Ch 10 - Anal yzi ng Faci l i t i es Capi t al Cost of Money

10. 0 - Chapt er I nt r oduct i on

10. 1 - Recogni zi ng El ement s Af f ect i ng Faci l i t i es
Capi t al Cost Of Money
10. 2 - I dent i f yi ng And Appl yi ng Faci l i t i es Capi t al
Cost Of Money Fact or s
o 10. 2. 1 - Cal cul at i ng Cont r act Faci l i t i es Capi t al
Cost Of Money
o 10. 2. 2 - Usi ng The DD For m1861

10.0 Chapter Introduction
Thi s chapt er i dent i f i es poi nt s t o consi der as you
devel op your pr enegot i at i on posi t i on on f aci l i t i es capi t al
cost of money.

10.1 Recognizing Elements Affecting Facilities Capital Cost
Of Money
Facilities Capital Cost of Money ( FAR 31. 205- 10( a) , App B,
9904. 414- 30, and App B, 9904. 417- 50) .
Faci l i t i es capi t al cost of money i s an i mput ed cost
r el at ed t o t he cost of cont r act or capi t al commi t t ed t o
f aci l i t i es. CAS 414, Cost of Money as an El ement of t he
Cost of Faci l i t i es Capi t al , pr ovi des det ai l ed gui dance on
cal cul at i ng t he amount of f aci l i t i es capi t al cost of money
due under a speci f i c cont r act . Under CAS 414, a busi ness-
uni t ' s f aci l i t i es capi t al cost of money i s cal cul at ed by
mul t i pl yi ng t he net book val ue of t he busi ness- uni t ' s
f aci l i t i es i nvest ment by a cost of money r at e based on t he
i nt er est r at es speci f i ed semi - annual l y by t he Secr et ar y of
t he Tr easur y under Publ i c Law 92- 41. The busi ness- uni t ' s
f aci l i t i es capi t al cost of money i s t hen br oken down by
over head pool and al l ocat ed t o speci f i c cont r act s usi ng t he
same al l ocat i on base used t o al l ocat e t he i ndi r ect cost s i n
t he over head pool .
Faci l i t i es capi t al cost of money i s det er mi ned wi t hout
r egar d t o whet her t he sour ce i s owner ' s equi t y or bor r owed
capi t al . I t i s not a f or mof i nt er est on bor r owi ng by t he
f i r m.
Faci l i t i es capi t al cost of money al l owed under CAS 414
does not dupl i cat e or r epl ace cost s al l owed under CAS 417,
Cost of Money as an El ement of t he Cost of Capi t al Asset s
Under Const r uct i on. CAS 417 est abl i shes cr i t er i a f or t he
measur ement of t he cost of money at t r i but abl e t o capi t al
asset s under const r uct i on, f abr i cat i on, or devel opment as
an el ement of t he cost of t hose asset s. CAS 417 cost s ar e
onl y accumul at ed whi l e asset s ar e under const r uct i on, t he
cost s ar e char ged as par t of cont r act depr eci at i on over t he
depr eci abl e l i f e of t he asset . As a r esul t , anal ysi s of CAS
417 cost s becomes a par t of t he compl ex pr ocess of asset
val uat i on and depr eci at i on. I f you have quest i ons r egar di ng
CAS 417 cost s, cont act t he cogni zant Gover nment audi t or .
Purpose of Facilities Capital Cost of Money ( FAR App B,
9904. 414- 20) . As cont r act or management consi der s
i nvest ment oppor t uni t i es, t hey must consi der t he cost of
capi t al r equi r ed t o make each i nvest ment and t he pot ent i al
r et ur n f r omt hat i nvest ment . To at t r act i nvest ment , t he
pr ospect i ve r et ur n on i nvest ment gener al l y must be hi gher
t han t he cost of capi t al r equi r ed t o make t he i nvest ment .
Thus, t he cost of capi t al i s a r eal cost t hat ef f ect s
i nvest ment deci si ons. Unf or t unat el y, t he cost of capi t al i s
not t he same f or al l sour ces ( e. g. , owner ' s equi t y and
l ong- t er ml oans) , al l f i r ms, or al l per i ods of t i me.
The pur pose of f aci l i t i es capi t al cost of money
cr i t er i a i s t o i mpr ove cont r act or cost measur ement by
pr ovi di ng f or al l ocat i on of t he cost of cont r act or
i nvest ment i n f aci l i t i es t o negot i at ed cont r act s. To assur e
uni f or mconsi der at i on, t he cr i t er i a r equi r e use of t he
cur r ent Tr easur y- det er mi ned cost of money r at e f or al l
f i r ms and al l f aci l i t y i nvest ment s.
Facilities Capital Cost of Money Allowability ( FAR 31. 205-
10( a) and 31. 205- 52) . Whet her or not t he cont r act i s
ot her wi se subj ect t o Cost Account i ng St andar ds, f aci l i t i es
capi t al cost of money i s al l owabl e when al l of t he
f ol l owi ng r equi r ement s ar e met :
The cont r act or ' s capi t al i nvest ment i s measur ed,
al l ocat ed t o cont r act s, and cost ed i n accor dance wi t h
CAS 414.
The cont r act or mai nt ai ns adequat e r ecor ds t o
demonst r at e compl i ance wi t h t he r equi r ement s of CAS
414.
The est i mat ed f aci l i t i es capi t al cost of money i s
speci f i cal l y i dent i f i ed or pr oposed i n cost pr oposal s
r el at i ng t o t he cont r act under whi ch t he cost i s t o be
cl ai med.
The r equi r ement s i n FAR 31. 205- 52, Asset Val uat i ons
Resul t i ng f r omBusi ness Combi nat i ons, ar e not
exceeded.
Contractor Waiver of Facilities Capital Cost of Money ( FAR
15. 404- 4( c) ( 3) , 15. 408( i ) , and 52. 215- 17) .
I f t he pr ospect i ve cont r act or f ai l s t o i dent i f y or
pr opose f aci l i t i es capi t al cost of money i n a pr oposal f or
a cont r act t hat wi l l be subj ect t o t he FAR cost pr i nci pl es
f or cont r act s wi t h commer ci al or gani zat i ons, f aci l i t i es
capi t al cost of money wi l l not be an al l owabl e cost i n any
r esul t i ng cont r act . Under t hose ci r cumst ances, t he cont r act
must i ncl ude t he FAR cl ause, Wai ver of Faci l i t i es Capi t al
Cost of Money.
Facilities Capital Cost of Money Cannot Be Used as a Profit
Base ( FAR 15. 404- 4( c) ( 3) and DFARS 215. 404- 71- 4) .
FAR r equi r es t hat you use your pr enegot i at i on cost
obj ect i ve as t he basi s f or cal cul at i ng t he pr enegot i at i on
obj ect i ve f or pr of i t or f ee. However , FAR al so r equi r es
t hat you excl ude any f aci l i t i es cost of capi t al i ncl uded i n
cost obj ect i ves bef or e appl yi ng pr of i t or f ee f act or s.
Even t hough FAR excl udes f aci l i t i es capi t al cost of
money f r omt he basi s f or cal cul at i ng pr of i t or f ee
obj ect i ves, your agency may pr ovi de f or usi ng t he
f aci l i t i es capi t al cost of money t o est i mat e t he cont r act or
f aci l i t i es capi t al empl oyed on t he cont r act . The pr of i t or
f ee obj ect i ve may t hen consi der t he est i mat ed f aci l i t i es
capi t al empl oyed.

