18/90
Definitions................................ ............................... 98
Approval or authorization of the grantor Federal agency ..........................
988
Cost allocation plan ...................... ...............................
Cost................................. ...............................
Costobjective ...............................
98
98
...........................
Federalagency ......................... ...............................
99
Federally - recognized Indian tribal governments ............................
I ... 99
Grant................................ ...............................
99
99
Grant program ......................... ...............................
99
Grantee.............................. ...............................
99
Localunit ............................. ...............................
99
Other State or local agencies ............... ...............................
Services............................... ...............................
99
Supporting services ...................... ...............................
99
Basic guidelines ............................ ............................... 99
Factors affecting allowability of costs ......... ............................... 99
Allocable costs ........................ ............................... 100
Applicable credits ...................... ............................... 100
Composition of cost ....................... ............................... 100
Totalcost ............................ ............................... 100
Classification of costs 101
................... ...............................
Direct costs .............................. ............................... 101
General.............................. ............................... 101
Application ........................... ............................... 101
Indirect costs ............................. ............................... 101
General.............................. ............................... 101
Grantee departmental indirect costs ..................... I ................. 102
Limitation on indirect costs ............... ............................... 102
Cost incurred by agencies other than the grantee .. ............................... 102
General.............................. ............................... 102
Alternative methods of determining indirect cost .............................. 102
Cost incurred by grantee department for others ... ............................... 103
General.............................. ............................... 103
Cost allocation plan ....................... ............................... 103
General.............................. ............................... 103
Requirements 103
.........................
Instructions for preparation of cost allocation plans ............................ 103
Revised: 7/18/90 iv
Negotiation and approval of indirect cost proposals for States .................... 103
Negotiation and approval of indirect cost proposals for local governments ........... 104
Negotiation and approval of indirect cost proposals for federally recognized
Indian tribal governments .............. ............................... 104
Resolution of problems .................. ............................... 104
Standards For Selected Items Of Costs ............ ............................... 105
Purpose and applicability . ................... ............................... 106
Objective............................ ............................... 106
Application........................... ............................... 106
Allowable costs ........................... ............................... 106
Accounting........................... ...............................
106
Advertising........................... ...............................
106
Advisory councils ...................... ...............................
106
Audit service .......................... ...............................
106
Bonding............................. ...............................
106
Budgeting............................ ...............................
106
Building lease management ............... ...............................
106
Central stores ......................... ...............................
107
Communications ....................... ...............................
107
Compensation for personal services ......... ...............................
107
Depreciation and use allowances ........... ...............................
107
Disbursing service ...................... ...............................
108
Employee fringe benefits ................. ...............................
108
Employee morale, health and welfare costs ... ...............................
108
Exhibits ............................. ...............................
108
Legal expenses ........................ ...............................
108
Maintenance and repair .................. ...............................
109
Materials and supplies ................... ...............................
109
Memberships, subscriptions and professional activities ..........................
109
Motorpools .......................... ...............................
109
Payroll preparation ..................... ...............................
109
Personnel administration ................. ...............................
109
Printing and reproduction ................ ...............................
109
Procurement service .................... ...............................
109
Taxes............................... ...............................
109
Training and education .................. ...............................
110
Transportation ........................ ...............................
110
Travel............................... ...............................
110
Costs allowable with approval of grantor agency .. ............................... 110
Automatic data processing ................ ............................... 110
Building space and related facilities ......... ............................... 110
Capital expenditures .................... ............................... 111
Insurance and indemnification ............. ............................... 111
Management studies .................... ............................... 111
Preagreement costs ..................... ............................... 112
v Revised: 7/18/90
Professional services .................... ............................... 112
Proposal costs ......................... ............................... 112
Unallowable costs ......................... ............................... 112
Baddebts ............................ ............................... 112
Contingencies ......................... ............................... 112
Contributions and donations .............. ............................... 112
Entertainment ......................... ............................... 112
Fines and penalties ..................... ............................... 112
Governor's expenses .................... ............................... 112
Interest and other financial costs ........... ............................... 112
Legislative expenses .................... ............................... 112
Underrecovery, of costs under grant agreements ............................... 112
APPENDIX B
OVERHEAD DETERMINATION AND ALLOCATION
PERCENTAGE OF DIRECT LABOR COSTS METHOD
Identification Rate Development And Allocation Of Overhead .......................... 114
UnitOverhead ............................ ............................... 115
Cost Components ....................... ...............................
115
115
Tracking of Unit Overhead ................ ...............................
Public Project Unit ................... ...............................
116
Organizational Unit Performing Public Project Work ........................
116
Rate Methodology
.... 116
Public Project Unit .................. ...............................
116
Organizational Unit Performing Public Project Work .......................
116
Overhead Allocation .................... ...............................
116
Government -Wide Overhead ................. ............................... 120
Internally Developed Govemment -wide Overhead Rates ........................ 120
Cost Components ................... ............................... 120
Rate Development .................. ............................... 120
Government -wide Overhead Rate .......... ............................... 121
Overhead Allocation .................... ............................... 121
Revised: 7/18/90 A
LISTING OF EXHIBITS
II -1
Project Ledger Card for Main Street School Remodeling ............................
44
II -2
Closed Project Ledger Card for Main Street School Remodeling with Estimate, Labor,
Materials and Supplies and Equipment Posted ..... ...............................
45
II -3
Estimate of Main Street School Remodeling ...... ...............................
47
II4
Project Ledger Card for Main Street School Remodeling with Estimate Posted ...........
48
III -1
Public Project Unit Employee Weekly Time Report . ...............................
53
III -2
Organizational Unit Which Performs Work on Public Project- Employee Weekly Time
Report.................................. ...............................
54
III -3
Productive Hourly Rate Calculation Example ..... ...............................
56
III4
Application Of Overhead To A Productive Hourly Rate ............................
59
III -5
Project Ledger Card for Main Street School with Estimate and Labor Posted ............
61
IV -1
Project Ledger Card for Main Street School Remodeling with Estimate, Labor, Materials,
Supplies and Subcontracts Posted .............. ...............................
68
IV -2
Calculation Of Handling/Carrying Overhead Rate .. ...............................
70
V -1
Equipment Weekly Timesheet for Main Street School Remodeling ....................
76
V -2
Equipment Weekly Timesheet for Main Street School Remodeling ....................
77
V -3
Equipment Depreciation Worksheet ............ ...............................
80
V4
Maintenance and Repair Equipment Ledger Card .. ...............................
82
V -5 Equipment Rate Development ................. ............................... 83
V -6 Project Ledger Card for Main Street School Remodeling with Estimate, Labor, Materials and
Supplies and Equipment Posted ................ ............................... 85
VI -1 Public Agency Force Account Daily Extra Work Report ............................ 90
VI -2 Public Agency Force Account Projuct Cost Summary ............................... 91
B -1 Public Project Unit Overhead Rate Development . ............................... 117
B -2 Organizational Unit Performing Public Project Work - Overhead Rate Development ....... 118
vii Revised: 7/18/90
PART I
INFORMATION FOR ADOPTION
AND IMPLEMENTATION
OF THE
CALIFORNIA UNIFORM PUBLIC
CONSTRUCTION COST ACCOUNTING ACT
Revised: 7/18/90
Instructions For Adoption and Implementation
Of the Uniform Construction Cost Accounting Procedures
By Local Agencies
(1) Governing Board must elect by resolution to become subject to the uniform construction cost accounting
procedures promulgated by the Controller pursuant to Public Contract Code Section 22019. The resolution
shall specify that the local agency will meet the requirements prescribed in the California Uniform Public
Construction Cost Accounting Commission's Cost Accounting Policies and Procedures Manual and state the
effective date the agency will implement the accounting and bidding procedures.
(2) Local Agency must notify the Controller in writing of the election to become subject to the uniform
construction cost accounting procedures. A copy of the resolution shall also be filed with the Controller.
Send to: Office of State Controller, Division of LGFA, Bureau of Accounting & Budgeting Procedures, P.O.
Box 942850, Sacramento, CA 94250 -5876.
(3) When a local agency elects to become subject to the uniform construction cost accounting procedures, the
entire entity is considered subject to the act and no departments will be exempt. However, Special Districts
which are governed by a board of supervisors or city council are only subject if a separate election is made.
(4) An informal bidding ordinance shall be enacted pursuant to Public Contract Code Section 22034.
(5) The governing board may discontinue the agency's participation under the uniform construction cost
accounting procedures by adopting a resolution stating this fact. A copy of the resolution shall be filed with
the Controller.
(6) The Controller shall notify the Commission of all local agencies electing to become subject to the uniform
construction cost accounting procedures. In addition, the Commission shall also be notified of local agencies
electing to discontinue participation under these procedures.
Revised: 7/18/90
SAMPLE ELECTION RESOLUTION
(MODEL)
RESOLUTION OF THE COUNCIL OF THE CITY' OF _
COUNTY OF , STATE OF CALIFORNIA
IN THE MATTER OF: UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING PROCEDURES
No.
I City Clerk of the City of County of State of
California, do hereby certify that the following resolution, proposed by
Councilmember and seconded by
Councilmember was duly passed and adopted
by the Council of the City of at a regular meeting thereof assembled this _ day of
. 19_, by the following vote, to -wit:
AYES: Councilmember:
NOES: Councilmember:
BSENT: Councilmember:
(SEAL) , City Clerk
City of
THE CITY COUNCIL OF THE CITY OF DOES HEREBY RESOLVE AS FOLLOWS
WHEREAS, prior to the passage of Assembly Bill No. 1666, Chap. 1054 Stats. 1983, which added Chapter
2 commencing with Section 22000 to Part 3 of Division 2 of the Public Contract Code, existing law did not provide
a uniform cost accounting standard for construction work performed or contracted by local public agencies; and
WHEREAS, Public Contract Code Section 22000 et seq., the Uniform Public Construction Cost Accounting
Act, establishes such a uniform cost accounting standard; and
WHEREAS, the Commission established under the Act has developed uniform public construction cost
accounting procedures for implementation by local public agencies in the performance of or in the contracting for
construction of public projects; and
'This SAMPLE ELECTION RESOLUTION indicates election by a city council. However, the
sample format can be used by any public agency governing body.
Revised: 7/18/90
NOW, THEREFORE, the City Council of the City of California, hereby elects under Public
Contract Code Section 22030 to become subject to the uniform public construction cost accountng procedures set
forth in the Act and to the Commission's policies and procedures manual and cost accounting review procedures,
as they may each from time to time be amended, and directs that the City Clerk notify the State Controller
forthwith of this election.
This Resolution shall take effect upon its adoption.
PASSED AND ADOPTED this _ day of 19_
City of
ATTEST:
, City Clerk
City of
Revised: 7/18/90 4
Mayor
SAMPLE INFORMAL BIDDING ORDINANCE
ORDINANCE NO.
AN ORDINANCE OF THE BOARD OF SUPERVISORS
OF THE COUNTY? OF
ADDING SECTION
TO THE ORDINANCE CODE
OF THE COUNTY OF
TO PROVIDE INFORMAL BIDDING PROCEDURES
UNDER THE
UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING ACT
(SECTION 22000, ET SEQ. OF THE PUBLIC CONTRACT CODE)
The Board of Supervisors of the County of do ordain as
follows:
SECTION 1
Section is hereby added to the County Code of the County of
to provide as follows:
Section Informal Bid Procedures
Public projects, as defined by the Act, of seventy-five thousand dollars ($75,000) or less may be let to
contract by informal procedures as set forth in Section 22032, et seq., of the Public Contract Code.
Section Contractors List
A list of contractors shall be developed and maintained in accordance with the provisions of Section 22034
of the Public Contract Code and criteria promulgated from time to time by the California Uniform
Construction Cost Accounting Commission.
Section . Notice Inviting Informal Bids
Where a public project is to be performed which is subject to the provisions of this Ordinance, a notice
inviting informal bids shall be mailed to all contractors for the category of work to be bid, as shown on the
list developed in accordance with Section , and to all construction trade journals as specified by the
California Uniform Construction Cost Accounting Commission in accordance with Section 22036 of the Public
Contract Code2. Additional contractors and /or construction trade journals may be notified at the discretion
of the department/agency soliciting bids; provided however:
'This SAMPLE INFORMAL BIDDING ORDINANCE indicates action by a county board of
supervisors. However, the sample format can be used by any public agency governing body.
2 Public Contract Code Section 22034(b) states that an agency shall mail a notice inviting informal bids
to all contractors on the (agency s) list for the category of work being bid and /or all construction trade
journals specified in Section 22036. The Commission recommends that each local agency define, in their
informal bidding ordinance, which procedure they will follow, i.e., notify contractors list, construction trade
journals or both. The Commission strongly urges notification of both as this sample ordinance is drafted.
Revised: 7/18/90
(1) If there is no list of qualified contractors maintained by the County for the particular category of work
to be prformed, the notice inviting bids shall be sent only to the construction trade journals specified
by the Commission.
(2) If the product or service is proprietary in nature such that it can be obtained only from a certain
contractor or contractors, the notice inviting informal bids may be sent exclusively to such contractor
or contractors.
Section Award of Contracts
The County Purchasing Agent and the Director of Public Works are each authorized to award informal
contracts pursuant to this Section'.
SECTION 2
This Ordinance shall take effect and be in force thirty (30) days from the date of its passage, and before the
expiration of fifteen (15) days after its passage, it or a summary of it, shall be published once, with the names of
the members of the Board of Supervisors voting for and against the same in the a
newspaper of general circulation published in the County of
PASSED, APPROVED and ADOPTED by the Board of Supervisors of the County of State
of California, this _ day of
1986, by the following vote:
AYES:
NOES:
ABSENT:
' Public Contract Code Section 22034(e) allows the governing body of the public agency to delegate
the authority to award informal contacts. The Commission recommends that each local agency define, in
their informal bidding ordinance, whether they wish to delegate this authority and if so, to whom.
Revised: 7/18/90
PROCEDURE FOR ESTABLISHMENT AND MAINTENANCE
OF LIST OF QUALIFIED CONTRACTORS
PER SECTION 22034 OF THE PUBLIC CONTRACT CODE
During November each year, each Public Agency which has elected to become subject to the Uniform Public
Construction Cost Accounting Procedures shall mail a written notice to all construction trade journals
designated for that Agency under Section 22036, inviting all licensed contractors to submit the name of their
firm to the Agency for inclusion on the Agency's list of qualified bidders for the following calendar year.
2. The notice shall require that the contractor provide the name and address to which a Notice to Contractors
or Proposal should be mailed, a phone number at which the contractor may be reached, the type of work
in which the contractor is interested and currently licensed to do (earthwork, pipelines, electrical, painting,
general building, etc.) together with the class of contractor's license(s) held and contractor license number(s).
3. The Public Agency may create anew contractors list starting January 1st of each year. The Agency may
include any contractors' names they so desire on the list, but the list must include at a minimum all
contractors who have properly provided the Agency with the information required under #2 above, either
during the calendar year in which the list is valid or during November or December of the previous year.
The Commission recommends that the Agency automatically include the names of all contractors who
submitted one or more valid bids to the Agency during the preceding calendar year.
4. A contractor may have his firm added to an Agency's contractors list at any time by providing the required
information.
Revised: 7/18/90
CALIFORNIA UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING COMMISSION
COUNTY -BY- COUNTY LIST OF CONSTRUCTION TRADE JOURNALS WHICH SHALL
RECEIVE MAILED NOTICE OF ALL INFORMAL AND FORMAL CONSTRUCTION
CONTRACT BEING BID FOR WORK
(PER SECTION 22036 OF THE PUBLIC CONTRACT CODE.)
The Commission has determined that all public agencies, who adopt and contract under the Uniform Public
Construction Cost Accounting Act, shall be required to mail a notice to the following specified construction trade
publications, of all informal and formal construction contracts being bid within the specified county (as provided
in sections 22034 and 22037 of the Public Contract Code). The numbers following the name of each county refer
to the corresponding numbered publications on the List of Construction Trade Journals beginning on page 10.
Users will note that a minimal number of publications have been listed as mandatory for each county. The list
of construction trade journals beginning on page 10 is much more extensive. The Commission urges each public
agency to select additional publications from their geographical area and include them on their list of publications
to be notified.
Information recommended to be included in the mailed notice to trade journals is listed on page 9.
COUNTY NAME TRADE JOURNALS
ALAMEDA
1, 3, 33
ALPINE
1, 3, 29, 43
AMADOR
1, 3, 28, 43
BUTTE
1, 3, 14
CALAVERAS
1, 3, 28, 43
COLUSA
1, 3, 14, 22
CONTRA COSTA
1, 3, 37
DEL NORTE
1, 3, 12
EL DORADO
1, 3, 22, 27
FRESNO
1, 3, 49
GLENN
1, 3, 13, 14
HUMBOLDT
1, 3, 12
IMPERIAL
2, 7, 74
INYO
1, 2, 3
KERN
1, 2, 9, 53
KINGS
1, 2, 3, 52
LAKE
1, 3, 16, 18
LASSEN
1, 3, 13, 29
LOS ANGELES
2, 4, 63
MADERA
1, 3, 45, 49
MARIN
1, 3, 18, 19
MARIPOSA
1, 3, 45
MENDOCINO
1, 3, 15, 18
MERCED
1, 3, 45
Revised: 7/18/90
COUNTY NAME TRADE JOURNALS
MODOC
1, 3, 11, 13
MONO
1,3
MONTEREY
1, 3, 47, 48
NAPA
1, 3, 20
NEVADA
1, 3, 25
ORANGE
2, 5, 63
PLACER
1, 3, 26
PLUMAS
1, 3, 14, 29
RIVERSIDE
2, 6, 63, 72
SACRAMENTO
1, 3, 22
SAN BENITO
1, 3, 48
SAN BERNARDINO
2, 6, 63, 72
SAN DIEGO
2, 7, 74
SAN FRANCISCO
1, 3, 30
SAN JOAQUIN
1, 3, 43
SAN LUIS OBISPO
1, 2, 3, 54, 55
SAN MATEO
1, 3, 38
SANTA BARBARA
2, 8, 56, 57, 59
SANTA CLARA
1, 3, 38, 39
SANTA CRUZ
1, 3, 46
SHASTA
1, 3, 13
SIERRA
1, 3, 29
SISKIYOU
1, 3, 10, 13
SOLANO
1, 3, 20
SONOMA
1, 3, 18
STANISLAUS
1, 3, 44
SUTTER
1, 3, 14, 22
TEHAMA
1, 3, 13, 14
TRINITY
1, 3, 12, 13
TULARE
1, 2, 3, 52
TUOLUMNE
1, 3, 44
VENTURA
2, 8, 60
YOLO
1, 3, 22
YUBA
1, 3, 21
Sample Information For Mailed Notice
The list below are the types of information that could be included in the mailed notice to the construction trade
journals. This list should only be used as a guide.
Project title and contract # (if any)
Cost range
Location of site
Who is taking bids /date and time due
Owner's address and phone number
Architect's address and phone number
Brief description of work to be done
Where plans may be obtained/Deposit required/Whether or not refundable
Percentage of bid bond/Percentage of performance bond/Percentage of payment bond
9 Revised: 7/18/90
CALIFORNIA UNIFORM CONSTRUCTION COST ACCOUNTING COMMISSION
LIST OF CONSTRUCTION TRADE JOURNALS
The following organizations have indicated to the Commission that they:
a) Publish a newsletter or trade journal on a weekly or more frequent basis, which contains a section
listing projects being bid; or, that they provide a telephone notice service to their members.
b) Do not charge for publishing or otherwise disseminating a Notice to Contractors.
They have indicated to the Commission that they serve subscribers or members in the counties listed to the right
of each organization.
Organizations which meet criteria (a) and (b) above may be added to the list, or changes or corrections can be
made to the list by contacting:
Office of State Controller
Division of L.G.F.A.
Bureau of Accounting & Budgeting Procedures
P. O. Box 942850
Sacramento, CA 94250 -5876
ORGANIZATION
1. Daily Construction Service
P.O. Box 3019
San Francisco, CA 94119
415 -781 -8088
2. Daily Construction Service
448 South Hill Street
Los Angeles, CA 90013
213 -623 -1477
3. F. W. Dodge Division
P. O. Box 7878, Rincon Annex
San Francisco, CA 94120
415- 864 -8600
Revised: 7/18/90 10
AREAS OF MEMBERS OR SUBSCRIBERS
BY COUNTY
Counties north of and including Inyo, Kern,
and San Luis Obispo
Counties south of and including Inyo, Kings,
San Luis Obispo, and Tulare
Counties north of and including Monterey,
Kings, Tulare, and Inyo
AREAS OF MEMBERS OR SUBCRIBERS
ORGANIZATION BY COUNTY
4. F. W. Dodge Division Los Angeles
2 Coral Circle
Monterey Park, CA 91754 R
213- 727 -0120
5. F. W. Dodge Division Orange
1835 W. Orangewood, Suite 101
Orange, CA 92688
6. F. W. Dodge Division San Bernardino and Riverside
202 E. Airport, Suite 130
San Bernardino, CA 92408
7. F. W. Dodge Division San Diego and Imperial
8825 Aero Drive - Suite A -120
San Diego, CA 92138
8. F. W. Dodge Division San Luis Obispo, Ventura, Santa Barbara, and
674 County Square Drive Northern Los Angeles
Ventura, CA 93303
9. F. W. Dodge Division Kern
6713 Hooper Avenue
Bakersfield, CA 93308
10. Medford Builders Exchange
315 North Bartlett Avenue
Medford, OR 97501
11. Klamath Builders Exchange
724 Main Street - Room 214
Klamath Falls, OR 97601
12. Humboldt Builders Exchange Humboldt, Del Norte, Trinity, Lake,
2355 Myrtle Avenue Mendocino, Shasta, Tehama, Glenn, and Butte
Eureka, CA 95501
13. Shasta Builders Exchange Counties north of Marysville/Ukiah line
2410 Larkspur Lane
Redding, CA 96001
916- 243 -4646 or 221 -5556
14. Valley Contractors Exchange
957 East Eighth Street
Chico, CA 95926
916 -343 -1981
11 Revised: 7/18/90
ORGANIZATION
15. Mendocino Contractors Exchange
331 North School Street
Ukiah, CA 95482
16. Lake County Contractors Exchange
199 North Main Street
Lakeport, CA 95453
17. Sonoma County Trades Referral Service
P. O. Box 98
Windsor, CA 95492
18. North Coast Builders Exchange
P. O. Box 6025
Santa Rosa, CA 95406
707 -542 -9502
19. Marin Builders Exchange
110 Belvedere Street
San Rafael, CA 94901
415456 -3233
20. Solano -Napa Builders Exchange
P. O. Box 2400
Napa, CA 94558
707 -255 -2515
21. Valley Contractors Exchange
1641 Colusa Highway
Yuba City, CA 95991
22. Sacramento Builders Exchange
P. O. Box 1462
Sacramento, CA 95807
916- 442 -8991
23. Construction Data Plan Center
P. O. Box 13816
Sacramento, CA 95853
916- 920 -2240
24. Greater Sacramento Area Plan
2220 Watt Avenue, Suite B -5
Sacramento, CA 95825
Revised: 7/18/90 12
AREAS OF MEMBERS OR SUBSCRIBERS
BY COUNTY
Sonoma, Marin, Lake, Yolo, Mendocino,
Solano, Humboldt, Del Norte, Contra Costa,
Alameda, Sacramento, Napa, San Francisco,
and San Mateo
Marin, Sonoma, San Francisco, Napa, and
Contra Costa
Counties north of and including Fresno
Counties north of and including Fresno
Lai Zf7•\5PAcyICOIN
25. Nevada County Builders Exchange
150 B South Auburn Street
Grass Valley, CA 95945
916- 273 -6542
26. Placer County. Contractors Association
220 Sacramento Street
Auburn, CA 95603
916- 885.6419
27. El Dorado Builders Exchange
681 Main Street, Suite 102
Placerville, CA 95667
916 -622 -2757
28. Builders Exchange of Amador
P. O. Box 441
Jackson, CA 95642
209 -223 -1813
29. Reno Builders' Exchange
310 South Wells Avenue
Reno, Nevada 89502
30. San Francisco Builders Exchange
850 South Van Ness
San Francisco, CA 94110
415 -282 -8220
31. Minority Business Exchange
1255 Post Street, Suite 625
San Francisco, CA 94109
32. United Asian Contractors Assn.
1670 Pine Street
San Francisco, CA 94109
33. Builders Exchange of Alameda
P.O. Box 1978
San Leandro, CA 94577
415- 483 -8880
34. Technical Data Corp.
1900 Powell Street
Emeryville, CA 94608
AREAS OF MEMBERS OR SUBSCRIBERS
BY COUNTY
Placer, Nevada, and Sacramento
El Dorado
Alameda
13 Revised: 7/18190
ORGANIZATTON
35. Golden State Business League, Inc.
333 Hegenberger Road
Oakland, CA 94621
36. Minority Contractors Assn. of Northern California
610 16th Street, Suite 214
Oakland, CA 94612
37. Contra Costa Builders Exchange
2490 Salvio Street
Concord, CA 94520
415 -685 -8630
38. Peninsula Builders Exchange
735 Industrial Road
San Carlos, CA 94070
415 - 5914486
39. Builders Exchange of Santa Clara County
P. O. Box 58032
Santa Clara, CA 94052
408- 727 -4000
40. California Builder & Engineer
P. O. Box 10070
Palo Alto, CA 94303
41. Bay Area Building Reporter, Inc.
1440 Franklin Street
Santa Clara, CA 95050
42. UMBE
413 Josefa Street
San Jose, CA 95126
43. Builders Exchange of Stockton
P. O. Box 8040
Stockton, CA 95208
209 -478 -1000
44. Valley Builders Exchange
P. O. Box 4307
Modesto, CA 95352
209 -522 -9031
Revised: 7/18/'90 14
AREAS OF MEMBERS OR SUBSCRIBERS
BY COUNTY
Contra Costa and all adjacent counties
San Mateo
Santa Clara, Santa Cruz, Monterey, Alameda,
and San Mateo
San Joaquin, Alpine, Calaveras, Amador,
Tuolumne, and Stanislaus
Stanislaus, San Joaqin, Merced, Mariposa,
Calaveras, Tuolumne, and Amador
1.. a. a Kok,
45. Merced - Mariposa Builders Exchange
P. O. Box 761
Merced, CA 95341
209- 722 -3612
46. Santa Cruz Builders Exchange
347 Coral Street
Santa Cruz, CA 95060
408426 -0404
47. Monterey Peninsula Builders Exchange
343 Ocean Avenue
Monterey, CA 93940
408- 373 -3033
48. Salinas Valley Builders Exchange
201 John Street, Suite I
Salinas, CA 93901
408- 758 -1624
49. Fresno Builders Exchange
P. O. Box 111
Fresno, CA 93707
209 -237 -1831
50. VEDA San Joaquin Valley
2010 N. Fine, No. 103
Fresno, CA 93727
51. Daily Construction Service
34 Sunnyside Avenue
Clovis, CA 93612
52. Tulare -Kings Builders Exchange
P. O. Box 667
Visalia, CA 93277
209- 7324568
53. Kern County Builders Exchange
711 - 24th Street
Bakersfield, CA 93301
805- 3244921
54. North County Contractors Assn.
527 Pine Street, Unit B
Paso Robles, CA 93446
805 -239 -0121
AREAS OF MEMBERS OR SUBSCRIBERS
BY COUNTY
Santa Cruz, Santa Clara, Monterey, San
Benito, and San Mateo
Monterey, Santa Cruz, and San Benito
Monterey, Santa Cruz, San Benito, Santa
Clara, and San Luis Obispo
Fresno, Madera, Merced, Kings, Tulare, and
Kern
Fresno, Madera, Merced, Kings, Tulare, and
Kern
San Luis Obispo, Monterey, and Santa
Barbara
15 Revised: 7/18/90
ORGANIZATION
55. San Luis Obispo Contractors Assn.
P. O. Box 1222
San Luis Obispo, CA 93406
805 -543 -7330
56. Santa Maria Valley Contractors Assn.
714 South Miller Street
Santa Maria, CA 93454
805 -925 -1191
57. Lompoc Valley Contractors Assn.
432 North Eighth Street, Suite B
Lompoc, CA 93436
805- 736 -3485
58. Santa Barbara Contractors Assn.
P. O. Box 4263
Santa Barbara, CA 93103
805- 962 -9775
59. Plan Service of Southern California
427 N. Salsipuedes Street
Santa Barbara, CA 93103
805- 965 -6189
60. Ventura County Contractors Assn.
P. O. Box 7365
Oxnard, CA 93031
805 -659 -2313
61. Ventura Plan Room
2640 Saddle Avenue
Oxnard, CA 93030
62. Harbor Builders Exchange
405 West 20th Street
San Pedro, CA 90731
63. Southern California Builders Assn.
12802 Valley View Blvd., Suite 6
Garden Grove, CA 92645
213430 -0524
64. Bid Editor
From The Ground Up
7115 Westminster Avenue
Westminster, CA 92683
Revised: 7/18/90 16
AREAS OF MEMBERS OR SUBSCRIBERS
BY COUNTY
San Luis Obispo County
Santa Barbara and San Luis Obispo
Santa Barbara
Santa Barbara and Ventura
Los Angeles, Orange, Riverside, and San
Bernardino
AREAS OF MEMBERS OR SUBSCRIBERS
ORGANIZATION BY COUNTY
65. Equivest Associates Southern California
307 North Santa Anita Ave., Suite A
Arcadia, CA 91006
818. 445 -7193
66. Plan Room, Inc.
142 Arena Street
El Segundo, CA 90245
67. Technical Data Corporation
101 North Labrea Ave., Suite 707
Inglewood, CA 90301
68. Desert Construction News
36-650 Sunair Plaza North
Cathedral City, CA 92234
69. Inland Empire Building News
P. O. Box 6266
San Bernardino, CA 92412
70. Operation Second Chance San Bernardino and Riverside
341 W. Second Street, Suite 1
San Bernardino, CA 92401
714- 884 -8764
71. Contractors "Hot Sheet" San Diego, Imperial, San Bernardino, Kern,
P. O. Box 4608 Ventura, Los Angeles, San Luis Obispo,
Riverside, CA 92514 Orange, and Riverside
714- 785 -7625
72. Desert Construction News/Plan Room
2664 Cherokee Way
Palm Springs, CA 92264
619- 324 -8481
73. San Diego Daily Transcript
Construction Department
P. O. Box 85469
San Diego, CA 92138
74. Daily Construction Reporter San Diego, Orange, and Imperial
1815 Hancock Street
San Diego, CA 92110
17 Revised: 7/18/90
ORGANIZATION
AREAS OF MEMBERS OR SUBSCRIBERS
BY COUNTY
75. Minority Business Development Center San Diego and Orange
6363 Alvarado Court, Suite 225
San Diego, CA 92120
619- 265 -3684
76. AGC Tri Counties
3324 State Street, Suite d-d
Santa Barbara, CA 93105
Revised: 7/18/90 18
CALIFORNIA UNIFORM CONSTRUCTION COST
ACCOUNTING COMMISSION
ACCOUNTING PROCEDURES REVIEW
Pursuant to the provisions of Public Contract Code Section 22042, the Commission has adopted the
following "Amounting Procedures Review", where an interested party presents evidence that the work
undertaken by the public agency falls within any of the following categories:
A. Is to be performed by a public agency after rejection of all bids, claiming work can be done less
expensively by the public agency.
B. Exceeded the force account limit.
C. Has been improperly classified as maintenance.
II. As used in the Amounting Procedures Review, "interested party" shall mean a licensed contractor eligible
to bid on the public project involved in the review, a labor organization whose members would be eligible
to perform work on the public project if it were performed by contract; an association of licensed contractors
and /or labor organizations; or a taxpayer of the public agency involved in the review.
III. Request for Amounting Procedures Review:
A. In those circumstances as set forth in section 1(a) above, a request for Commission review shall be in
writing, sent by certified or registered mail received by the Commission postmarked not later than five
business days from the date the public agency has rejected all bids.
B. In those circumstances set forth in section 1(b) or 1(c), a request for Commission review shall be by
letter received by the Commission not later than five calendar days from the above date an interested
party formally complains in writing to the public agency.
C. The address for purpose of notice herein is the: CALIFORNIA UNIFORM CONSTRUCTION
COST ACCOUNTING COMMISSION, Office of State Controller, Division of I— G.F.A., Bureau of
Amounting & Budgeting Procedures, P.O. Box 942850, Sacramento, CA 94250 -5876.
D. Such written notice shall include the following information:
1. Name, address, phone number of interested party as defined in (2) above, and person to be
contacted presenting evidence.
2. Indicate that work undertaken by the public agency falls within one of the following:
a. Is to be performed by a public agency after rejection of all bids claiming work can be done
less expensively by the public agency.
b. Exceeded the force amount limits.
c. Has been improperly classified as maintenance.
3. Name, address, and phone number of Public Agency involved.
19 Revised: 7/18/'90
ACCOUNTING PROCEDURES REVIEW
(CONTINUED)
4. Project name, location, or other project identification number.
5. Bid date and rejection date, if applicable.
6. Low bid dollar amount, if applicable.
7. Agency estimate, if available.
8. Other supporting information, if available.
E. At the time it transmits its request to the Commission for review, the interested party shall mail a copy
of the request by first class mail, postage prepaid, to the public agency involved.
IV. The Commission shall approve and designate in writing consultants available to investigate requests for
accounting procedures review. Such consultants shall be prequalified as follows:
A. They shall submit resumes of experience to the Commission for prequalification.
B. Each applicant shall have at least five years of experience with, and be knowledgeable of, public works
construction and /or accounting under contracts let by public agencies.
C. They shall submit their schedule of fees required to perform such service.
V. Immediately upon receipt of a request for accounting procedure review, it shall be assigned by the
Commission to one /or more of the prequalified consultants for review.
A. The consultant will review all of the information set forth in Section 3(d).
B. The consultant will interview the public agency involved and submit as a part of his findings a complete
statement of the public agencies position with respect to the review being conducted.
C. The Consultant shall prepare his written findings and his recommended decision within twenty (20)
calendar days from the date the request for review was received by the Commission.
VI. The Commission may appoint a subcommittee consisting of at least three (3) members to meet and review
the findings of fact and recommended decision of the consultant. The Commission shall render its final
decision within thirty (30) calendar days of the date on which the request was received by the Commission.
A copy of the decision shall be mailed by first class mail, postage prepaid, to each Commission member, the
interested party, and the Public Agency involved.
VII. Decisions on accounting procedures reviews shall be collected and maintained at the offices of the
Commission and shall be available for public inspection during regular working hours. Such decisions may
be cited and relied upon by interested parties and public agencies in subsequent reviews.
Revised: 7/18/90 20
UNIFORM PUBLIC
CONSTRUCTION COST
ACCOUNTING ACT
21 Revised: 7 /18/90
CHAPTER 2. BIDDING ON PUBLIC CONTRACTS
Article 1. Legislative Intent and Definitions
22000. This chapter shall be known and maybe cited as the "Uniform Public Construction Cost Accounting Act."
22001. The Legislature finds and declares that there is a statewide need to promote uniformity of the cost
accounting standards and bidding procedures on construction work performed or contracted by public entities in
the state. This chapter provides for the development of cost accounting standards and an alternative method for
the bidding of public works projects by public entities.
22002. (a) 'Public agency" for purposes of this chapter, means a city, county, city and county, including chartered
cities and chartered counties, any special district, and any other agency of the state for the local performance of
governmental or proprietary functions within limited boundaries. 'Public Agency" also includes a nonprofit transit
corporation wholly owned by a public agency and formed to carry out the purposes of the public agency.
(b) "Representatives of the construction industry" for purposes of this chapter, means a general
contractor, subcontractor, or labor representative with experience in the field of public works construction.
(c) "Public project" means any of the following:
(1) Construction, reconstruction, erection, alteration, renovation, improvement, demolition, and repair
work involving any publicly owned, leased, or operated facility.
(2) Painting or repainting of any publicly owned, leased, or operated facility.
(3) In the case of a publicly owned utility system, "public project" shall include only the construction,
erection, improvement, or repair of dams, reservoirs, powerplants, and electrical transmission lines of 230,000 volts
and higher.
(d) "Public project" does not include maintenance work. For purposes of this section, "maintenance
work" includes all of the following:
(1) Routine, recurring, and usual work for the preservation or protection of any publicly owned or
publicly operated facility for its intended purposes.
(2) Minor repainting.
(3) Resurfacing of streets and highways at less than one inch.
(4) Landscape maintenance, including mowing, watering, trimming, pruning, planting, replacement of
plants, and servicing of irrigation and sprinkler systems.
(5) Work performed to keep, operate, and maintain publicly owned water, power, or waste disposal
systems, including, but not limited to, dams, reservoirs, powerplants, and electrical transmission lines of 230,000
volts and higher.
(e) For purposes of this chapter, "facility" means any plant, building, structure, ground facility, utility
system, subject to the limitation found in paragraph (3) of subdivision (c), real property, streets and highways, or
other public work improvement.
Revised: 7/18/90 22
22003. A public agency which has, by resolution, elected to become subject to the uniform construction cost
accounting procedures set forth in Article 2 (commencing with Section 22010), may utilize the bidding procedures
set forth in Article 3 (commencing with Section 22030) when contracting for 'maintenance work,' as defined in
Section 22002, or when contracting for any other work which does not fall within the definition of "public project;
as defined in Section 22002.
Article 2. California Uniform Construction Cost Accounting Commission
22010. There is hereby created the California Uniform Construction Cost Accounting Commission. The
commission is comprised of 14 members.
(a) Thirteen of the members shall be appointed by the Controller as follows:
(1) Two members who shall each have at least 10 years of experience with, or providing professional services
to, a general contracting firm engaged, during that period, in public works construction in California.
(2) Two members who shall each have at least 10 years of experience with, or providing professional services
to, a firm or firms engaged, during that period, in subcontracting for public works construction in California.
(3) Two members who shall each be a member in good standing of, or have provided professional services
to, an organized labor union with at least 10 years of experience in public works construction in California.
(4) Seven members who shall each be experienced in, and knowledgeable of, public works construction
under contracts let by public agencies; two each representing cities, counties, respectively, and two representing
school districts (one with an average daily attendance over 25,000 and one with an average daily attendance under
25,000), and one member representing a special district. At least one of the two county representatives shall be
a county auditor or his or her designee.
(b) The member of the Contractors, State License Board who is a general engineering contractor as that
term is defined in Section 7056 of the Business and Professions Code shall serve as an ex officio voting member.
He or she shall become a member of the commission when the first vacancy occurs in an office of one of the
members under paragraph (1) of subdivision (a).
22011. The Controller, in an effort to select highly qualified commission members, shall solicit from organized
representatives of the construction industry and public agencies recommendations for appointments to the
commission.
22012. At least one commission member of the six representing the construction industry and at least one of the
six representing public agencies shall have previous accounting experience.
22013. The commission members shall select a chairperson from among its membership. The chairperson shall
serve as chair for a term of one year from the date of selection or February 1, whichever comes first. In no event
shall two consecutive chairpersons be appointees representing either the construction industry or public agencies.
23 Revised: 7/18/90
22014. (a) The members of the commission shall hold office for terms of three years, and until their successors
are appointed, except as otherwise provided for in this section.
(b) In the case of members initially appointed by the Controller, two representing the construction
industry and two representing public agencies shall be appointed to serve until July 1, 1985; two representing the
construction industry and two representing public agencies shall be appointed to serve until July 1,1986; and three
representing the construction industry and three representing public agencies shall be appointed to serve until
July 1, 1987.
(c) Members may be reappointed for subsequent terms of three years.
(d)The Controller shall, within 45 days after expiration of any term, appoint a replacement to fill the
vacancy on the Commission.
22015. (a) The Controller shall make available for the conduct of the commission's business, such staff and other
support as does not conflict with the accomplishment of the other business of the office of the Controller.
(b) Each member of the commission shall serve without compensation, but shall be reimbursed for travel
and other expenses necessarily incurred in the performance of the member's duties.