10.2 Identifying And Applying Facilities Capital Cost Of
Money Factors
Thi s sect i on pr esent s pr ocedur es f or cal cul at i ng and
appl yi ng f aci l i t i es capi t al cost of money f act or s and f or
usi ng t he DD For m1861 ( avai l abl e i n Adobe Acr obat ( PDF)
f or mat .
10. 2. 1 - Cal cul at i ng Cont r act Faci l i t i es Capi t al Cost
Of Money
10. 2. 2 - Usi ng The DD For m1861

10.2.1 Calculating Contract Facilities Capital Cost Of
Money
Developing Facilities Capital Cost of Money Rates ( FAR App
B, 9904. 414- 60) . The cont r act or i s r esponsi bl e f or
pr oposi ng f aci l i t i es capi t al cost of money f act or s usi ng
t he For mCASB- CMF. Accor di ngl y, any r evi ew or anal ysi s of
cost of money f act or devel opment shoul d exami ne t he
pr ocedur es used by t he cont r act or i n each st ep i nvol ved i n
compl et i ng t he For mCASB- CMF.
FORM CASB-
CMF
FACI LI TI ES CAPI TAL
COST OF MONEY FACTORS COMPUTATI ON
CONTRACTOR:
BUSI NESS UNI T:
ADDRESS:
COST ACCOUNTI NG
PERI OD:
1.
APPLI CABLE
COST OF
MONEY
RATE
__8__%
2.
ACCUMULATI ON
& DI RECT
DI STRI BUTI ON
OF N. B. V.
3. ALLOCATI ON
OF
UNDI STRI BUTED
4. TOTAL
NET BOOK
VALUE
5. COST OF
MONEY FOR
THE COST
ACCOUNTI NG
PERI OD
6.
ALLOCATI ON
BASE FOR
THE PERI OD
7.
FACI LI TI ES
CAPI TAL
COST OF
MONEY
FACTORS
RECORDED $1, 052, 500
LEASED PROPERTY $90, 000
BASI S OF
ALLOCATI ON
COLUMNS
2+3
COLUMNS
1x4
I N UNI T( S)
OF MEASURE
COLUMNS
5/ 6
CORPORATE OR
ROUP G
$62, 000
TOTAL $1, 204, 500
UNDI STRI BUTED $1, 052, 000
BUSI NESS
UNI T
FACI LI TI ES
CAPI TAL
DI STRI BUTED $152, 500