(c) The commission may accept grants from federal, state, or local public agencies, or from private
foundations or individuals, in order to assist it in carrying out its duties, functions, and powers under this chapter.
22016. The commission shall meet not less than once each year, at a time and place chosen by its membership.
22017. The commission shall do all of the following:
(a) After due deliberation and study, recommend for adoption by the Controller, uniform construction
cost accounting procedures for implementation by public agencies in the performance of, or in contracting for,
construction on public projects. The procedures shall, to the extent deemed feasible and practicable by the
commission, incorporate, or be consistent with construction cost accounting procedures and reporting requirements
utilized by state and federal agencies on public projects, and be uniformly applicable to all public agencies which
elect to utilize the uniform procedures. As part of its deliberations and review, the commission shall take into
consideration relevant provisions of Office of Management and Budget Circular A -76.
(b) After due deliberation and study, recommend for adoption by the Controller cost accounting
procedures designed especially for implementation by California cities with a population of less than 10,000. The
procedures shall incorporate cost accounting and reporting requirements deemed practicable and applicable to all
cities under 10,000 population which elect to utilize the uniform procedures.
(c) Recommend for adoption by the Controller, procedures and standards for the periodic evaluation
and adjustment, as necessary, of the monetary limits specified in Section 22032.
(d) The commission shall make an annual report to the Legislature with respect to its activities and
operations, together with .those recommendations as it deems necessary.
22018. The Controller shall, upon receipt of the commission's recommendations, review and evaluate the
recommended procedures and either formally adopt or reject the recommended procedures within 90 days of
submission by the commission.
Revised: 7/18/90 24
22019. Upon determining that the recommended uniform construction cost accounting procedures will serve the
best interests of the state and public agencies, and upon formal adoption by the Controller, the Controller shall
promulgate the uniform procedure for all public agencies electing to participate, together with instructions for their
adoption and implementation by any public agency.
22020. In accordance with procedures and standards adopted pursuant to Section 22017, every five years the
commission shall consider whether there have been material changes in public construction costs and make
recommendations to the Controller regarding adjustments in the monetary limits prescribed by Section 22032, but
in no case shall the amount, as adjusted, be less than fifteen thousand dollars ($15,000). Any adjustment shall be
effective beginning with the fiscal year which commences not less than 60 days following the Controller's
notification to affected public agencies of the adjustment.
Article 3. Public Projects: Alternative Procedure
22030. This article applies only to a public agency whose governing board has by resolution elected to become
subject to the uniform construction cost accounting procedures set forth in Article 2 (commencing with Section
22010) and which has notified the Controller of that election. In the event of a conflict with any other provision
of law relative to bidding procedures, this article shall apply to any public agency which has adopted a resolution
and so notified the Controller.
22031. Nothing in this article shall prohibit a board of supervisors or a county road commissioner from utilizing,
as an alternative to the procedures set forth in this article, the procedures set forth in Article 25 (commencing with
Section 20390) of Chapter 1.
22032. (a) Public projects of twenty-five thousand dollars ($25,000) or less may be performed by the employees
of a public agency by force account, by negotiated contract, or by purchase order.
(b) Public projects of seventy-five thousand dollars ($75,000) or less may be let to contract by informal
procedures as set forth in this article.
(c) Public projects of more than seventy-five thousand dollars ($75,000) shall, except as otherwise
provided in this article, be let to contract by formal bidding procedure.
22033. It shall be unlawful to split or separate into smaller work orders or projects any projects for the purpose
of evading the provisions of this article requiring work to be done by contract after competitive bidding.
22034. Each public agency which elects to become subject to the uniform construction accounting procedures set
forth in Article 2 (commencing with Section 22010), shall enact an informal bidding ordinance to govern the
selection of contractors to perform public projects pursuant to subdivision (b) of Section 22032. The ordinance
shall include all of the following:
(a) The public agency shall maintain a list of qualified contractors, identified according to categories of
work Minimum criteria for development and maintenance of the contractors list shall be determined by the
commission.
(b) All contractors on the list for the category of work being bid or all construction trade journals
specified in Section 22036, or both all contractors on the list for the category of work being bid and all
construction trade journals specified in Section 22036, shall be mailed a notice inviting informal bids unless the
product or service is proprietary.
25 Revised: 7/18/90
(c) All mailing of notices to contractors and construction trade journals pursuant to subdivision (b) shall
be completed not less than 10 calendar days before bids are due.
(d) The notice inviting informal bids shall describe the project in general terms, how to obtain more
detailed information about the project, and state the time and place for the submission of bids.
(e) The governing body of the public agency may delegate the authority to award informal contracts to
the public works director, general manager, purchasing agent, or other appropriate person.
(f) If all bids received are in excess of seventy-five thousand dollars (575,000), the governing body of the
public agency may by passage of a resolution by a four -fifths vote, award the contract, at eighty thousand dollars
($80,000), or less, to the lowest responsible bidder, if it determines the cost estimate of the public agency was
reasonable.
22035. In cases of great emergency, as determined by the governing body of the public agency, including, but not
limited to, states of emergency defined in Section 8558 of the Government Code, when repair or replacements are
necessary to permit the continued conduct of the operation or services of a public agency or to avoid danger to
life or property, the governing body by majority vote, may proceed at once to replace or repair any public facility
without adopting plans, specifications, strain sheets, or working details, or giving notice for bids to let contracts.
The work may be done by day labor under the direction of the governing body, by contract, or by a combination
of the two. The governing body, by majority vote, may delegate to the appropriate county administrative officer
or city manager the power to declare a public emergency subject to confirmation by the governing body, by a
four -fifths vote, at its nerd meeting.
22036. The commission shall determine, on a county-by -county basis, the appropriate construction trade journals
which shall receive mailed notice of all informal and formal construction contracts being bid for work within the
specified county.
22037. Notice inviting formal bids shall state the time and place for the receiving and opening of sealed bids and
distinctly describe the project. The notice shall be published at least 14 calendar days before the date of opening
the bids in a newspaper of general circulation, printed and published in the jurisdiction of the public agency, or,
if there is no newspaper printed and published within the jurisdiction of the public agency, in a newspaper of
general circulation which is circulated within the jurisdiction of the public agency, or, if there is no newspaper
which is circulated within the jurisdiction of the public agency, publication shall be by posting the notice in at least
three places within the jurisdiction of the public agency as have been designated by ordinance or regulation of the
public agency as places for the posting of its notices. The notice inviting formal bids shall also be mailed to all
construction trade journals specified in Section 22036. The notice shall be mailed a least 30 calendar days before
the date of opening the bids. In addition to notice required by this section, the public agency may give such other
notice as it deems proper.
Tat of section operative until Jan. 1, 1991
22038. (a) In its discretion, the public agency may reject any bids presented. If after the first invitation for bids
all bids are rejected, the public agency shall state the reasons for the rejection, and after reevaluating its cost
estimates of the project, the public agency shall have the option of either of the following:
(1) Abandoning the project or readvertising for bids in the manner described by this article.
(2) By passage of a resolution by a four -fifths vote of its governing body declaring that the project can
be performed more economically by the employees of the public agency, may have the project done by force
account without further complying with this article.
Revised: 7/18/90 26
(b) If a contract is awarded, it shall be awarded to the lowest responsible bidder. If two or more bids
are the same and the lowest, the public agency may accept the one it chooses.
(c) If no bids are received, the project may be performed by employees of the public agency by force
account, or by informal bidding procedures set forth in Section 22034 without further complying with this article.
(d) Any statement of reasons for the rejection of all bids made pursuant to subdivision (a) shall not
constitute a new cause of action separate and apart from any existing remedies which may be available to the
bidders.
This section shall remain in effect only until January 1, 1991, and as of such date is repealed, unless a later enacted
statute, which is chaptered before January 1, 1991, deletes or extends such date.
Text of sectiort operative Jan. 1, 1991
2203& (a) In its discretion, the public agency may reject any bids presented. If after the first invitation of bids
all bids are rejected, after reevaluating its cost estimates of the project, the public agency shall have the option
of either of the following:
(1) Abandoning the project or readvertising for bids in the manner described by this article.
(2) By passage of a resolution by a four - fifths vote of its governing body declaring that the project can
be performed more economically by the employees of the public agency, may have the project done by force
account without further complying with this article.
(b) If a contract is awarded, it shall be awarded to the lowest responsible bidder. If two or more bids
are the same and the lowest, the public agency may accept the one it chooses.
(c) If no bids are received through the formal or informal procedure, the project may be performed by
the employees of the public agency by force account, or negotiated contract wihtout further complying with this
article..
This section shall become operative on January 1, 1991.
22039. The governing body of the public agency shall adopt plans, specifications, and working details for all public
projects exceeding the amount specified in subdivision (c) of Section 22032.
22040. Any person may examine the plans, specifications, or working details, or all of these, adopted by the public
agency for any project.
22041. This article does not apply to the construction of any public building used for facilities of juvenile forestry
camps or juvenile homes, ranches, or camps established under Article 15 (commencing with Section 880) of
Chapter 2 of Part 1 of Division 2 of the Welfare and Institutions Code, if a major portion of the construction work
is to be performed by wards of the juvenile court assigned to those camps, ranches, or homes.
22042. The commission shall review the accounting procedures of any participating public agency where an
interested party presents evidence that the work undertaken by the public agency falls within any of the following
categories:
(a) Is to be performed by a public agency after rejection of all bids, claiming work can be done less
expensively by the public agency.
27 Revised: 7/18190
(b) Exceeded the force account limits.
(c) Has been improperly classified as maintenance.
22043. In those circumstances as set forth in subdivision (a) of Section 22042, a request for commission review
shall be in writing, sent by certified or registered mail received by the commission postmarked not later than five
business days from the date the public agency has rejected all bids. In those circumstances set forth in subdivision
(b) or (c) of Section 22042, a request for commission review shall be by letter received by the commission not later
than five days from the date an interested party formally complains to the public agency. The commission review
shall commence immediately and conclude within 30 days from the receipt of the request for commission review.
During the review of a project that falls within subdivision (a) of Section 22042, the agency shall not proceed on
the project until a final decision is received by the commission.
22044. The commission shall prepare written findings. Should the commission find that the provisions of this
chapter or of the uniform cost accounting procedures provided for in this chapter were not complied with by the
public agency, the following steps shall be implemented by that agency:
(a) On those projects set forth in subdivision (a) of Section 22042, the public agency has the option of
either (1) abandoning the project, or (2) awarding the project to the lowest responsible bidder.
(b) On those projects set forth in subdivision (b) or (c) of Section 22042, the public agency shall present
the commission's findings to its governing body and that governing body shall conduct a public hearing with regard
to the commission's finding within 30 days of receipt of the findings.
22045. (a) No later than January 1, 1985, the commission shall recommended, for adoption by the Controller,
written procedures implementing the accounting procedures review provided for in this article.
(b) The Controller shall, upon receipt of the commission's recommendation, review and evaluate the
recommended procedures and either formally adopt or reject the recommended procedures within 90 days of
submission of the commission.
Revised: 7/18190 28
PART II
UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING
POLICIES AND PROCEDURES
29 Revised: 7/18/90
Revised: 7/18/90 30
SECTION I. INTRODUCTION
31 Revised: 7/18/J0
As specified in the State of California Public Contracts Code, all governmental jurisdictions are limited to the
dollar amount of public project work that can be performed using internal resources. The jurisdictions are further
required to follow various bidding procedures in undertaking construction work performed or contracted in the
jurisdiction. The passage of Chapter 1054, Statutes of 1983 (Uniform Public Construction Cost Accounting Act),
and subsequent amendments provided in Chapter 758, Statutes of 1983; Chapter 993, Statutes of 1984; Chapter
1019, Statutes of 1986; Chapter 1327, Statutes of 1987; Chapters 239 and 1408, Statutes of 1988; and Chapters 241
and 733, Statutes of 1989, amended and added Chapter 2 (commencing with Section 22000) to Part 3 of Division
2 of the Public Contract Code. This legislation provides for alternative bidding procedures by public agencies in
undertaking public project work, provided they subscribe to uniform construction cost accounting policies and
procedures developed in accordance with the law.
The purpose of this document is to give public agencies those construction cost accounting policies and procedures
required in accordance with this above mentioned legislation. To assist in understanding these policies and
procedures we have provided examples of typical transactions which would occur under this program. These
examples are for illustrative purposes only and although they may be used should not be considered required
formats for public agencies operating under this program.
A. UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING ACT
Public Agency
The law applies to all public agencies including cities, counties, chartered cities and chartered counties, any
special district and any other agency of the state responsible for the local performance of governmental or
proprietary functions with unlimited boundaries. "Public agency" also includes a nonprofit transit corporation
wholly owned by a public agency and formed to carry out the purposes of the public agency.
Public Projects
The law includes all public projects performed by public agencies related to the following:
Construction, reconstruction, erection, alteration, renovation, improvement, demolition and repair work
involving any publicly- owned, leased or operated facility.
Painting or repainting of any publicly- owned, leased or operated facility.
In the case of a publicly -owned utility system, construction, erection, improvement or repair of dams,
reservoirs, powerplants and electrical transmission lines of 230,000 volts and higher.
Exemptions
Construction of any public building used for facilities of juvenile forestry camps or juvenile homes, ranches,
or camps established under Article 15 (commencing with Section 880) of Chapter 2 of Part 1 of Division 2
of the Welfare and institutions Code, if a major portion of the construction work is to be performed by wards
of the juvenile court assigned to those camps, ranches or homes is exempt from the provisions of the Act.
Revised: 7/18/90 32
In addition, in cases of great emergency, as determined by the governing body of the public agency, including,
but not limited to, states of emergency defined in Section 8558 of the Government Code, when repair or
replacements are necessary to permit the continued conduct of the operation or services of a public agency
or to avoid danger to life or property, the governing body by majority vote, may proceed at once to replace
or repair any public facility without adopting plans, specifications, strain sheets, or working details, or giving
notice for bids to let contracts. The work may be done by day labor under the direction of the governing
body, by contract, or by a combination of the two. The governing body, by majority vote, may delegate to
the appropriate county administrative officer or city manager the power to declare a public emergency subject
to confirmation by the governing body, by a four -fifths vote, at its next meeting.
Bid Limitations
For those agencies whose governing board has by resolution elected to become subject to the uniform
construction cost accounting policies and procedures and which have notified the State Controller of that
election, the following bid limitations will be in effect.
° Public projects of twenty-five thousand dollars ($25,000) or less may be performed by the employees
of a public agency by force account (for definition see Section II), by negotiated contract, or by
purchase order.
Public projects of seventy-five thousand dollars ($75,000) or less may be let to contract by informal
procedures as set forth in this legislation.
° If all bids received are in excess of seventy-five thousand dollars ($75,000), the goveming body of the
public agency may by passage of a resolution by a four -fifths vote, award the contract, at eighty
thousand dollars ($80,000), or less, to the lowest responsible bidder, if it determines the cost estimate
of the public agency was reasonable.
° Public projects of more than seventy-five thousand dollars ($75,000) shall, except as otherwise provided
in this legislation, be let to contract by formal bidding procedure.
Award of Bid
The law allows the public agency to reject any bids presented. If after the first invitation for bids all bids are
rejected, the public agency shall have the option, after reevaluating its cost estimates of the project, of one
of the following:
The public agency may abandon the project or re- advertise for bids in the manner described by this
legislation.
° By passage of a resolution by a four -fifths majority of its governing body declaring that the project can
be performed more economically by its employees, the public agency may have the project done by force
account without further complying with this legislation.
° If a contract is awarded, it shall be awarded to the lowest responsible bidder. If two or more bids are
the same and the lowest, the public agency may accept the one it chooses.
If no bids are received, the project may be performed by employees of the public agency by force
account or by informal bidding procedures set forth in Section 22034 of the Public Contract Code.
33 Revised: 7/18/90
California Uniform Construction Cost Accountine Commission
Chapter 1054 created the California Uniform Construction Cost Accounting Commission ( CUCCAC). The
Commission is comprised of 14 members, 13 members appointed by the State Controller and one member
of the Contractors' State License Board. Commission membership includes representatives from the
construction industry, who have experience as general contractors and subcontractors on public works
construction projects; representatives of organized labor, and public agency officials who are involved in
letting public works construction contracts.
The Commission is empowered to review and recommend for adoption by the State Controller uniform public
construction cost accounting policies and procedures to be followed by public agencies in the performance
of or in contracting for construction of public projects under this program.
Imniementation
The public agency must perform several administrative steps to comply and elect into the law. The major
steps include:
Notifying the State Controller of the election.
Adopting ordinances or regulations providing informal bidding procedures as required by the law.
Complying with the public construction cost accounting construction policies and procedures presented
in this manual.
The CUCCAC shall review the accounting procedures of any participating public agency where an interested
parry presents evidence that the work undertaken by the public agency falls within any of the following
categories:
1. Is to be performed by a public agency after rejection of all bids, claiming work can be done less
expensively by the public agency.
2. Exceeded the force account limits.
3. Has been improperly classified as maintenance.
Revised: 7/18/90 34
SECTION H. UNIFORM PUBLIC CONSTRUCTION
COST ACCOUNTING POLICIES AND PROCEDURES
35 Revised: 7/18/90
The California Uniform Construction Cost Accounting Commission (CUCCAC) is responsible for the review and
development of uniform public construction cost accounting policies and procedures to be followed by public
agencies electing to participate in the program. This section of the manual discusses the basic philosophy and
intent of the Commission in developing these cost accounting policies and procedures, the range of public
construction projects that may be undertaken by a public agency that would utilize the cost accounting policies
and procedures, and the support systems deemed necessary to comply with this program.
A. CUCCAC PHILOSOPHY
The policies and procedures, as dictated by the law, shall, to the extent deemed feasible and practicable,
incorporate or be consistent with construction cost accounting guidelines and standards and reporting requirements
utilized by state and federal agencies on public projects and be uniformly applicable to all public agencies which
elect to utilize the policies and procedures. The Commission recognizes the wide divergence in the size,
capabilities and scope of operations of various public agencies operating under this legislation. Therefore, in
developing this manual the Commission wishes to present policies and procedures that are reasonable and do not
demand extensive tracking of detail. The Commission feels that all cost elements -- personnel, materials, supplies
and subcontracts, equipment and overhead -- associated with a project must be recorded and reported at the
project level. Each of the cost elements is to be expressed in the initial bid /estimate process, captured and
recorded during the construction period and compared to the initial estimate at the conclusion of the public
project. This shall require the existence of a project tracking system as discussed later in this section. The
Commission refrains from dictating a specific system but requires a system to estimate for bidding purposes, and
to capture the actual costs in a manner consistent with the bid estimate. In this manner, the policies and
procedures are results - oriented.
B. APPLICABLE PROJECTS
In keeping with the Commission's objective of providing cost accounting policies and procedures that are specific
in concept yet broad enough to encompass all public agencies regardless of size and scope of services, these policies
and procedures should enable the public agencies to track all applicable construction- oriented public projects.
While allowing for the divergence of activities performed, these policies and procedures parallel construction cost
accounting practices as much as possible to allow for a comparability of private and public estimates and actual
costs incurred in constructing public projects.
C. DEFINITIONS
The definitions listed below will assist users of this manual in interpreting and understanding the policies and
procedures as stated in this manual. It is important to note these definitions pertain only to the contents of this
manual.
Cost Findine
Cost finding is a less formal method than project accounting of cost determination or estimation on an
irregular basis. There may be no formal accounting entries during the year to record costs incurred in specific
cost accounts. Instead, cost finding usually involves taking available fund financial accounting data and
recording it and adjusting it to devise the cost data or estimate needed. This approach will be used in
selected instances as defined in this manual.
Revised: 7/18/90 36
Direct Costs
Direct costs represent economic resources that can be specifically identified with a particular construction
activity or function. To the extent possible, such costs should be charged directly to the project for purposes
of cost determination rather than being subjected to allocation procedures.
End Cost Obiective
An end cost objective is a cost center or activity established for the accumulation of the direct cost of
performing government services. All the costs should be considered to indirectly support the performances
of these services.