MATERI AL $20, 000 $40, 000 $60, 000 $4, 800 $960, 000 0. 00500

ENGI NEERI NG $20, 000 $100, 000 $120, 000 $9, 600 $640, 000 0. 01500

MANUFACTURI NG $112, 500 $850, 000 $962, 500 $77, 000 $700, 000 0. 11000


OVERHEAD
POOLS


G&A EXPENSE - $0 - $62, 000 $62, 000 $4, 960 $4, 000, 000 0. 00124
G&A
EXPENSE
POOLS

TOTAL $152, 500 $1, 052, 000 $1, 204, 500 $96, 360


For each account i ng per i od, t he f act or - devel opment
pr ocess f ol l ows a 7- st ep pr ocedur e:
1. Determine the appropriate cost of money rate. The
cont r act or must use t he cur r ent cost of money r at e as
det er mi ned by t he Secr et ar y of t he Tr easur y, under
P. L. 92- 40. The r at e i s publ i shed t wi ce a year i n t he
Feder al Regi st er . ( Col umn 1)
2. Accumulate net book value of business-unit facilities
capital. For each account i ng per i od, t hi s accumul at i on
must i ncl ude t he net book val ue of f aci l i t i es owned by
t he busi ness uni t , t he capi t al i zed val ue of f aci l i t i es
capi t al - l ease i t ems, and t he busi ness- uni t ' s al l ocat ed
shar e of cor por at e or gr oup f aci l i t i es. Thi s f i gur e
wi l l nor mal l y change f r omper i od t o per i od. ( Busi ness
Uni t Faci l i t i es Capi t al - - Col umn 2)
3. Allocate facilities capital net book value to indirect
cost pools. Busi ness- uni t f aci l i t i es capi t al i s
assi gned t o account s f or al l ocat i on t o cont r act s.
These account s wi l l be r el at ed t o t he cont r act or ' s
over head pool s. I f depr eci at i on f or a bui l di ng i s par t
of t he engi neer i ng over head pool , t he f aci l i t i es
capi t al woul d be assi gned t o a f aci l i t i es capi t al pool
i dent i f i ed as engi neer i ng over head. ( Col umn 2 and
Col umn 3)
4. Sum facilities capital net book value for each pool.
The f aci l i t i es capi t al net book val ues assi gned t o
each pool must be summed t o det er mi ne t he t ot al pool
val ue. ( Col umn 2 + Col umn 3 = Col umn 4)
5. Calculate the facilities capital cost of money for
each pool. To cal cul at e t he f aci l i t i es capi t al cost of
money f or each pool , mul t i pl y each f aci l i t i es capi t al
pool by t he cur r ent cost of money r at e. ( Col umn 4 x
Col umn 1 = Col umn 5)
6. Identify the appropriate allocation base for each
facilities capital cost of money pool. The al l ocat i on
base used t o al l ocat e a f aci l i t i es capi t al cost of
money pool wi l l be t he same as t he base used t o
al l ocat e t he r el at ed i ndi r ect cost pool . Dependi ng on
t he met hod used t o est i mat e cost s, t he base est i mat e
wi l l nor mal l y change f r omper i od t o per i od. ( Col umn 6)
7. Calculate facility cost of money factors. Di vi de each
f aci l i t i es capi t al cost of money pool by t he
appr opr i at e al l ocat i on base. CAS 414 r equi r es t hat t he
cal cul at i on be t aken t o f i ve deci mal pl aces. ( Col umn
5/ Col umn 6 = Col umn 7)
Government Facilities Cost of Capital Factor Analysis ( FAR
15. 402( a) , 15. 404- 2( a) , and DFARS 230. 7004- 1) .
Because f aci l i t i es capi t al cost of money f act or s af f ect
cont r act s acr oss t he busi ness uni t , suppor t f r omt he
cogni zant audi t or and admi ni st r at i ve cont r act i ng of f i cer
( when one i s assi gned) can be par t i cul ar l y i mpor t ant t o
your anal ysi s. When i ndi r ect cost r at es ar e audi t ed by
cogni zant Gover nment audi t or s, f aci l i t i es capi t al cost of
money f act or s ar e t ypi cal l y audi t ed at t he same t i me. ACOs
may negot i at e f or war d pr i ci ng f aci l i t i es capi t al cost of
money f act or s at t he same t i me t hat t hey negot i at e f or war d
pr i ci ng i ndi r ect cost r at es. However , r emember t hat t he
cont r act i ng of f i cer st i l l has ul t i mat e r esponsi bi l i t y f or
det er mi ni ng cont r act pr i ce r easonabl eness.
Applying Factors to Appropriate Bases. To be consi der ed
f or f aci l i t i es capi t al cost of money, t he of f er or must
i ncl ude i t i n t he f i r m' s cost pr oposal . The cal cul at i ons
ar e nor mal l y f ound at t he end of t he pr oposed cost
br eakdown, af t er pr of i t . The t abl e bel ow demonst r at es how
f aci l i t i es capi t al cost of money woul d be cal cul at ed f or
wor k per f or med dur i ng each cont r act account i ng per i od. Not e
t hat each f aci l i t i es capi t al cost of money f act or i s
appl i ed t o t he same base ( cost el ement names i n bol d f ont )
as t he r el at ed i ndi r ect cost r at e.
Contract Price Position Including Facilities Capital
Cost of Money
Cost Element Rate/Factor and Base Cost
Direct Material $90, 000
Mat er i al Over head 5. 0%of Di r ect Mat er i al
Cost
$4, 500
Direct Engineering
Labor
$74, 000
Engi neer i ng
Over head
50. 0%of Di r ect
Engi neer i ng Labor Cost
$37, 000
Direct
Manufacturing Labor
$150, 000
Manuf act ur i ng
Over head
215. 0%of Di r ect
Manuf act ur i ng Labor Cost
$322, 500
Ot her Di r ect Cost $22, 000
Total Manufacturing
Cost
$700, 000
G&A Expense 6. 0%of Tot al
Manuf act ur i ng Cost
$42, 000
Tot al Cost Less
Cost of Money
$742, 000
Pr of i t 20. 0%of Tot al
Manuf act ur i ng Cost
$140, 000
Tot al Pr i ce Less
Cost of Money
$882, 000
Faci l i t i es Capi t al
Cost of Money