Fguinment Usage Tracking System
An equipment usage tracking system allows for the identification, recording, accumulation and reporting of
usage of a specific piece of equipment or type of equipment and the unit of usage, e.g., hours, days, mileage,
to a particular activity.
Force Account
Work performed on public projects using internal resources including but not limited to labor, equipment,
and materials, supplies and subcontracts of the public agency.
Government -wide Overhead
Government -wide overhead is defined to include all costs of a public agency not associated with
organizational units performing services which support all end cost objectives of the government entity.
Materials. Supplies and Subcontracts Tracking System
A materials, supplies and subcontracts tracking system allows for the identification, recording, accumulation
and reporting of materials, supplies and subcontracts used on a particular activity.
Materiality
It is the Commission's position that, if the value of these goods obtained from inventory is material, the cost
must be recorded to the public project code as a direct cost item. Materiality is defined for purposes of this
manual to be any item that has a unit or aggregate value of $25 or more.
Overhead Costs
Overhead costs represent economic resources that are employed for common or joint purposes benefiting
several projects or functions. As such, overhead costs are not as readily chargeable to individual projects and,
therefore, generally require allocation based upon statistical relationships.
Personnel Tracking System
A personnel tracking system allows for the identification, recording, accumulation and reporting of personnel
working on a particular activity.
37 Revised: 7/18/90
Project Accounting
Project accounting is the continuous process of analyzing, classifying, recording and summarizing cost data
within the confines and controls of a formal project accounting system and reporting them to users on a
regular basis.
Project Tracking System
A project tracking system allows for the identification and establishment of cost codes to particular activities.
The system would be used to record, accumulate and report personnel costs; equipment costs; material,
supplies and subcontracts costs; and allocated overhead to activities identified.
Public Project Unit
A public project unit is an identifiable organization of any size whose primary goals include the undertaking
and completion of public projects. The Commission would, in general, consider a unit to be a public project
unit when over 25% of the total unit's annual budget is expended on public projects. It is more common to
have these organizational units in the larger public agencies - urban counties, cities and school districts.
Subcontract
The use of an outside contractor with specialized skills and /or equipment needed to complete an element of
work on the public project.
Unit Overhead
Unit overhead is defined as all costs incurred by an organizational unit, such as a public project unit,
department, division or section, which are not directly attributable to any end cost objective whether it be
a public project or not. These costs include personnel costs, materials, supplies and subcontracts and
equipment costs not directly attributable to any end cost objective.
Work Order
A work order is written authorization for the performance of a particular project. It contains a description
and location of the project and specifications for the work to be performed. Work orders are assigned an
identification code and are used to record all costs both direct and indirect incurred in completing the project.
D. PUBLIC AGENCY ORGANIZATION STRUCTURE
In general, public agencies will contract out design- and -build and heavy construction projects and only perform
general building projects and specialty construction projects with internal resources. Frequently, this decision to
undertake general building and specialty construction projects is made based on the agency's organization structure,
current workload requirements and available staffing resources.
Often, in large organizations, due to the ongoing workload, there are organizational units whose stated objective
is to undertake and complete on an as- needed basis general building and specialty construction projects. These
organizational units are project - oriented. Their end cost objectives primarily consist of the performance of public
projects. Costs specifically incurred in connection with individual end cost objectives are considered to be direct
costs. Costs not specifically incurred to support individual and cost objectives are considered to be overhead costs
associated with the organizational units taken as a whole. To recognize all the costs associated with an end cost
objective, these overhead costs must be allocated back to these end cost objectives. Examples of end cost
objectives include public projects, such as the construction of a warehouse, renovation of a lunch room or street
Revised: 7/18/90 38
reconstruction and resurfacing over 1 inch. Smaller public agencies, which comprise the majority of public agencies
in the state, usually do not have organizational units whose annual budgets represent more than 25% of public
project work. Frequently, these employees perform general maintenance duties in addition to working on public
projects. The public project costs incurred by these employees are more difficult to identify yet equally important.
The cost accounting standards discussed in Sections III, IV, V and VI have provided the needed flexibility to
properly address the unique organization structures of the varied participating public agencies.
E. CLASSIFICATION OF COSTS
It is the stated objective of the law and CUCCAC to have public agencies estimate the cost of public projects and
then track these project costs in a manner similar to private industry. Essential to achieving this objective is the
understanding and agreement by both parties as to the components of costs that are included in public projects.
The major classification of cost components for construction projects include:
° Direct
° Indirect
° Overhead
1. Direct Costs
Direct costs include costs that can be specifically identified with a construction job and /or with a unit
of production within a job.
Direct costs generally include these categories of costs: labor, equipment, permanent materials and
supplies, subcontracts, nonpermanent materials and supplies and miscellaneous costs. Components of
each of these direct project cost categories are shown below and include costs applicable to the
construction industry.
a. Labor
Hourly Pay/Salary
Payroll Taxes (Employer Contribution)
° Workers' Compensation Insurance (Allocation of Self Insurance)
Group Health Insurance
° Group Life Insurance
Retirement Plan (Employer Contribution)
Holiday Leave
Vacation
Sick Leave
° Unassigned Time
° Disability Insurance
° Unemployment Insurance
° Military Leave
Jury Duty Leave
° Management Leave /Compensatory Leave
° Uniform/Uniform Allowance
° Tuition Reimbursement
Union Time -off
Time Off for Illness or Death of Family Member
39 Revised: 7/18/90
Personal Liability Insurance
Administration /Employer Contribution of Deferred compensation Prograad401K
Overtime Premium
b. Eguipment
(1) Internal Equipment Rate
• Depreciation
• Insurance (Allocation of Self Insurance)
• Initial Assembling and Dismantling Costs
° Maintenance Costs
• Repair Costs
• Provision for Major Overhauls
Unassigned Time
• Maintenance and Storage Yard Facilities Costs
• Fuel and Oil
Tires and grease
(2) External Rate (Leased or Rented from Commercial Dealer)
Rental Rate
Maintenance Costs
Assembling and Dismantling Costs
Insurance Costs
° Fuel and Oil
° Tires and grease
c. Permanent Materials and Supplies
(1) Cost of Permanent Materials and Supplies - Charged Directly to Job
° Permanent Materials and Supplies Cost
Sales/Use Tax
Freight
Discounts Taken
(2) Cost of Permanent Materials and Supplies - Inventory
Inventory Cost (LIFO, FIFO, Average)
Handling
• Warehouse and Transportation Costs
• Spoilage, Loss and Theft
d. Subcontracts
Payments made to Subcontractors
Revised: 7118/90 40
e. Nonpermanent Materials and Supplies/Miscellaneous Costs
Nonpermanent Materials and Supplies
° Permits
° Fees
Performance Bonds
°
licenses
Miscellaneous Costs
2. Indirect Costs
Indirect costs can be identified with a project but not with a specific job or unit of production within
the project.
Indirect costs generally include two categories of costs: labor and other miscellaneous project site
expenses. Components of each of these indirect cost categories are shown below.
a. Labor
Quality Control and Inspection
Field Supervision
Security guards
Superintendent
° Job Secretary
b. Other Project Expenses
° Mobilization, Assembly, Move -Out Costs
° Yarding and Hauling
Trailer
° Utilities
Telephone
Warehouse Costs
° Spoilage, Loss and Theft
° Other Costs
3. Overhead Costs
Overhead costs cannot be identified with or charged to jobs or units of production unless some more
or less arbitrary allocation basis is used.
Components of overhead are shown below and include costs applicable to the construction industry,
public agencies or both, e.g., public agencies do not have to pay surety bond premiums as does the
construction industry to perform construction work, but both have costs incurred due to the processing
of payroll.
• Payroll
• Personnel
° Purchasing/Procurement
Bid/Estimate Expense
Advertising Expense
° Legal Costs
41 Revised: 7/18/90
° General Government
• General Accounting/Finance
• Departmental Accounting/Finance
Facilities
° Data Processing
Top Management
° Management Expenses
Typically public agencies recognize only two classifications of costs:
Direct
Overhead
It is important to note that this does not suggest that public agencies exclude indirect costs but rather
classify a majority of them as direct costs. For example, in the construction industry a foreman
supervising employees working at the job site would have his personnel costs pooled and allocated to
a job or unit of production. In a public agency the foreman's labor cost would be charged directly to
the appropriate public projects.
Regardless of the differences in how the various costs are classified, both the construction industry and
public agencies recognize that the significant cost elements of any construction project include:
° Personnel
Materials, supplies and subcontracts
° Equipment
° Overhead
F. PROJECT IDENTIFICATION
Public projects, as defined in Section I, shall be identified and given specific project codes. These codes are
generally referred to as project or work order numbers. These codes shall enable the public agency to segregate
the cost elements discussed above, thereby allowing for the proper estimation, tracking and comparison of
estimated vs. actual cost elements incurred at the completion of a public project.
G. PROJECT TRACKING
The public agency shall have a manual or automated system that records, accumulates and periodically reports the
cost elements - personnel; materials, supplies and subcontracts; equipment; and overhead - incurred in completing
all.public projects. The public agency shall be required to account for the costs of the public project in a manner
consistent with the way in which the project was bid/estimated. An audit trail of the accumulation of these cost
elements shall be maintained. Source documents shall be retained identifying costs incurred on the project. These
documents may include timesheets, equipment tracking records, requisitions of materials and supplies used at the
project site and the documentation of the development of overhead rates. The project tracking system does not
have to be a part of the public agency's fiscal system but should capture the major cost elements and comply with
the other requirements stated in this manual. This may require the agency to establish a project tracking system
or alter an existing cost accounting system.
Revised: 7/18/90 42
1. Examples of Project Tracking Systems
Project tracking systems range widely in terms of the complexity of establishing and maintaining these
systems. Most counties and larger school districts, cities and special districts have established
automated cost accounting systems which can track all identified public projects. Other project tracking
systems include work order systems and project ledger card system.
Work orders are written authorizations for the performance of a particular project. They contain a
description and location of the project and the specifications for the work to be performed. These
authorizations, used extensively by public agencies, are assigned an identification code and are used to
accumulate and report labor, materials and supplies and other costs associated with the project. Work
orders can be used to cost public project work, as well as maintenance work and other types of end cost
objective work.
A project ledger card system establishes a single ledger card to be used in recording, in summary, all
cost elements associated with a particular public project. This type of project tracking system (project
ledger card) will be used in examples throughout this manual.
2. Discussion of Example
As shown in Exhibit II -1, a project ledger card has been established by the school district's accounting
area to record the costs of remodeling the Main Street School. The following data elements are
included on the ledger card to establish the public project:
Project Code
° Start date
End date
° Person responsible for work
Name of project
A completed project ledger card is shown in Exhibit II -2 as an example of what information a project
tracking system should contain upon completion of a project. This manual shows in detail how the
postings through January 31, 1985 were recorded. From the last posting made in January a monthly
total for job -to -date costs was calculated, subsequent labor and equipment posted and the job closed.
This completed example is for illustrative purposes only and to provide an overview of the sections to
follow, and should not be considered a required format for public agencies operating under this
program.
43 Revised: 7/18/90
EXHIBIT II -1
Project Ledger Card for
Main Street School Remodeling
Project Code: #3359 Name: Main Street School Remodeling
Stan Date: 117/85 End Date: 2/28/85
Foreman: Sanders
Materials,
Labor & Supplies & Total Total
Description Date Ref. Overhead Subcontracts FAuiRment Cost Estimate
Revised: 7/18/90 44
EXHIBIT II -2
Closed Project Ledger Card for Main Street
School Remodeling with Estimate, Labor, Materials
and Supplies and Equipment Posted
Project Code:
#3359
PR SZ799
$2,799
Equipment
Name: Main Street School Remodeling
FB 3
$39 $ 39
Start Date: 1/7/85
2/7 /85
TSI
5102 $102
End Date:
2/205
Foreman:
Sanders
Materials,
Labor &
Supplies &
Total
Total
Description
Date
Ref.
Overhead
Subcontracts
ui ment Cost
Estimate
Cost
Estimate
1/2/85
EB
$3,243
S2,533
$180
$5,956'
Labor
1/31 /85
PR
$ 652
S 652
Carpeting
1/31 /85
Inv #1
S 900
S 900
Painting-
1/31 /85
Inv #2
$1,500
51,500
Subcon-
tract
Drywall
1/31/85
R #1
S 200
S 200
Warehouse
16.6%
Charge
1/31/85
S 33
S 33
Equipment
1/31 /85
FB 3
S 39 S 39
Equipment
1/31 /85
TSI
S102 S 102
Job -to -date 1/31/85 S 652 52,633 S 141 53,426
Labor
2/7/85
PR SZ799
$2,799
Equipment
2/1/85
FB 3
$39 $ 39
Equipment
2/7 /85
TSI
5102 $102
Job -to -date 2/28 /85 S3,451 $2,633 5282 $6,366
Job Closed 2/28 /85 S3,451 52,633 5282 56,366
See Exhibit II -3
45 Revised: 7/18/90
H. ESTIMATED VS. ACTUAL COSTS
Upon identification of a public project and assignment of a project code, an estimate of all cost elements as
discussed in Sections III, IV, V and VI shall be made and recorded to the project tracking system in a manner
consistent with the way bids shall be requested. The estimate shall be predicated on the cost elements discussed
in this manual and should be tracked accordingly by the project tracking system. This estimate shall include all
direct and overhead costs anticipated to be incurred by the proposed public project. The Commission recognizes
the existence of equipment rate books which can be utilized by the public agency in lieu of its existing data to
estimate and report equipment costs. As well, the Commission recognizes the existence of established
govemment -wide overhead allocation rates, such as A-87 and J-41A as shown in Appendices A and B, that may
be used by public agencies for estimating and reporting their overhead costs associated with public projects. The
use of these supplemental materials is discussed in greater detail in the appropriate sections. Each cost element
-- personnel; materials; supplies; subcontracts; equipment; and overhead — shall be estimated for each public
project. This estimation determines what bidding criteria the public project must come under.
1. Discussion of Exam&
The cost of remodeling the Main Street School has been estimated in Exhibit II -3. No standard format
is required for the preparation of this estimate, but the estimate of the cost elements must be recorded
to the project tracking system. An example of recording the estimate to a project ledger card is shown
in Exhibit II-4. The total cost of performing the remodeling is less than the 525,000 limit and can
therefore be performed by force account.
The remaining sections of this manual discuss the significant cost elements in further detail:
III.
Personnel Costs
IV.
Materials, Supplies and Subcontracts
V.
Equipment Costs
VI.
Overhead
Revised: 7/18/90 46
Project Code: #3359
Estimate Date: 12185
Start Date: 1/7/85
Estimator: E. Block
PERSONNEL y
Class
1. Maint. II
2 Maint. I1
Total Personnel Cost
EQUIPMENT /
Class of Equipment
EXHIBIT II -3
Estimate of Main Street School Remodeling
Name: Main Street School Remodeling
Estimated
Time/Mileage Rate
1. Flatbed Truck 2 days
2. Table Saw, 16" Blade 1 week
Total Equipment Cost
MATERIALS SUPPLIES AND SUBCONTRACTS 1/
v
v
Y
v
S38.80 /day
S 102.46/week
$3,343
$ 78Y
102 y
$ 180
Estimated
Dent.
Hours Rate Total
Bldg. Div.
100 S22.19J S2,219
Mnt. Dep.
50 $20.48A -' 1,024
Estimated
Time/Mileage Rate
1. Flatbed Truck 2 days
2. Table Saw, 16" Blade 1 week
Total Equipment Cost
MATERIALS SUPPLIES AND SUBCONTRACTS 1/
v
v
Y
v
S38.80 /day
S 102.46/week
$3,343
$ 78Y
102 y
$ 180
47 Revised: 7/18/90
Cost Per
Ouantity
Ouanti
1. Carpeting 400 sq. ft.
$2 /sq ft.
$ 800
2. Painting - Subcontract
1,500 _v
3. Drywall 10 panels
$20 /panel
200
4. Warehouse Handling/Carrying
33
Charge (16.6 %) on Drywall
Total Materials, Supplies
and Subcontracts
1202
TOTAL COST ESTIMATE
116956
Further discussion is provided in Sections III, IV and V.
Rate is the productive hourly rate plus overhead for a Maintenance
Worker II. See Section III for
further discussion on personnel costs.
Amount was rounded to nearest whole dollar.
Cost per bid submitted by painting subcontractor.
47 Revised: 7/18/90
Project Code: #3359
Start Date: 1(1185
Foreman: Sanders
EXHIBIT 114
Project Ledger Card for Main Street School Remodeling
with Estimate Posted
Name: Main Street School Remodeling
End Date: 228/85
Materials,
Supplies,
& Total Total
Description Date Ref. Labor Subcontracts FAuiRment Cost Estimate
Cost
Estimate 12/85 EB $3,243 $2,533 $180 $5,956
Revised: 7/18/90 48
SECTION M. IDENTIFICATION, REPORTING AND COMPUTATION
OF PERSONNEL COSTS
49 Revised: 7/18/90
The accurate estimating, tracking and costing of personnel costs is imperative to ensure accurate reporting and
future estimating of these costs. Personnel costs are those costs associated with employing public agency personnel
in the performance of a specific job. They include three elements:
Annual salary or wage paid by the public agency
Benefits received by employees such as a public agency's contribution to employee retirement programs,
group health plans and unemployment insurance
Benefits paid to employee such as salaries or wages paid to employees who are on holidays, vacation
and sick leave.
This section of the manual describes the systems and methods used to track personnel time, determine the costs
associated with personnel and record these costs to a project tracking system.
A. TRACKING PERSONNEL TIME
Critical to the public agency's determining personnel costs is the ability to identify time spent by employees
performing work on all public projects.
1. TimekeeRiing System
A public agency shall have a timekeeping system which accumulates hours worked by employees and
assigns these hours to all public project codes. Typically, this project code is assigned by the agency's
accounting department and conveyed to the person responsible for the public project, generally the
foreman. This system shall enable the agency to track hours worked on public projects to allow for the
subsequent distribution of the appropriate personnel costs.
a. Examples of Timekeeping Systems
The simplest of all time records is a foreman's time book. These books usually have 50 pages and
the foreman records on a daily or weekly basis the employee and his daily time spent on a
particular project. These books have heavy tagboard covers so they can remain at the job site and
be carried in a foreman's pocket. Typically, at the week's end, the foreman's time book is copied
onto timesheets or timecards. This may be done at the central office by the foreman, timekeeper,
payroll clerk or bookkeeper. This timekeeping system has the advantage of actual timekeeping
being performed at the job site; but if the book is lost, the entire project's time record is lost.
Weekly timesheets or timecards can also be used to record time. These documents should be
completed by employees at the end of the week showing the hours worked on each public project.
For the employees to complete the cards or sheets, they must be informed of the appropriate
project code to charge. This appears to be an insignificant issue; but without the establishment
of a project code and the conveyance of that information to personnel working on the public
project, the costs may never get recorded. This decentralization of timekeeping presents the
opportunity for possible inaccuracies in the recording of time spent on public projects. Therefore,
this system may warrant additional review by management.
Revised: 7/18/90 50
Work orders can be used to record time by the appropriate employee. As discussed in the project
tracking requirements, work orders are written authorization for the performance of a particular
job containing a project code, a description and location of the job and specifications for the work
to be performed. Work orders are the most frequent public project timekeeping systems used by
public agencies. These are generally completed by the supervisor of the public project who records
the employees' time spent on a public project
It is important to note that work performed on public projects, unlike timekeeping in the
construction industry, requires close supervision by management to ensure hours worked on end
cost objectives as defined by this manual are recorded properly.
2. Application of Timekeeping Systems
As discussed earlier, there are two types of organizational units within public agencies which may
perform public project work. These are (1) public project units and (2) other organizations that may,
in addition to their primary duties, work on public projects.
a. Public Project Unit
A public project unit is an identifiable organizational unit of any size whose primary goals include
the undertaking and completion of public projects. Typically, these units perform construction,
reconstruction, erection, alteration, renovation, improvement, demolition, repairwork and painting
of any publicly-owned, leased or operated facility. For example, a public works department may
have a division/section comprised of employees who as defined by this bill are dedicated to the
undertaking and completion of public projects such as road resurfacing, painting, landscaping and
building/remodeling. The Commission would, in general, consider a unit to be a public project
unit when over 25% of the total unit's annual budget is expended on public projects. It is more
common to have these organizational units in the larger public agencies - urban counties, cities
and school districts.
(1) Timekeeping Requirements
Employees who generally are considered direct labor and are assigned to a public project unit
shall record their time on an hourly basis and record all hours of a full work day. This will
include time spent on public projects as well as time spent on projects excluded from this
program. Unassigned time by these employees will also be recorded and charged to an
appropriate code.
Employees not performing labor on public projects, but who provide administrative support
services to the employees of the public project unit, shall also record their time on an hourly
basis and record all hours of a full work day. This time will be charged to an appropriate
overhead account and will be used in the development of the organizational unit's overhead
rate as discussed in Section VI.
All employees, whether performing direct labor or providing support services, shall have their
time posted to the project tracking system on a periodic basis as discussed in Section II. An
audit trail of all labor hours shall be maintained.
51 Revised: 7/18/90
(2) Discussion of Example
Exhibit III -1 is an example of how a public project unit employee should record his time as
discussed above. As noted, the employee has recorded on an hourly basis a full forty-hour
work week. He has identified 32 hours spent performing work on specific public projects:
22 hours on remodeling the Main Street School, Work Order #3359, and 10 hours on
weatherizing the District's Administration Building. Four hours were spent on miscellaneous
maintenance work and 4 hours on waiting for assignment to a job.
b. Other Organizations Units Performing Work on Public Projects
There are other organizational units that have employees who perform work on public projects
but whose primary goal is the performance of routine maintenance work and /or other general
government services. Typically, these organizational units include parks and recreation
departments; divisions of public works agencies which have not been identified specifically as
public project units, such as engineering; water and sewer, street maintenance; and routine
maintenance.
(1) Timekeeping Requirements
Employees of these organizational units shall report time worked on public projects.
Although the Commission strongly believes it is advisable for employees to record an
eight -hour day to various end cost objectives, work performed outside of public projects is
excluded from the scope of the program and is not required to be reported. All time worked
on public projects by a public agency employee shall be posted to a project tracking system
on a timely basis with an adequate audit trail maintained.
(2) Discussion of Example
Exhibit III -2 is an example of how an employee of an organizational unit who performs work
on a public project, but whose organization is not identified as a public project unit, must
report his time. As noted, the employee has only recorded the time worked on a public
project. Unit management, employees performing maintenance work and unassigned
employees need not record their time as do similar employees in a public project unit.
3. Recording Time to Public Projects
A public project's direct labor time shall be recorded to a project code under the following
circumstances:
• Employee worked on a public project
• Employee was in transit to or from project site.
Employee performed clean -up work on a public project, e.g., employee returned to central
headquarters to complete paperwork attributable to a public project.
° Employee was assigned to work on a public project but was unable to work due to unforeseen
circumstances, e.g., equipment breakdown or inclement weather, and was therefore idle.
Revised: 7/18790 52
Public Project Unit Employee Weekly Time Report
Week of. 1/31185
Name: I Star
Unit: Building Division
Classification: Maintenance Worker II
Rate:
Classification
#3359 - Main Street
School - Remodel
#3401 - Admin.
Bldg. - Weather -
ization
#5015 - (Maintenance)
#0001 - Unassigned
M
T
W
T
F
S
S
8
8
6
2
8
4
4
8
8
8
8
8
53
EXHIBIT III -1
Total
22
10
4
4
40
Recording Supervisor
Revised: 7/18/90
Organizational Unit Which Performs Work on
Public Proiect- Emg)ovee Weekly Time Report
Week of: 1131/85
Name: H. TriRV
Unit: Maintenance Department
Classification: Maintenance Worker II
Rate:
Classification M T W T F S S
#3359 - Main Street
School - Remodel
8
• Performed 32 hours of general maintenance activities.
Revised: 7/18190 54
EXHIBIT 111 -2
Total
Recording Supervisor
B. COMPUTING PERSONNEL COSTS
In determining personnel costs, three different rates must be determined and applied: the employee's productive
hourly rate, the department's overhead rate and the general government overhead rate.
1. Productive Hourly Rate
Personnel costs in many public projects represent the single largest cost of a public project. In
calculating these costs it is important to include the three components of personnel costs:
Annual salary/wages
Benefits received
Benefits paid.
The calculation of an hourly rate integrating these three cost components is commonly called a
.productive hourly rate."
A productive hourly rate shall be used to cost time reported to public projects. A productive hourly
rate determines the full cost per hour of employing public agency personnel on a public project. A
productive hourly rate is calculated by dividing annual personnel costs by an employee's available hours
(as shown in Exhibit I11 -3) for work assignment to determine a productive hourly rate.
(a) Annual Personnel Cost
The annual personnel cost of an employee or class of employees shall be determined by the public
agency. This cost shall include:
Annual salary/wages
Fringe benefits paid by the public agency
Fringe benefits are generally calculated as a percentage of annual salary/wages or
as an annual cost per employee.
If the productive hourly rate is calculated by employee class, members of each class
should have reasonably comparable fringe benefits. Otherwise, further division of
the employee class should be performed.
Fringe benefits calculations shall take into consideration, but not be limited to, the
employer contribution portion of the following costs:
00 Disability insurance
0o Life insurance
0o Retirement plan
0o Unemployment insurance
0o Workers' compensation insurance
0o Personal liability insurance
55 Revised: 7/18/90
EXHIBIT III -3
PRODUCTIVE HOURLY RATE CALCULATION EXAMPLE
The following example indicates how to develop a productive hourly rate for each class of employee. This rate
includes the cost of benefits as well as the reduced time available for work due to holidays, sick leave, etc. The
following section is divided into three steps to demonstrate how to arrive at a productive hourly rate for a specified
class of employee.
Step 1: Determine Annual Cost of Maintenance Worker II
Direct salary
Benefits:
Retirement contribution (18.5% of salary)
Workers' compensation insurance (6.4% of salary)
Unemployment insurance (.1% of salary)
Health insurance ($95 /month)
Life insurance ($5 /month)
Step 2: Determine Available Working Hours of Employee Class
Total Hours
Less:
Holiday
Vacation (average)
Sick leave (average)
Other leave (average)
SteR 3: Calculate Productive Hourly Rate of Maintenance Worker II
Annual cost $26, 200
Available working hours 1,842
$14.22/hour
4 ttt
3,700
1,280
20
1,140
60
i . tt
tT:rO
( 80)
( 80)
( 70)
( 8)
1.842
Note: Additional examples of how to calculate a productive hourly rate can be found in Cost Accounting for
California Cities: Concepts and Application. Holder, William and Kirmer, Rick, 1981 and Accounting
Standards and Procedures for Counties Division of Local Government Fiscal Affairs.
Revised: 7/18/90 56
The fringe benefits calculation is not required to include accrued benefits, such as sick
leave or vacation earned but not taken, as a component of personnel costs. It is
recognized that these accrued benefits represent a significant future cost to the public
agency. Yet, many public agencies do not account for these costs and would have
difficulty in developing accurate figures. If further pronouncements concerning accrued
benefits of public agencies are issued, the Commission will determine whether inclusion
of these costs are appropriate.
b. Productive Hours
The public agency shall start with the assumption of 2080 productive hours in a year if a forty -hour
work week is the standard for the public agency. If a forty-hour work week is not the standard,
the appropriate number of annual productive hours must be determined by the agency. The public
agency shall then determine average annual nonproductive time either by employee, class of
employee or agency-wide. Nonproductive time is time when the employee is not available for work
or assignment to work and includes but is not limited to:
° Vacation
Sick leave
Holidays
° Military leave
Jury duty
Training
2. Unit Overhead Rate
a. Public Proiect Unit
A unit overhead rate shall be developed for each public project unit. This unit overhead rate shall
include all public project unit costs that are not direct costs. The overhead rate shall be developed
and added to the productive hourly rate. For illustrative purposes, Exhibit III4 shows the
application of public project unit overhead to the productive hourly rate of a Maintenance Worker
II who is an employee of this public project unit. Further detailed discussion of unit overhead rate
development can be found in Appendix B.
b. Organizational Unit Performinp Public Project Work
A unit overhead rate shall be developed for each organizational unit performing work on public
projects in addition to its primary duties. This unit overhead rate shall include all of the
organizational unit's costs that are not direct costs. The overhead rate should be developed and
applied to the employee's productive hourly rate.
For illustrative purposes, Exhibit III4 shows the application of an overhead rate to the productive
hourly rate of a Maintenance Worker II who is an employee of a public project unit. Further
detailed discussion of unit overhead rate development can be found in Appendix B.
57 Revised: 7/18/90
3. Government -wide Overhead Rate
A government -wide overhead rate shall be developed to include all costs of a public agency not
associated with organizational units performing services which support all end cost objectives of the
government entity. The government -wide rate shall be developed and applied to the productive hourly
rate after unit overhead has been applied. For illustrative purposes, Exhibit III-4 shows the application
of government -wide overhead to the productive hourly rate of the two Maintenance Workers assigned
to the Building Division and Maintenance Department respectively. This calculation results in a
fully - burdened labor rate.
Revised: 7/18/90 58
EXHIBIT III-4
APPLICATION OF OVERHEAD TO A PRODUCTIVE HOURLY RATE
The following example indicates how to develop a productive hourly rate and apply unit and general government
overhead to a class of employee.
Step 1: Determine Annual Cost of Maintenance Worker II
Direct salary $20,000
Benefits:
Retirement contribution (18.5% of salary) 3,700
Workers' compensation insurance (6.4% of salary) 1,280
Unemployment insurance (.1% of salary) 20
Health insurance (S95/month) 1,140
Life insurance (S5 /month) 60
526.200
Step 2: Determine Available Working Hours of Employee Class
Total Hours
2,080
Less:
Holiday ( 90) Vacation (average) ( 80)
Sick leave (average) ( 70)
Other leave (average) ( 8)
1.842
Step 3: Calculate Productive Hourly Rate of Maintenance Worker 1I
Annual cost $26,2 00 = $14.22/hour
Available working hours 1,842
Step 4: Apply Unit and Government -wide Overhead
Unit Overhead
Building Division - Unit overhead rate is 3090 (see Section VI).
Maintenance Department - Unit overhead is 20% (see Section VI).
Government -wide Overhead
Government -wide overhead rate is 20% (Agency's Circular A -87 rate).
Building Division employee - Maintenance Worker II
130% x S14.22 = S18.49/hr. (with unit overhead).
120% x $18.49 = S22.191hr. (with unit and government -wide overhead).
Maintenance Department employee - Maintenance Worker II
120% x S14.22 = S17.06/hr. (with unit overhead).
120% x S17.06 = S20.48/hr. (with unit and government -wide overhead).
•
59 Revised: 7/18/90
See Section VI for the Commission's simplified overhead calculation and allocation method.
See Appendix B for further discussion on government -wide overhead rate development.
4. Discussion of Example
Exhibit III -5 shows the posting of the weekly personnel costs (productive hourly rate and overhead
allocation) incurred in the remodeling of the Main Street School for the week of January 31, 1985. J.
Star reported he worked 22 howl on the project in Exhibit 111 -1. H. Tripp reported she worked 8
hours on the project in Exhibit III -2. J. Star's fully - burdened rate is $22.19, while H. Tripp's
fully- burdened rate is S20.47, as were calculated in Exhibit I11.4. Hours worked on the remodeling are
costed out as follows and the cost was posted to the ledger card as shown in Exhibit 111 -5.
Personnel Hours Rate Total
J. Star 22 $2219 $488.18
H. Tripp 8 $20.47 163.76
$651.94
Revised: 7/18/90 60
Project Code: #3359
Start Date: 1/7/85
Foreman: Sanders
EXHIBIT III -5
Project Ledger Card for Main Street School
with Estimate and Labor Posted
Name: Main Street School Remodeling
End Date: 228 90
Materials,
Supplies & Equip- Total Total
Description Date Ref. Labor Subcontracts ment Cost Estimate
Cost
Estimation-' 12/85 EB $3,243 $2,533 $180 $5,956
Labor 1/31/85 PR $ 652y $652
'- See Exhibit II -3.
Amount rounded to the nearest whole dollar.
61 Revised: 7/18/90
Revised: 7/18/90 62
SECTION IV. IDENTIFICATION, REPORTING AND COSTING
OF MATERIALS, SUPPLIES AND SUBCONTRACTS
63 Revised: 7/18/90
Materials, supplies and subcontracts used on public projects are considered a cost element by the Commission and
include such items as lumber, bricks, cement, doors, paint, asphalt, wire, sand, gravel, pipe and work performed
under a subcontract. Materials and supplies used on public projects shall be tracked and charged to project codes
as discussed in Section II and can be accounted for in two ways:
Direct purchase
Inventory
This section of the manual describes the systems and methods used to track materials, supplies and subcontracts;
determine their value, as well as the other costs associated with providing materials and supplies and record these
costs to a project tracking system.
A. TRACKING MATERIALS AND SUPPLIES
The Commission wishes to provide policies and procedures so that public agencies account for public projects
in a manner similar to the construction industry. The nature of governmental procurement and inventory
practices presents challenges to the public agency's ability to meet the Commission's objective of effectively
measuring material and supply costs for public projects.
1. Direct Purchases
Materials and supplies are often purchased directly for use on a public project. The public agency can
thus identify the associated dollar value of items purchased to the public project code, which should
be identified on the purchase order when the procurement is initiated.
2. Inventory
It is more difficult to identify the associated costs of items obtained from the public agency's inventory
of materials and supplies, generally maintained at a warehouse or stockroom. The major challenge is
identifying and recording the costs of material and supplies utilized for the public project which are
obtained from the public agency's inventory. It is the Commission's position that, if the value of these
goods obtained from inventory is material, the cost must be recorded to the public project code as a
direct cost item. Materiality is defined for purposes of this manual to be any item that has a unit or
aggregate value of S25 or more.
Revised: 7/18/90 64
Items purchased and placed into inventory that would subsequently be used on public projects and
which may exceed the $25 limit shall be issued to projects in a manner consistent with good accounting
controls. Requisitions or work orders should be required for these items which may include, for
example, the following:
- Rough lumber
- Doors
- Reinforcing wire or steel
- Nails
- Pipe (concrete, clay, steel
- Finish hardware
or cast iron)
- Plumbing and electrical
- Conduit
- fixtures
- Asphalt
- Sacked cement
- Steel concrete forms
- Plaster and lime
- Form ties and clamps
- Finish tile
- Bricks
- Electric wire
- Concrete blocks
- Switchboxes
- Clay tile
- Acoustical tile
- Metal lath
- Floor coverings
- Finish lumber
- Hose
- Aluminum or copper tubing
- Sand
- Sash
- Gravel
- Paint
- Drywall
65 Revised: 7/18/90
B. COSTING MATERIALS AND SUPPLIES
1. Direct Purchase
The total material and supplies cost is the invoiced amount. This amount should be posted to the
project tracking system for direct purchases on a timely basis. This recorded amount should include
the cost of the materials and supplies, freight, sales tax, use tax and any other appropriate costs.
2 Inventory
The public agency shall have a method to provide for the valuation of the inventory it releases to public
projects. Acceptable methods include:
FIFO (First -in, first -out) - The earliest acquired stock is assumed to be used first; the latest
acquired stock is assumed to be still on hand. Therefore, when inventory is issued, is valued
at the cost of the earliest acquired stock.
LIFO (Last -in, first -out) - The earliest acquired stock is assumed to be still on hand; the
latest acquired stock is assumed to have been used immediately. Therefore, when inventory
is issued, it is valued at the cost of the most recently (latest) acquired stock.
° Weighted average - In this type of inventory valuation system, each purchase of stock is
aggregated with the former inventory balances so that a new average unit price is used to
price the subsequent issues of inventory.
° Recent cost - The most recent unit cost is applied to units consumed to yield total cost.
The method used by the public agency should be used consistently to prevent arbitrary fluctuation in
inventory costs. Periodic physical inventories must be taken so that inventory shrinkage is reflected as
an overhead item.
3. Discussion of Example
Exhibit IV -1 shows the posting of materials and supplies used on the Main Street School remodeling
project. The carpeting was obtained through direct purchase and the drywall was obtained from
the warehouse. Subcontract bids were requested for painting of the Main Street School and a
competitive low bid of $1,500 was accepted and awarded. The purchase orders issued by the division's
purchasing department for the carpeting and the subcontractor for painting were coded to ensure the
costs of carpeting and painting were charged to the appropriate public project code. Subsequently,
invoices were received from the vendor supplying the carpeting and the painting subcontractor. The
amount from each of the invoices was posted to the project ledger card. The foreman requisitioned
the drywall from the central warehouse using a work order form. The costed copy of the work order
identifying the items issued was sent to the accounting area and posted to the project ledger card. A
warehouse handling/carrying charge of 16.6% (see Exhibit IV -2) was applied to the requisitioned
inventory, i.e., the drywall.
Revised: 7/18/90 66
C. HANDLING /CARRYING COSTS
Personnel, equipment and facilities costs are incurred by the public agency to store and transport inventoried
items. This is separate and distinct from the cost of procurement that is considered to be recaptured through
general government overhead as discussed in Section VI. (If warehousing and transportation costs are not
provided by a central organization, then it is assumed these costs are recovered through the government -wide
overhead rate.)
67 Revised: 7/18/90
EXHIBIT IV -1
Project Ledger Card for Main Street
School Remodeling with Estimate, Labor,
Materials Supplies and Subcontracts Posted
Project Code:
#3359
Name: Main Street School Remodeling
Start Date: 1/7/85
End Date:
228/85
Foreman: Sanders
Materials,
Supplies,
&
Total
Total
Proiect Code
Date
Ref.
Labor Subcontracts Equipment
Cost
Estimate
Cost
Estimate's
12185
EB
$3,243 $1,433
$180
54,856
Labor
1/31/85
PR
S 652
$652
Carpeting
1/3185
Inv #1
$ 900
$900
Painting -
Subcon-
tract
1/3185
Inv #2
$1,500
$1,500
Drywall
1/3185
R#1
$ 200
$200
Warehouse
$ 33"
$ 33
Charge
1/3185
16.6%
Y See Exhibit II -3.
_v Amount rounded to the nearest whole dollar.
Revised: 7/18/90 68
The handling/carrying overhead rate shall be calculated to recover:
Warehouse /storeroom personnel costs
Facility costs of storeroomhvarehouse
Utilities
Rent
Insurance
Transportation costs associated with the receipt/delivery of materials and supplies.
See Exhibit N -2 for an example of how a handling/carrying cost can be developed.
69 Revised: 7/18/90
EXHIBIT IV -2
CALCULATION OF HANDLINGICARRYING OVERHEAD RATE
Annual Cost of Requisitioned Inventory
Annual Inventory Handling/Carrying Costs:
Warehouse Personnel:
Warehouse Annual Salaries
60.E
Fringe Benefits:
Workers' Compensation
1 +000
Unemployment
500
Retirement Plan
500
Health Plan
500
62,500
Warehouse Facility: 1,200
Annual Rent
Utilities 500
1,700
Transportation Costs:
Delivery Truck (Fuel, Maintenance, Tires) 2
Total Annual Carrying/Handling Costs $66,2 = B
of Inventory
Carrying/Handling Charges as Percentage of
Requisitioned Inventory = B $ 66,200 = 16.6%
A 400,000
NOTE: This percentage is applied to all requisitioned inventory to recover carrying/handling costs.
Revised: 7/18/90 70
D. SUBCONTRACTS
A public agency may wish to complete work on a public project by subcontracting a portion of the work
This would encompass hiring an outside contractor to perform a portion of work on the public project.
Subcontractors shall be accounted for in a manner similar to a direct purchase of materials and supplies.
Contracts or purchase orders should be coded with the appropriate project code and the subcontract costs
recorded onto the project tracking system in a timely manner.
71 Revised: 7/18/90
Revised: 7/18190 72
SECTION V. IDENTIFICATION, REPORTING AND COSTING EQUIPMENT
73 Revised: 7/18/90
Usage of equipment on public projects is a cost element of performing those public projects. Equipment usage
excluding passenger riding sedans must be tracked when a piece of equipment is assigned to a public project.
Equipment used on public projects shall be charged to a project cost code. This section describes the systems and
methods used to track equipment usage, determine equipment cost and record the costs to a project tracking
system.
A. EQUIPMENT TRACKING SYSTEM
1. Fquipment Tracking System
The public agency shall have a manual or automated system that tracks the appropriate equipment by
time, mileage or other usage factor to a public project. The system shall have the capability to track
equipment usage to a public project:
When it is in motion to/from project site.
° When at public project site (whether in use or not), if time is the means of equipment
tracking.
° When at public project site and in use, if mileage or some other mechanism is the means of
equipment tracking.
a. Examples of Equipment Tracking Systems
One of the simplest forms for tracking equipment is a weekly timesheet for each piece of
equipment which has been assigned to the public project and the time or mileage incurred by the
public project. These sheets should be submitted weekly with labor timesheets or cards. They
should then be sent to the accounting area and charged to a project tracking system.
2. Equipment Tracking of Agency Owned /Operated Equipment
As will be seen in Section B, the public agency can cost out equipment owned and operated by it in one
of two ways. The public agency can either utilize internally developed equipment rates or rates from
industry equipment rate books.
a. Internal Rates
When an agency develops internal equipment rates for certain or all types of equipment, that agency
must track the time that equipment was used on end cost objectives such as public projects,
maintenance work and unassigned time. This enables the public agency to determine what the
equipment's history of productive hours has been. This enables a better forecast of projected
productive hours to be made for rate development purposes.
(1) Discussion of Example
Exhibit V -1 shows the weekly timesheet for the flatbed truck used on the Main Street School
Remodeling. The truck's equipment rate was developed internally by the Agency in
accordance with the policies and procedures discussed in this section.
Revised: 7/18/90 74
b. Eguiument Rate Book Rates
When an agency utilizes the calculated equipment rate from rate books it must record the time
or mileage the equipment is used on public projects. Since these equipment rates generally factor
in idle time, a full tracking of the equipment as performed for 'internal rate" equipment is not
mandated.
(1) Discussion of Example
Exhibit V -2 shows the weekly timesheet for the table saw used on the Main Street School
Remodeling. The saw was delivered to the project site on Monday and was left there all
week.
75 Revised: 7/18/90
EXHIBIT V -1
Equipment Weekly Timesheet for Main Street
School Remodeline
Week Ending: 1/31185
Equipment Code: Flatbed Truck - FB3
Rate:
Proiect Code M T W T F Total
Main Street School 8 8
Remodeling #3359
Maintenance Work #5400 8 8 16
UnassignedY — 8 8 — — 16
Total 8 8 8 8 8 40
Recording Supervisor
11 Unassigned time must be tracked if an agency is on the "internal rate" method.
Revised: 7/18/90 76
EXHIBIT V -2
Equipment Weekly Timesheet for Main Street
School Remodeling
Week Ending: ll31/85
Equipment Code: Table Saw - TSI Recording Supervisor
Rate:
project Code M T W T F Total
Main Street School
Remodeling #3359 8 8 8 8 8 40
Total 8 8 8 8 8 40
77 Revised: 7/18/90
Therefore, the project was charged for a weekly rate of $102.46. This rate was obtained from
Mechanical Contractors Association 1984 Tool and Equipment Guide.
Work orders can also be used to record equipment usage. Personnel issuing equipment would
generally record the time/mileage when the equipment was issued and returned. Upon return of the
equipment, the accounting area would receive the work order and would value and post the
equipment usage costs.
B. EQUIPMENT USAGE RATES
There are three acceptable means of determining equipment rates. They include rates developed
internally for public agency owned and operated equipment, equipment rate books used by the
construction industry and rental or lease rates charged by commercial vendors. Each of these methods
attempts to recapture the costs associated with the equipment's purchase and operations, such as
depreciation, fuel, maintenance, repair and insurance.
1. Internal Rates (Equipment Owned by Public Agencvl
Public agencies shall utilize internally developed equipment usage rates that reflect the full cost of
owning, operating and maintaining types of equipment. Rates should be developed for classes of
equipment and comply with the following guidelines:
The internal equipment rate methodology shall be documented and an adequate audit trail
provided.
Costs which shall be included in the internally developed rates are:
Depreciation
Depreciation is the method used to spread the cost of equipment, capital lease or
replacement value less residual value, over a piece of equipment's useful life. The public
agency's capitalization policy should be used to determine whether a piece of equipment
should be depreciated. Generally, equipment which costs more than $1,000 and has a
useful life of more than a year should be depreciated.
Revised: 7/18/90 78
a. Calculation of depreciation
(I) Useful Life: Depreciation should be based on the average useful life for the piece of equipment in
a particular operation. Determination of useful life should be based on actual or planned retirement
and replacement practices.
(2) Residual Value: Residual value is the value at disposition (less costs of disposal) estimated at the
time of acquisition. In many cases, the estimated residual value is so small and occurs so far in the
future that it has no significant impact. As well, residual value may be almost or completely offset
by removal and dismantling costs. Normally, public agency equipment will be used through the end
of its estimated useful life and the residual value may be carried at zero. In the event that it is
known at the time of acquisition that the capital equipment will not be used for at least 75% of its
scheduled useful life, residual value should be estimated.
(3) Capital Improvements: Capital improvements are the costs of major overhauls and modifications
which add value and prolong the life of a piece of equipment. These costs should be treated as
capital expenditures and depreciated over the extended or remaining useful life of either the asset
or improvement, whichever is less.
(4) Straight Line Depreciation Method: The straight line depreciation method charges an equal amount
for each period of useful life (generally a year). This method is considered the most practical and
reasonable method for determining equipment usage costs.
(5) Calculation of Depreciation Examples: Using the example in Exhibit V -3, annual depreciation for
capitalized equipment will be estimated as follows:
(a) Stan with the acquisition cost (purchase price) plus capital improvements, plus all other costs
incurred to place the equipment in usage, e.g., transportation, installation. The public agency
may choose to utilize replacement value for this calculation.
(b) Determine the useful life of the equipment utilizing applicable guides such as the IRS guide.
(c) Compute annual depreciation by dividing the depreciable basis (acquisition cost plus capital
improvements less residual value) by the useful life.
79 Revised: 7/18/7o
EXHIBIT V -3
EQUIPMENT DEPRECIATION WORKSHEET
a. b.
C.
Depreciable
Basis
(Acquisition Cost
Plus Capital
Annual
Equipment/Equipment Improvement Useful
Depreciation
Identification Less Residual Value) Life
a « b
Flatbed Truck (1 ton)/FB3 $17,975'- 5
53,595
11 Purchase price (acquisition cost) was obtained from the invoice.
Revised: 7/18/90 80
The following costs shall be aggregated and reflected in the public agency's internal equipment class rates:
Maintenance and Remits
These are costs (labor and parts) which are incurred for maintenance and repairs to keep the
equipment in normal operating condition. These costs do not include capital improvements which
add value to equipment and are accounted for under depreciation. Tires and grease are included in
this classification of cost. Typically a ledger card for each piece of equipment (see Exhibit V-4) will
be necessary to record these costs.
Fuel and Oil
These costs include the costs of supplying (labor and fuel) the equipment with fuel of any type and
oil.
Equipment Storage costs
Equipment storage costs include the cost of facilities associated with the use of equipment. These
costs include equipment yards, warehouse facilities and cost of guards and other security measures.
Insurance
These costs include the premiums paid by the public agency (whether self - insured or paid to an
outside agency) for equipment insurance.
A sample approach to developing an equipment rate is shown in Exhibit V -5. As well, a good discussion of
the calculation of internal equipment rates can be found in Accounting Standards and Procedures for Counties
under the Road Fund Accounting section.
2. Equipment Rate Books (Equipment Owned by Public Agency)
Public agencies which own equipment used on public projects but which do not calculate internal equipment
rates shall utilize appropriate private industry equipment rate books. It is understood that industrial rates may
include certain costs which are not incurred by public agencies, such as personal property taxes paid on the
assessed value of the equipment and interest charges. However, these equipment usage rates in some cases
do not include the cost of fuel or other energy costs to operate a particular piece of equipment; cost of
preparatory work performed before a piece of equipment can be made operative; costs of dies, blades or welding
rods which are normally consumed in the operation of a piece of equipment; or costs of extraordinary wear and
tear. Therefore, the use of industrial rates is assumed to provide a reasonable approximation of internal rates.
Equipment rate books which are acceptable to the Commission to be used in lieu of internal rates include:
Caltrans Labor Surcharee and Equipment Rental Rates
Mechanical Contractors Association Tool and Equipment Rental Guide
National Electrical Contractors Association Tool and Equipment Rental Schedule
Use of other guides must first be reviewed and approved by the Commission.
These guides are maintained and updated on a periodic basis by appropriate agency or association to accurately
reflect current costs associated with equipment usage. If a piece of equipment or comparable piece of
equipment is not included in an established guide, then an internal rate shall be developed, or a documented
quote from an equipment leasing or rental agency may be utilized.
81 Revised: 7/18/90
Maintenance and Repair
Fguinment Led¢er Card
Equipment: Flatbed Truck - FB3
Purchase Date: 5/83
Estimated Life: 5 years
Salvage Value: 0
Date Ref. Labor
1/10/83 W.O. #ill'- S101
4/18/84 W.O. #325 -" $450
6/11/84 W.O. #491' SI01
Allocation of Shop overhead for 1983 -84 year
Total Shop Maintenance and Repairs, Tire and
Grease Costs for 1983/84
Materials
SUnnlies
S120
$220
$600
-' Detail for this repair is located on Work Order #ill.
?' Detail for this repair is located on Work Order #325.
Detail for this replacement of 4 titres is located on Work Order #491.
Revised: 7/18/90 82
EXHIBIT V4
Other Total
$20 S 241
S 670
S 701
144
$1.756
Total
Costs
to date
S 241
$ 911
$1,612
$1,756
EXHIBIT V -5
EQUIPMENT RATE DEVELOPMENT
Flatbed Truck - FB3
Y See Exhibit V -3.
v See Exhibit V-4 for recording of expenses to Equipment Ledger Card.
y Shop Maintenance and Repairs, Tires and Grease costs projected to increase
5% from prior year.
y Fuel and oil costs tracked and accumulated on public agency's fuel and oil
log.
y Fuel and oil costs projected to increase by 5% from prior year.
Equipment storage costs accumulated through a cost finding study and
allocated on a unit basis. No increase anticipated from prior year.
-'' Insurance costs accumulated through a cost finding study. No increase
calculated from prior year.
5 Projected hours of use estimated to be the same as the prior year actual use.
83 Revised: 7/18/90
Upcoming
Prior
Projected
Year
Year
Actual
1984 -85
1983 -84
Proiected Annual Costs
$3,595 _v
S3,595 _1'
Depreciation
Shop Maintenance and Repairs,
Tires and Grease
1,844 v
1,75621
Fuel and Oil
4,206 _v
4,0065/
Equipment Storage Costs
641 _v
641 V
Insurance
422 '-'
422'' -'
$10,708
$10,420
Projected Hours of Use
276 S'
276 a
Hourly Rate
38.80
$ 37.75
Y See Exhibit V -3.
v See Exhibit V-4 for recording of expenses to Equipment Ledger Card.
y Shop Maintenance and Repairs, Tires and Grease costs projected to increase
5% from prior year.
y Fuel and oil costs tracked and accumulated on public agency's fuel and oil
log.
y Fuel and oil costs projected to increase by 5% from prior year.
Equipment storage costs accumulated through a cost finding study and
allocated on a unit basis. No increase anticipated from prior year.
-'' Insurance costs accumulated through a cost finding study. No increase
calculated from prior year.
5 Projected hours of use estimated to be the same as the prior year actual use.
83 Revised: 7/18/90
3. Rental or Lease Rates
Rented or leased equipment to be used partially or completely on public projects shall be tracked and
have the appropriate amount charged to the public project. Additional costs associated with the leasing
or renting of equipment used partially on a public project shall be charged on a pro rata basis, if
appropriate to that project Costs related to renting or leasing equipment generally include, but are not
limited to:
Rates
Moving, loading and assembly costs
Maintenance and repairs
Insurance
Fuel (under some rate schedules).
4. Discussion of Example
Exhibit V-6 shows the posting of the flatbed truck and the table saw used on the Main Street School
remodeling project the week of January 31, 1985. The foreman used the truck to pick up and deliver part
of the drywall to the school. He had the flatbed truck at the project site all day, therefore, the project
was charged for a day of use. The flatbed truck is owned by the school district, and an internal equipment
usage rate of $38.00 per day had been developed (See Exhibit V4). The table saw was at the project site
for the entire week and, therefore, the project was charged for a weekly rate of $102. This rate was
obtained from the Mechanical Contractors Association 1984 Tool and Equipment Guide which is an
approved equipment rate book.
Revised: 7/18/90 94
EXHIBIT V-6
Project Ledger Card for Main Street
School Remodeling with Estimate, Labor, Materials
and Supplies and Equipment Posted
Project Code:
#3359
Name: Main Street School Remodeling
Start Date: 1/7/85
End Date:
22885
Foreman•
Sanders
Materials,
Supplies &
Equip-
Total
Total
Description
Date
Ref.
Labor Subcontracts
ment
Cost
Estimate
Cost
Estimate
1285
EB
S3,243 $2,533
$180
$5,956
Labor
1/3185
PR
S 652
$ 652
Carpeting
1/3185
Inv #1
S 900
$ 900
Painting
Subcontract
1/3185
Inv #2
S1,500
S1,500
Drywall
1/3185
R#1
$ 200
S 200
Warehouse
Charge
1/3185
16.6%
$ 33
S 33
Equipment
1/3185
FB 3
S 3Sa/
S 39
Equipment
1/3185
TSl
$102
$ 102
1/ Amount was rounded to nearest whole dollar.
85 Revised: 7/18/90
Revised: 7/18/90 86
SECTION VI. IDENTIFICATION, RATE DEVELOPMENT AND
ALLOCATION OF OVERHEAD
87 Revised: 7/18/90
A. COMMISSION ADOPTED SIMPLIFIED OVERHEAD RA E
In order to simplify the overhead calculation process, the Commission has adopted an overhead rate of
20% which shall be applied to all direct costs of the project. EXHIBIT VI -1 and EXHIBIT VI -2 are
sample forms to illustrate the application of the Commission adopted 20% overhead rate.
In lieu of the Commission adopted rate, agencies may elect to calculate their overhead rates by one of
the three following methods:
1) Appendix A is the Federal Government's method of calculating overhead. (Circular A -87)
2) Appendix B is a method of calculating overhead by allocating overhead costs as a percentage
of direct labor costs.
3) Any method of calculating overhead is satisfactory with the Commission provided that
acceptable accounting procedures are used and all administrative costs are included.
Section I1, C, DEFINITIONS lists items that define overhead as follows:
Overhead Costs
Overhead Costs represent economic resources that are employed for common or joint purposes
benefiting several projects or functions. As such, overhead costs are not readily chargeable to
individual projects and, therefore, generally require allocation based upon statistical relationships.
Unit Overhead
Unit Overhead is defined as all costs incurred by an organizational unit, such as a public project unit,
Department, Division, or Section, which are not directly attributable to any cost objective whether
it is a public project or not. These costs include personnel costs, materials, supplies, and
subcontracts and equipment costs not directly attributable to any end cost objective.
Government -wide Overhead
Government -wide Overhead is defined to include all costs of a public agency not associated with
organizational units performing services which support all end cost objectives of the government
entity.
End Cost Obiective
An End Cost Objective is a cost center or activity established for the accumulation of the direct cost
of performing government services. All costs should be considered to indirectly support the
performances of these services.
Public Project Unit
Public Project Unit is an identifiable organization of any size whose primary goals include the
undertaking and completion of public projects. The Commission would, in general, consider a unit
to be a public project unity when over 25% of the total unit's annual budget is expended on public
Projects. It is more common to have these organizational units in the larger public agencies - urban
counties, cities, and school districts.
89 Revised: 7/18/90
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(Logo, Address, Pbone No., etc)
Project Title
Project No. i.ocation
Description of Work
FORCE ACCOUNT
PROJECT COST SUMMARY
Period Work Performed:
Through
Account No.
UCCAC FORM 2 (2/90)
91
FEDERAL CIRCULAR #A -87
PRINCIPLES FOR DETERMINING COSTS APPLICABLE
TO GRANTS AND CONTRACTS WITH STATE, LOCAL, AND
FEDERALLY RECOGNIZED INDIAN TRIBAL GOVERNMENTS
93 Revised: 7/18/90
APPENDIX A
January 15,
CIRCULAR NO. A -87
Revised
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Cost principles for State and local governments
1. Purpose. This Circular establishes principles and standards for determining costs applicable to grants,
contracts, and other agreements with State and local governments and federally- recognized Indian tribal
governments.
2. Supersession. This Circular supersedes Federal Management Circular 744 as revised. The Circular is
reissued under its original designation of OMB Circular A -87.
3. Summary of chances. No substantive changes are made in the Circular.
4. Policy intent. This Circular provides principles for determining the allowable costs of programs
administered by State, local, and federally- recognized Indian tribal governments under grants from and
contracts with the Federal Government. They are designed to provide the basis for a uniform approach
to the problem of determining costs and to promote efficiency and better relationships between grantees
and the Federal Government. The principles are for determining costs only and are not intended to
identify the circumstances nor to dictate the extent of Federal and State or local participation in the
financing of a particular project. They are designed to provide that federally- assisted programs bear their
fair share of costs recognized under these principles except where restricted or prohibited by law. No
provision for profit or other increment above cost is intended.
5. Applicability and scope.
a. The provisions of this Circular apply to all Federal agencies responsible for administering programs
that involve grant and contracts with State, local, and federally- recognized Indian tribal governments.
b. Its provisions do not apply to grants and contracts with:
(1) Publicly - financed educational institutions subject to Office of Management and Budget Circular
A -21, and
(2) Publicly owned hospitals and other providers of medical care subject to requirements
promulgated by the sponsoring Federal agencies.
(No. A -87) 94
APPENDIX A
Any other exceptions will be approved by the Office of Management and Budget in particular cases where
adequate justification is presented.
6. Attachments. The principles and related policy guided are set forth in the attachments, which are:
Attachment A - Principles for determining costs applicable to grants and contracts with State, local,
and federally -rec organized Indian tribal governments.
Attachment B - Standards for selected items of cost.
In uiries. Further information concerning this Circular may be obtained by contacting the Financial
Management Branch, Budget Review Division, Office of Management and Budget, Washington, D.C.
20503, telephone 202- 3954773.
Attachments
James T. McIntyre, Jr.
Director
95 (No. A -87)
(No. A -87) 96
PRINCIPLES FOR DETERMINING COSTS APPLICABLE
TO GRANTS AND CONTRACTS WITH STATE, LOCAL, AND
FEDERALLY RECOGNIZED INDIAN TRIBAL GOVERNMENTS
97 (No. A -87)
APPENDIX A
A Purpose and scone.
1. Obiectives. This Attachment sets forth principles for determining the allowable costs of programs
administered by State, local, and federally - recognized Indian tribal governments under grants from
and contracts with the Federal Government. The principles are for the purpose of cost determination
and are not intended to identify the circumstances or dictate the extent of Federal and State or local
participation in the financing of a particular grant. They are designed to provide that
federally - assisted programs bear their fair share of costs recognized under these principles, except
where restricted or prohibited by law. No provision for profit or other increment above cost is
intended.
2. Policy guides. The application of these principles is based on the fundamental premises that:
a. State, local, and federally- recognized Indian tribal governments are responsible for the
efficient and effective administration of grant and contract programs through the application
of sound management practices.
b. The grantee of contractor assumes the responsibility for seeing that federally- assisted
program funds have been expended and accounted for consistent with underlying agreements
and program objectives.
c Each grantee or contractor organization, in recognition of its own unique combination of
staff facilities and experience, will have the primary responsibility for employing whatever
form of organization and management techniques may be necessary to assure proper and
efficient administration.
3. Application. These principles will be applied by all Federal agencies in determining costs incurred
by State, local and federally recognized Indian tribal governments under Federal grants and cost
reimbursement type contracts (including subgrants and subcontracts) except those with (a)
publicly - financed educational institutions subject to Office of Management and Budget Circular A -21,
and (b) publicly -owned hospitals and other providers of medical care subject to requirements
promulgated by the sponsoring Federal agencies.
B. Definitions.
1. Approval or authorization of the grantor Federal agency means documentation evidencing consent
prior to incurring specific cost.
2. Cost allocation plan means the documentation identifying, accumulating, and distributing allowable
costs under grants and contracts together with the allocation methods used.
3. .Cost, as used herein, means cost as determined on a cash, accrual, or other basis acceptable to the
Federal grantor agency as a discharge of the grantee's accountability for Federal funds.
4. Cost objective means a pool, center, or area established for the accumulation of cost Such areas
include organizational units, functions, objects or items of expense, as well as ultimate cost objectives
including specific grants, projects, contracts, and other activities.
(No. A-87) 98
u.
5. Federal agency means any department, agency, commission, or instrumentality in the executive branch
of the Federal Government which makes grants to or contracts with State, local, or
federally - recognized Indian tribal governments.
6. Federally - recognized Indian tribal governments means the governing body or a governmental agency
of any Indian tribe, band, nation, or other organized group or community (including any native village
as defined in Section 3 of the Alaska Native Claims Settlement Act, 85 Stat. 688) certified by the
Secretary of Interior as eligible for the special programs and services provided by him through the
Bureau of Indian Affairs.
7. Grant means an agreement between the Federal Government and a State, local, or
federally - recognized Indian tribal government whereby the Federal Government provides funds or aid
in kind to carry out specified programs, services, or activities. The principles and policies stated in
this Circular as applicable to grants in general also apply to any federally- sponsored cost
reimbursement -type of agreement performed by a State, local, or federally - recognized Indian tribal
government.
8. Grant program means those activities and operations of the grantee which are necessary to carry out
the purposes of the grant, including any portion of the program financed by the grantee.
9. Grantee means the department or agency of State, local, or federally- recognized Indian tribal
government which is responsible for administration of the grant.
10. Local unit means any political subdivision of government below the State level.
11. Other State or local agencies means departments or agencies of the State or local unit which provide
goods, facilities, and services to a grantee.
11 Services as used herein, means goods and facilities, as well as services.
13. Supporting services means auxiliary functions necessary to sustain the direct effort involved in
administering a grant program or an activity providing service to the grant program. These services
may be centralized in the grantee department or in some other agency, and include procurement,
payroll, personnel functions, maintenance and operation of space, data processing, accounting,
budgeting, auditing, mail and messenger service, and the like.
C. Basic guidelines.
1. Factors affecting allowability of costs. To be allowable under a grant program, costs must meet the
following general criteria:
a. Be necessary and reasonable for proper and efficient administration of the grant programs,
be allocable thereto under these principles, and, except as specifically provided herein, not
be a general expense required to carry out the overall responsibilities of State, local, or
federally- recognized Indian tribal governments.
b. Be authorized or not prohibited under State or local laws or regulations.
c. Conform to any limitations or exclusions set forth in these principles, Federal laws, or other
governing limitations as to types or amounts of cost items.
99 (No. A -87)
APPENDIX A
d. Be consistent with policies, regulations, and procedures that apply uniformly to both
federally assisted and other activities of the unit of government of which the grantee is a
part.
e. Be accorded consistent treatment through application of generally accepted accounting
principles appropriate to the circumstances.
L Not be allocable to or included as a cost of any other federally financed program in either
the current or a prior period.
g. Be net of all applicable credits.
Z. Allocable costs.
a. A cost is allocable to a particular cost objective to the extent of benefits received by such
objective.
b. Any cost allocable to a particular grant or cost objective under the principles provided for
in this Circular may not be shifted to other Federal grant programs to overcome fund
deficiencies, avoid restrictions imposed by law or grant agreements, or for other reasons.
c, Where an allocation of joint cost will ultimately result in charges to a grant program, an
allocation plan will be required as prescribed in Section J.
3. Applicable credits.
a. Applicable credits refer to those receipts or reduction of expenditure -type transactions which
offset or reduce expense items allocable to grants as direct or indirect costs. Examples of
such transactions are: purchase discounts; rebates or allowances, recoveries or indemnities
on losses; sale of publications, equipment, and scrap; income from personal or incidental
services; and adjustments of overpayments or erroneous charges.
b. Applicable credits may also arise when Federal funds are received or are available from
sources other than the grant program involved to finance operations or capital items of the
grantee. This includes costs arising from the use or depreciation of items donated or
financed by the Federal Government to fulfill matching requirements under another grant
program. These types of credits should likewise be used to reduce related expenditures in
determining the rates or amounts applicable to a given grant.
D. Composition of cost.
1. Total cost. The total cost of a grant program is comprised of the allowable direct cost incident to
its performance, plus its allocable indirect costs, less applicable credits.
(No. A -87) 100
APPENDIX A
2 Classification of costs. There is no universal rule for classifying certain costs as either direct or
indirect under every accounting system. A cost may be direct with respect to some specific service
or function, but indirect with respect to the grant or other ultimate cost objective. It is essential,
therefore, that each item of cost be treated consistently either as a direct or an indirect cost. Specific
guides for determining direct and indirect costs allocable under grant programs are provided in the
sections which follow.
I? Direct costs.
1. General. Direct costs are those that can be identified specifically with a particular cost objective.
These costs may be charged directly to grants, contracts, or to other programs against which costs are
finally lodged. Direct costs may also be against which costs are finally lodged. Direct costs may also
be charged to cost objectives used for the accumulation of costs pending distribution in due course
to grants and other ultimate cost objectives.
2. Application. Typical direct costs chargeable to grant programs are:
a. Compensation of employees for the time and effort devoted specifically to the execution of
grant programs.
b. Cost of materials acquired, consumed, or expended specifically for the purpose of the grant.
c. Equipment and other approved capital expenditures.
d. Other items or expense incurred specifically to carry out the grant agreement.
e. Services furnished specifically for the grant program by other agencies, provided such charges
are consistent with criteria outlined in Section G of these principles.
F. Indirect costs.
1. General. Indirect costs are those (a) incurred for a common or joint purpose benefiting more than
one cost objective, and (b) not readily assignable to the cost objectives specifically benefitted, without
effort disproportionate to the results achieved. The term "indirect costs," as used herein, applies to
costs of this type originating in the grantee department, as well as those incurred by other
departments in supplying goods, services, and facilities, to the grantee department. To facilitate
equitable distribution of indirect expenses to the cost objectives served, it may be necessary to
establish a number of pools and indirect cost within a grantee department or in other agencies
providing services to a grantee department Indirect cost pools should be distributed to benefiting
cost objectives on bases which will produce an equitable result in consideration of relative benefits
derived.
101 (No. A -87)
APPENDIX A
2. Grantee departmental indirect costs. All grantee departmental indirect costs, including the various
levels of supervision, are eligible for allocation to grant programs provided they meet the conditions
set forth in this Circular. In lieu of determining the actual amount of grantee departmental indirect
cost allocable to a grant program, the following methods may be used.
a. Predetermined fixed rates for indirect costs. A predetermined fixed rate for computing
indirect costs applicable to a grant may be negotiated annually in situations where the cost
experience and other pertinent facts available are deemed sufficient to enable the contracting
parties to reach an informed judgment (1) as to the probable level of indirect costs in the
grantee department during the period to be covered by the negotiated rate, and (2) that the
amount allowable under the predetermined rate would not exceed actual indirect cost.
b. Negotiated lump sum for overhead. A negotiated fixed amount in lieu of indirect costs may
be appropriate under circumstances where the benefits derived from a grantee department's
indirect services cannot be readily determined as in the case of small, self- contained or
isolated activity. When this method is used, a determination should be made that the
amount negotiated will be approximately the same as the actual indirect cost that may be
incurred. Such amounts negotiated in lieu of indirect costs will be treated as an offset to
total indirect expenses of the grantee department before allocation to remaining activities.
The base on which such remaining expenses are allocated should be appropriately adjusted.
3. Limitation on indirect costs.
a. Federal grants may be subject to laws that limit the amount of indirect costs that may be
allowed. Agencies that sponsor grants of this type will establish procedures which will assure
that the amount actually allowed for indirect costs under each such grant does not exceed
the maximum allowable under the statutory limitation or the amount otherwise allowable
under this Circular, whichever is the smaller.
b. When the amount allowable under a statutory limitation is less than the amount otherwise
allocable as indirect costs under this Circular, the amount not recoverable as indirect costs
under a grant may not be shifted to another federally- sponsored grant program or contract.
G. Cost incurred by agencies other than the grantee.
1. General. The cost of service provided by other agencies may only include allowable direct costs of
the service plus a pro rata share of allowable supporting costs (Section B.12.) and supervision directly
required in performing the service, but not supervision of a general nature such as that provided by
the head of a department and his staff assistants not directly involved in operations. However,
supervision by the head of a department or agency whose sole function is providing the service
furnished would be an eligible cost. Supporting costs include those furnished by other units of the
supplying department or by other agencies.
2. Alternative methods of determining indirect cost. In lieu of determining actual indirect cost related
to a particular service furnished by another agency, either of the following alternative methods may
be used provided only one method is used for a specific service during the fiscal year involved.
a. Standard indirect rate. An amount equal to ten percent of direct labor cost in providing the
service performed by another State agency (excluding overtime, shift, or holiday premiums
and fringe benefits) may be allowed in lieu of actual allowable indirect cost for that service.
(No. A -87) 102
APPENDIX A
b. Predetermined fixed rate. A predetermined fixed rate for indirect cost of the unit or activity
providing service may be negotiated as set forth in Section F.2 a.
H. Cost incurred by grantee department for others.
1. General. The principles provided in Section G will also be used in determining the cost of services
provided by the grantee department to another agency.
J. Cost allocation plan.
1. General. A plan for allocation of costs will be required to support the distribution of any joint costs
related to the grant program. All costs included in the plan will be supported by formal accounting
records which will substantiate the propriety of eventual charges.
2. Requirements. The allocation plan of the grantee department should cover all joint costs of the
department as well as costs to be allocated under plans of other agencies or organizational units
which are to be included in the costs of federally- sponsored programs. The cost allocation plans of
all the agencies rendering services to the grantee department, to the extent feasible, should be
presented in a single document. The allocation plan should contain, but not necessarily be limited
to, the following:
a. The nature and extent of services provided and their relevance to the federally - sponsored
programs.
b. The items of expense to be included.
c. The methods to be used in distributing cost.
3. Instructions for preparation of cost allocation plans. The Department of Health and Human Services
in consultation with the other Federal agencies concerned, will be responsible for developing and
issuing the instructions for use by grantees in preparation of cost allocation plans. This responsibility
applies to both central support services at the State, local, and Indian tribal level and indirect cost
proposals of individual grantee departments.
4. Negotiation and approval of indirect cost proposals for States.
a. The Department of Health and Human Services, in collaboration with the other Federal
agencies concerned, will be responsible for negotiation, approval, and audit of cost allocation
plans, which will be submitted to it by the States. These plans will cover central support
service costs of the State.
b. At the grantee department level in a State, a single cognizant Federal agency will have
responsibility similar to that set forth in a, above, for the negotiation, approval, and audit
of the indirect cost proposal. A current list of agency assignments is maintained by the
Office of Management and Budget.
c. Questions concerning the cost allocation plans approved under a. and b. above, should be
directed to the agency responsible for such approvals.
103 (No. A -87)
APPENDIX A
5. Ne¢otiation and approval of indirect cost proposals for local rovernments.
a. Cost allocation plans will be retained at the local government level for audit by a designated
Federal agency except in those cases where that agency requests that cost allocation plans
be submitted to it for negotiation and approval.
b. A list of cognizant Federal agencies assigned responsibility for negotiation, approval and
audit of central support service cost allocation plans at the local government level is
maintained by the Office of Management and Budget.
c At the grantee department level of local governments, the Federal agency with the
predominant interest in the work of the grantee department will be responsible for necessary
negotiation, approval and audit of the indirect cost proposal.
6. Negotiation and a rovat of tnarrea ckiw �� �� •� • �•° • • --- -
governments. The Federal agency with the predominant interest in the work of the grantee
department will be responsible for necessary negotiation, approval and audit of the indirect cost
proposal.
Resolution of problems. To the extent that problems are encountered among the Federal agencies
in connection with 4 and 5 above, the Office of Management and Budget will lend assistance as
required.
(No. A -87) 104
APPENDIX A
STANDARDS FOR SELECTED ITEMS OF COSTS
105 (No. A -87)
APPENDIX A
A. Purpose and applicabiliri.
1. Objective. This Attachment provides standards for determining the allowability of selected items of
cost.
2. Application. These standards will apply irrespective of whether a particular item of cost is treated
as direct or indirect cost. Failure to mention a particular item of cost in the standards is not intended
to imply that it is either allowable or unallowable, rather determination of allowability in each case
should be based on the treatment of standards provided for similar or related items of cost. The
allowability of the selected items of cost is subject to the general policies and principles stated in
Attachment A of this Circular.
B. Allowable costs.
1. Accounting. The cost of establishing and maintaining accounting and other information systems
required for the management of grant programs is allowable. This includes costs incurred by central
service agencies for these purposes. The cost of maintaining central accounting records required for
overall State or Indian tribal government purposes, such as appropriation and fund accounts by the
Treasurer, Controller, or similar officials, is considered to be a general expense of government and
is not allowable.
2. Advertising. Advertising media includes newspapers, magazines, radio and television programs, direct
mail, trade papers, and the like. The advertising costs allowable are those which are solely for:
a. Recruitment of personnel required for the grant program.
b. Solicitation of bids for the procurement of goods and services required.
c. Disposal of scrap or surplus materials acquired in the performance of the grant agreement.
d. Other purposes specifically provided for in the grant agreement.
3. Advisory councils. Costs incurred by State advisory councils or committees established pursuant to
Federal requirements to carry out grant programs are allowable. The cost of like organizations is
allowable when provided for in the grant agreements.
4. Audit service. The cost of audits necessary for the administration and management of functions
related to grant programs is allowable.
5. Bonding Costs of premiums on bonds covering employees who handle grantee agency funds are
allowable.
6. Budgeting. Costs incurred for the development, preparation, presentation, and execution of budgets
are allowable. Costs for services of a central budget office are generally not allowable since these are
costs of general government. However, where employees of the central budget office actively
participate in the grantee agency's budget process, the cost of identifiable service is allowable.
7. Building lease management. The administrative cost for lease management which includes review of
lease proposals, maintenance of a list of available property for lease, and related activities is
allowable.
(No. A -87) 106
8. Central stores. The cost of maintaining and operating a central stores organization for supplies,
equipment, and materials used either directly or indirectly for grant programs is allowable.
9. Communications. Communication costs incurred for telephone calls or service, teletype service, wide
area telephone service (WATS), centrex, telpak (tie lines), postage, messenger service and similar
expenses are allowable.
10. Compensation for personal services.
a. General. Compensation for personal services includes all remuneration, paid currently or
accrued, for services rendered during the period of performance under the grant agreement,
including but not necessarily limited to wages, salaries, and supplementary compensation and
benefits (Section B.13.). The costs of such compensation are allowable to the extent that total
compensation for individual employees: (1) is reasonable for the services rendered; (2) follows
an appointment made in accordance with State, local, or Indian tribal government laws and rules
and which meets Federal merit system or other requirements, where applicable•, and (3) is
determined and supported as provided in b. below. Compensation for employees engaged in
federally- assisted activities will be considered reasonable to the extent that it is consistent with
that paid for similar work in other activities of the State, local, or Indian tribal government. In
cases where the kinds of employees required for the federally- assisted activities are not found in
the other activities of the state, local, or indian tribal government compensation will be
considered reasonable to the extent that it is comparable to that paid for similar work in the
labor market in which the employing government competes for the kind of employees involved.
Compensation surveys providing data representative of the labor market involved will be an
acceptable basis for evaluating reasonableness.
b. Pavroll and distribution of time. Amounts charged to grant programs for personal services,
regardless of whether treated as direct or indirect costs, will be based on payrolls documented
and provided in accordance with generally accepted practice of the State, local, or Indian tribal
government. Payrolls must be supported by time and attendance or equivalent records for
individual employees. Salaries and wages of employees chargeable to more than one grant
program or other cost objective will be supported by appropriate time distribution records. The
method used should produce an equitable distribution of time and effort.
11. Depreciation and use allowances.
a. Grantees may be compensated for the use of buildings, capital improvements, and equipment
through use allowances or depreciation. Use allowances are the means of providing
compensation in lieu of depreciation or other equivalent costs. However, a combination of the
two methods may not be used in connection with a single class of fixed assets.
b. The computation of depreciation or use allowance will be based on acquisition cost. Where
actual cost records have not been maintained, a reasonable estimate of the original acquisition
cost may be used in the computation. The computation will exclude the cost or any portion of
the cost of buildings and equipment donated or home directly or indirectly by the Federal
Government through charges to Federal grant programs or otherwise, irrespective of where title
was originally vested or where it presently resides. In addition, the computation will also exclude
the cost of land. Depreciation or a use allowance on idle or excess facilities is not allowable,
except when specifically authorized by the grantor Federal agency.
107 (No. A -87)
APPENDIX A
c. Where the depreciation method is followed, adequate property records must be maintained, and
any generally- accepted method of computing depreciation may be used. However, the method
of computing depreciation must be consistently applied for any specific asset or class of assets
for all affected federally - sponsored programs and must result in equitable charges considering the
extent of the use of the assets for the benefit of such programs.
d. In lieu of depreciation, a use allowance for buildings and improvements may be computed at an
annual rate not exceeding two percent of acquisition Cost. The use allowance for equipment
(excluding items properly capitalized as building cost) will be computed at an annual rate not
exceeding six and two - thirds percent of acquisition cost of usable equipment.
e. No depreciation or use charge may be allowed on any assets that would be considered as fully
depreciated, provided, however, that reasonable use charges may be negotiated for any such assets
if warranted after taking into consideration the cost of the facility or item involved, the estimated
useful life remaining at time of negotiation, the effect of any increased maintenance charges or
decreased efficiency due to age, and any other factors pertinent to the utilization of the facility
or item for the purpose contemplated.
12. Disbursing service . The cost of disbursing grant program funds by the Treasurer or other designated
officer is allowable. Disbursing services cover the processing of checks or warrants, from preparation
for redemption, including the necessary records of accountability and reconciliation of such records
with related cash accounts.
13. Emplovee fringe benefits. Costs identified under a. and b. below are allowable to the extent that total
compensation for employees is reasonable as defined in Section B.10.
a. Employee benefits in the form of regular compensation paid to employees during periods of
authorized absences from the job, such as for annual leave, sick leave, court leave, military leave,
and the like, if they are: (1) provided pursuant to an approved leave system; and (2) the cost
thereof is equitably allocated to all related activities, including grant programs.
b. Employee benefits in the form of employers' contribution or expenses for social security,
employees' life and health insurance plans, unemployment insurance coverage, workmen's
compensation insurance, pension plans, severance pay, and the like, provided such benefits are
granted under approved plans and are distributed equitably to grant programs and to other
activities.
14. Employee morale, health and welfare costs. The costs of health or first -aid clinics and /or infirmaries,
recreational facilities, employees' counseling services, employee information publications, and any
related expenses incurred in accordance with general State, local or Indian tribal policy, are allowable.
Income generated from any of these activities will be offset against expenses.
15. Exhibits. Costs of exhibits relating specifically to the grant programs are allowable.
16. Legal expenses. The cost of legal expenses required in the administration of grant programs is
allowable. Legal services furnished by the chief legal officer of a State, local or Indian tribal
government or his staff solely for the purpose of discharging his general responsibilities as legal
officer are unallowable. Legal expenses for the prosecution of claims against the Federal Government
are unallowable.
(No. A-87) 108
APPENDIX A
17. Maintenance and repair. Costs incurred for necessary maintenance, repair, or upkeep of property
which neither add to the permanent value of the property nor appreciably prolong its intended life,
but keep it in an efficient operating condition, are allowable.
18. Materials and supplies. The cost of materials and supplies necessary to carry out the grant programs
is allowable. Purchases made specifically for the grant program should be charged thereto at their
actual prices after deducting all cash discounts, trade discounts, rebates, and allowances received by
the grantee. Withdrawals from general stores or stockrooms should be charged at cost under any
recognized method of pricing consistently applied Incoming transportation charges are a proper part
of material cost.
19. Memberships, subscriptions and professional activities.
a. Memberships. The cost of membership in civic, business, technical and professional
organizations is allowable provided:
(1) the benefit from the membership is related to the grant program; (2) the expenditure is for
agency membership; (3) the cost of the membership is reasonably related to the value of the
services or benefits received; and (4) the expenditure is not for membership in an
organization which devotes a substantial part of its activities to influencing legislation.
b. Reference material. The cost of books, and subscriptions to civic, business, professional, and
technical periodicals is allowable when related to the grant program.
c. Meetings and conferences. Costs are allowable when the primary purpose of the meeting is the
dissemination of technical information relating to the grant program and they are consistent with
regular practices followed for other activities of the grantee.
20. Motor pools. The costs of a service organization which provides automobiles to user grantee agencies
at a mileage or fixed rate and /or provides vehicle maintenance, inspection and repair services are
allowable.
21. Payroll preparation. The cost of preparing payrolls and maintaining necessary related wage records
is allowable.
22. Personnel administration. Costs for the recruitment, examination, certification, classification, training,
establishment of pay standards, and related activities for grant programs, are allowable.
23. Printing ¢ nd reRroduction. Costs for printing and reproduction services necessary for grant
administration, including but not limited to forms, reports, manuals, and informational literature, are
allowable. Publication costs of reports or other media relating to grant program accomplishments
or results are allowable when provided for in the grant agreement.
24. Procurement service. The cost of procurement service, including solicitation of bids, preparation and
award of contracts, and all phases of contract administration in providing goods, facilities and services
for grant programs, is allowable.
25. Taxes. In general, taxes or payments in lieu of taxes which the grantee agency is legally required to
pay are allowable.
109 (No. A -87)
APPENDIX A
26. Training and education. The cost of in- service training, customarily provided for employee
development, which directly or indirectly benefits grant programs is allowable. Out-of-service training
involving extended periods of time is allowable only when specifically authorized by the grantor
agency.
27. Transportation. Costs incurred for freight, cartage, express, postage and other transportation costs
relating either to goods purchased, delivered, or moved from one location to another are allowable.
28. Travel. Travel costs are allowable for expenses for transportation, lodging, subsistence, and related
items incurred by employees who are in travel status on official business incident to a grant program.
Such costs may be charged on an actual basis, on a per diem or mileage basis in lieu of actual costs
incurred, or on a combination of the two, provided the method used is applied to an entire trip, and
results in charges consistent with those normally allowed in like circumstances in non - federally
sponsored activities. The difference in cost between first -class air accommodations and
less- than - first -class air accommodations is unallowable except when less- than - first -class -air
accommodations are not reasonably available. Notwithstanding the provisions of paragraphs D.6. and
8., travel costs of officials covered by those paragraphs when specifically related to grant programs,
are allowable with the prior approval of a grantor agency.
C. Costs allowable with approval of grantor agency.
1. Automatic data yrocessine. The cost of data processing services to grant programs is allowable. This
cost may include rental of equipment or depreciation on grantee -owned equipment. The acquisition
of equipment, whether by outright purchase, rental- purchase agreement or other method of purchase,
is allowable only upon specific prior approval of the grantor Federal agency as provided under the
selected item for capital expenditures.
2. Building space and related facilities. The cost of space in privately or publicly owned buildings used
for the benefit of the grant program is allowable subject to the conditions stated below. The total
cost of space, whether in a privately or publicly owned building, may not exceed the rental cost of
comparable space and facilities in a privately -owned building in the same locality. The cost of space
procured for grant program [sage may not be charged to the program for periods of nonoccupancy,
without authorization of the grantor Federal agency.
a. Rental cost. The rental cost of space in a privately -owned building is allowable. Similar costs
for publicly owned buildings newly occupied on or after October 1, 1980, are allowable where
'rental rate" systems, or equivalent systems that adequately reflect actual costs, are employed.
Such charges must be determined on the basis of actual cost (including depreciation based on
the useful life of the building, interest paid or accrued, operation and maintenance, and other
allowable costs). Where these costs are included in rental charges, they may not be charged
elsewhere. No costs will be included for purchases or construction that were originally financed
by the Federal Government.
b. Maintenance and operation. The cost of utilities, insurance, security, janitorial services, elevator
service, upkeep of grounds, normal repairs and alterations and the like, are allowable to the
extent that they are not otherwise included in rental or other charges for space.
c. Rearrangements and alterations. Costs incurred for rearrangement and alteration of facilities
required specifically for the grant program or those that materially increase the value or useful
life of the facilities (Section C.3.) are allowable when specifically approved by the grantor agency.
(No. A -87) 110
APPENDIX A
d. Depreciation and use allowances on publicly -owned buildings. The costs are allowable as
provided in Section B.11.
e, Occuvancv of space under rental- purchase or a lease with option -to purchase agreement. The
3. Capital expenditures. The cost of facilities, equipment, other capital assets, and repairs which
materially increase the value or useful life of capital assets is allowable when such procurement is
specifically approved by the Federal grantor agency. When assets acquired with Federal grant funds
are (a) sold; (b) no longer available for use in a federally- sponsored program; or (c) used for purposes
not authorized by the grantor agency, the Federal grantor agency's equity in the asset will be refunded
in the same proportion as Federal participation in its cost. In case any assets are traded on new
items, only the net cost of the newly- acquired assets is allowable.
4. Insurance and indemnification.
a. Costs of insurance required, or approved and maintained pursuant to the grant agreement, are
allowable.
b. Costs of other insurance in connection with the general conduct of activities are allowable subject
to the following limitations:
(1) Types and extent and cost of coverage will be in accordance with general State or local
government policy and sound business practice.
(2) Costs of insurance or of contributions to any reserve covering the risk of loss of, or damage
to, Federal Government property are unallowable except to the extent that the grantor
agency has specifically required or approved such costs.
c. Contributions to a reserve for a self- insurance program approved by the Federal grantor agency
are allowable to the extent that the type of coverage, extent of coverage, and the rates and
premiums would have been allowed had insurance been purchased to cover the risks.
d. Actual losses which could have been covered by permissible insurance (through an approved
self- insurance program or otherwise) are unallowable unless expressly provided for in the grant
agreement. However, costs incurred because of losses in keeping with sound management
practice, and minor losses not covered by insurance, such as spoilage, breakage and disappearance
of small hand tools which occur in the ordinary course of operations, are allowable.
e. Indemnification. Includes securing the grantee against liabilities to third persons and other losses
not compensated by insurance or otherwise. The Government is obligated to indemnify the
grantee only to the extent expressly provided for in the grant agreement, except as provided in
d. above.
S. Management studies. The cost of management studies to improve the effectiveness and efficiency of
grant management for ongoing programs is allowable except that the cost of studies performed other
than the grantee department or outside consultants is allowable only when authorized by the Federal
grantor agency.
111 (No. A-87)
u. r. .
6. Preagreement costs. Costs incurred prior to the effective date of the grant or contract, whether or
not they would have been allowable thereunder if incurred after such date, are allowable when
specifically provided for in the grant agreement.
7. Professional services. Cost of professional services rendered by individuals or organizations not a part
of the grantee department are allowable subject to such prior authorization as may be required by
the Federal grantor agency.
8. Proposal costs. Costs of preparing proposals on potential Federal Government grant agreements are
allowable when specifically provided for in the grant agreement.
D. Unallowable costs.
1. Bad debts. Any losses arising from uncollectible accounts and other claims, and related costs, are
unallowable.
2. Contingencies. Contributions to a contingency reserve or any similar provision for unforeseen events
are unallowable.
3. Contributions and donations. Unallowable.
4. Entertainment. Costs of amusements, social activities, and incidental costs relating thereto, such as
meals, beverages, lodgings, rentals, transportation, and gratuities, are unallowable.
5. Fines and penalties. Costs resulting from violations of, or failure to comply with Federal, State and
local laws and regulations are unallowable.
6. Governor's expenses. The salaries and expenses of the Office of the Governor of a State, or the chief
executive of a political subdivision, are considered a cost of general State or local government and
are unallowable. However, for a federally- recognized Indian tribal government, only that portion of
the salaries and expenses of the office of the chief executive that is a cost of general government is
unallowable. The portion of salaries and expenses directly attributable to managing and operating
programs by the chief executive and his staff is allowable. The allowable portion shall be determined
by the Federal cognizant agency and the Indian government representatives on a reasonable basis.
7. Interest and other financial costs. Interest on borrowings (however represented), bond discounts, cost
of financing and refinancing operations, and legal and professional fees paid in connection therewith,
are unallowable except when authorized by Federal legislation and except as provided for in
paragraph C la. of this Attachment.
8. Legislative expenses. Salaries and other expenses of the State legislature or similar local
governmental bodies such as county supervisors, city councils, school boards, etc., whether incurred
for purposes of legislation or executive direction, are unallowable.
9. Underrecovery of costs under rg ant agreements. Any excess of cost over the Federal contribution
under one grant agreement is unallowable under other grant agreements.
(No. A -87) 112
az17►:4:3
OVERHEAD DETERMINATION
AND ALLOCATION
PERCENTAGE OF DIRECT LABOR COSTS METHOD
113
APPENDIX B
IDENTIFICATION RATE DEVELOPMENT AND ALLOCATION OF OVERHEAD
Overhead is the one cost element most frequently misunderstood and absent from public agency costs. This
section defines overhead costs and the various methods used to identify, track and allocate these costs. The
Commission believes that overhead is a significant factor and that it is essential that public agencies record
and allocate their costs to fairly reflect the total cost of performing public projects. It is not intended that
public agencies be required to recover all their overhead costs but that overhead costs reasonably borne by
public projects be allocated to these projects.
Overhead includes all costs except:
Labor performed at the site and directly charged to any end cost objective (including other than
public projects) including a pro rata share of payroll taxes and related employee benefits, such as
workers' compensation, group insurance, holiday and sick leave, and similar "fringe benefits". As
discussed previously, an end cost objective is a pool, center or activity established for the
accumulation of the direct cost of performing fundamental government services. Labor charged to
an end cost objective should be traceable to the finished goods or services performed.
Materials, supplies and subcontracts actually consumed on and directly charged to any end cost
objective, including related freight, sales or use tax and handling/carrying charges if appropriate.
Materials and supplies charged to an end cost objective should be traceable to the finished goods
or services provided.
Equipment costs directly charged to any end cost objective. Equipment costs charged to an end cost
objective should be traceable to the finished goods or services provided.
Overhead costs represent economic resources that are employed for common or joint purposes benefiting
several end cost objectives and are not identifiable to an individual end cost objective. The challenge is to
achieve an equitable allocation of overhead costs to these various end cost objectives of the public agency.
Public agencies shall calculate two overhead rates:
Unit overhead rate
Government -wide overhead rate
Unit overhead is defined as all costs incurred by an organizational unit, such as a public project unit,
department, division or section, which are not directly attributable to any end cost objective whether it
be a public project or not. These costs include personnel costs, materials, supplies and subcontracts and
equipment costs not directly attributable to any end cost objective. As was discussed in Section III, unit
overhead must be developed for public project units and organizational units performing public project
work.
Government -wide overhead is defined to include all costs of a public agency not associated with
organizational units performing services which support all end cost objectives of the government entity
(see below).
The unit and government -wide overhead rates must be developed on an annual basis. These rates should
be developed prior to the fiscal year and applied to the productive hourly rate as discussed in Section III.
114
APPENDIX B
A UNIT OVERHEAD
Unit overhead is made up of personnel costs, materials, supplies and subcontracts equipment usage and
facilities costs that are not identified as direct costs. As was stated in Section II, unit overhead rates shall
be developed for public project units and any other organizational units whose employees may perform
work on public projects.
1. Cost Components
Components which shall be included in the calculation of unit overhead include, but are not limited
to, costs incurred within the organizational unit related to:
° Administration
° Accounting/Finance
Clerical Assistance
Facilities
Rental Costs (Depreciation of facilities purchased or constructed by a public agency
is not required by the Commission.)
Utilities
Insurance
Data Processing
° Direct Labor Not Charged to Direct Activities
Materials and Supplies Not Charged to Direct Activities
° Under - realization of Labor and Equipment Rates
Unit overhead components shall not be included in the government -wide overhead.
I Tracking of Unit Overhead
The tracking of overhead costs can be performed in two ways. Overhead can be determined through
the utilization of a formal cost accounting system. This system allows for the identification of such
costs as salaries and indirect materials and supplies as overhead costs, and records these costs to
management overhead codes. Alternatively, cost finding studies can be performed. A cost finding
study, a less precise method of overhead determination, is usually performed on an annual basis and
generally involves taking available financial accounting data and determining the value of overhead
pools through various estimation techniques.
115
u► ►
a. Public Project Unit
As discussed in Section II, a public project unit's personnel shall record and account for a full
work day. This enables the public project unit to track and record time spent on overhead
activities and unassigned time on an actual basis. As well, the public project shall record
equipment usage costs, subcontractor costs, materials, supplies and subcontracts and facilities
costs to overhead codes when not identifiable to a specific project. Thus, the public project unit
accounts for all of its costs, whether they are direct costs or overhead. The public project unit
will use the resulting data to develop its unit overhead rate.
b. Organizational Unit Performing Public Project Work
Personnel working for an organizational unit whose primary goals includes the performance of
routine maintenance work and /or other general government work are not required to account
for a full work day. However these employees must record all hours of work performed on
public projects. This organizational unit shall develop a unit overhead rate through an annual
cost finding study which distinguishes direct costs for end cost objectives from indirect
(overhead) costs.
3. Rate Methodoloev
a. Public Project Unit
Exhibit B -1 presents an overview and an example of how a unit rate for a public project unit
should be developed. Direct labor dollars (represented by "A") are used to allocate overhead
costs ("B" and "D ") to all end cost objectives including public projects, preferably through a
fully - loaded hourly rate.
b. Organizational Unit Performing Public Project Work
Exhibit B -2 presents an overview and an example of how a rate for an organizational unit
performing public project work might be developed. Since a full cost accounting system often
is not in place, the unit must:
Determine which employees are direct employees who work exclusively on end cost
objectives
Allocate non - personnel costs to direct indirect (overhead) activities.
Direct labor dollars are then used as above to allocate overhead costs through a fully- loaded rate.
4. Overhead Allocation
The departmental (organizational unit) overhead rate of public project units and organizational units
performing public project work shall be applied to the appropriate productive hourly rate. See Section
II for a more detailed discussion.
116
APPENDIX B
fei �:il]Y1i:31
PUBLIC PROJECT UNIT OVERHEAD RATE DEVELOPMENT
The total budget for a public project unit can be subdivided as follows:
A = Productive hourly labor dollars charged to end cost objectives, including public project codes.
B = Productive hourly labor dollars charged to unassigned time code(s) and overhead code(s).
C = Other direct costs.
D = Other overhead costs charged to unit overhead code(s).
E = A + B + C + D = Total unit budget.
Generally, overhead rate development should be performed at the beginning of the fiscal year to forecast the
overhead rate for the upcoming fiscal year:
Overhead rate as a = B + D
percentage of direct A
labor dollars
EXAMPLE
In the fiscal year 1984, the Building Division of the Central School District, which includes Main Street
School, forecasted its budget to be allocated as follows:
A = $250,000 of productive hourly labor dollars expected to be charged to end cost objectives
including public project codes.
B = $5,000 of productive hourly labor dollars expected to be charged to an unassigned code.
C = 51,666 of materials and supplies expected to be charged to various end cost objectives including
public projects.
D = $70,000 of overhead costs remaining.
E _ $326,666 representing the total budget of the Division.
The calculation of the Building Division overhead rate is as follows:
Unit overhead rate = BB ±D = 75,000 = 30%
as a percentage of A S250,000
chargeable direct labor
A 30% unit overhead rate should be applied to the productive hourly rate of all Building Division employees
(see Section III).
117
APPENDIX B
ORGANIZATIONAL UNIT PERFORMING PUBLIC PROJECT WORK
OVERHEAD RATE DEVELOPMENT
EXHIBIT B -2
Page 1 of 2
The total budget for an organizational unit performing public project work can be subdivided as follows:
A = Direct tabor force (including fringes).
B = Other personnel costs.
C = Other costs charged to public project codes.
D = Other costs allocated to other end cost objectives.
E = Other costs allocated to overhead activities.
F = A+B +C+D +E = Total unit budget.
At the beginning of the fiscal year, the unit considers which employees constitute the direct labor force (A)
which work directly on end cost objectives. Through various estimating processes, the unit allocates other
costs between B and E.
Overhead rate as a
percentage of = BB ±E
labor dollars A
EXAMPLE
The 1984 budget of the Maintenance Department of Central School District, which performs maintenance
work and occasional building projects, is as follows:
Personnel Costs (including fringes) 5800,000
Materials for building projects 50,000 ( =C)
Other materials and supplies 100•
$950,000
The Department performs a study and determines that S700,000 ( =A) of the personnel costs represents the
cost, including fringes, of the maintenance work force. The remaining 5100,000 of personnel costs ( =B)
represents clerical, administrative and supervisory personnel. Of the $100,000 in other costs, the Department
performs another study and determines that 560,000 ( =D) represents maintenance costs, while the remaining
540,000 ( =E) represents a variety of cost items which support the Department as a whole.
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APPENDIX B
EXHIBIT B -2
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ORGANIZATIONAL UNIT PERFORMING PUBLIC PROJECT WORK
OVERHEAD RATE DEVELOPMENT
Overhead rate as a = $100,000 +540.000 = 20%
percentage of direct $700,000
labor dollars
Thus a 20% overhead rate should be applied to the productive hourly rate of Department employees who work
on building projects.
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APPENDIX B
B. GOVERNMENT -WIDE OVERHEAD
Government -wide overhead represents costs incurred by the support functions of the governmental entity
which are not associated with an organizational unit performing end cost objectives. As was stated in
Section II, government -wide overhead rates shall be determined by each public agency.
1. Internally Developed Government -wide Overhead Rates
Public agencies shall utilize an internally developed government-wide overhead rate. The rate
methodology shall be documented and an adequate audit trail provided.
a. Cost Components
The government -wide overhead rate shall include but not be limited to costs associated with the
functions shown below to the extent they are not included in specific unit overhead rates:
Payroll Department
Procurement/Purchasing Department
° Legal Function
° Central Administrative Function
• Accounting/Finance/Budget Function
• Data Processing
Insurance (whether self- insured or premiums are paid to an agency)
Public Relations
Vehicle Pool
The government -wide overhead rate may exclude the costs associated with the legislative and
judicial branches of the public agency.
b. Rate Development
The public agency shall develop the government -wide overhead rate of the public agency using
direct labor dollars to allocate these government -wide overhead costs in a manner similar to the
allocation of unit overhead.
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APPENDIX B
2. Government -wide Overhead Rate
Where a govemment -wide cost allocation plan has been prepared under the auspices of OMB
Circular A-87, or other government -wide rate methodologies, the public agency may utilize the
overhead costs or rates developed in lieu of an internally developed government -wide overhead rate
as described in this manual. The Commission recognizes that public agencies may consider these
rates imprecise or inappropriate. It is acknowledged that in developing these rates, some costs are
not included because they are considered 'not allowable.' Thus, the rate may not recover all costs
associated with the program. In contrast, an argument could be made that the rates are calculated
to recover the costs of government -wide overhead which would occur whether or not the specially
funded program was undertaken. In this instance, the rate would be considered too high. In
acknowledging these arguments, the Commission wishes to identify the issues but still allow the use
of these rates as a reasonable alternative for the calculation of government -wide overhead.
3. Overhead Allocation
The government -wide overhead rate shall be applied to the appropriate productive hourly rate after
the unit overhead has been applied. See Section II for a more detailed discussion.
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