Mat er i al . 00500 x Direct Material
Cost
$450
Engi neer i ng . 01500 x Direct
Engineering Labor Cost
$1, 110
Manuf act ur i ng . 11000 x Direct
Manufacturing Labor Cost
$16, 500
G&A . 00124 x Total
Manufacturing Cost
$868
Tot al $18, 928
Tot al Pr i ce $900, 928

10.2.2 Using The DD Form 1861
DD Form 1861 Uses ( DFARS 230. 7001- 1) . The DoD has cr eat ed
t he DD For m1861, Cont r act Faci l i t i es Capi t al Cost of
Money, t o pr ovi de a uni f or mf or mat f or cal cul at i ng and
document i ng t he cont r act f aci l i t i es capi t al cost of money
and t he cont r act or f aci l i t i es capi t al empl oyed on a
cont r act . I n t he DoD, t he cont r act or ' s f aci l i t i es capi t al
empl oyed i s used t o measur e cont r act or f aci l i t i es
i nvest ment f or consi der at i on i n pr of i t / f ee anal ysi s.
Calculating Contract Facilities Capital Cost of Money
( DFARS 230. 7001- 2 and NFS 1830. 7001- 1) .
I f you ar e assi gned t o a DoD or gani zat i on, use t he DD
For m1861 ( or an el ect r oni c ver si on of t he f or m) t o
cal cul at e t he cont r act f aci l i t i es capi t al cost of money. I f
you ar e assi gned t o anot her agency, your agency may per mi t
or di r ect you t o use of t he DD For m1861.
The f ol l owi ng f i gur e demonst r at es t he use of a DD For m
1861 t o document t he f aci l i t i es capi t al cost of money
cal cul at i ons f r omt he exampl e i n t he pr evi ous sect i on.
CONTRACT FACI LI TI ES CAPI TAL COST OF MONEY For mAppr oved
OMB No. 0704-
0267
Expi r es Mar
31, 1998
Publ i c r epor t i ng bur den f or t hi s col l ect i on of
i nf or mat i on i s est i mat ed t o aver age 10 hour s per
r esponse, i ncl udi ng t he t i me f or r evi ewi ng i nst r uct i ons,
sear chi ng exi st i ng dat a sour ces, gat her i ng and
mai nt ai ni ng t he dat a needed, and compl et i ng and
r evi ewi ng t he col l ect i on of i nf or mat i on. Send comment s
r egar di ng t hi s bur den est i mat e or any ot her aspect of
t hi s col l ect i on of i nf or mat i on, i ncl udi ng suggest i ons
f or r educi ng t hi s bur den, t o Washi ngt on Headquar t er s
Ser vi ces, Di r ect or at e f or I nf or mat i on Oper at i ons and
Repor t s, 1215 J ef f er son Davi s Hi ghway, Sui t e 1204,
Ar l i ngt on, VA 22202- 4302, and t o t he Of f i ce of
Management and Budget , Paper wor k Reduct i on Pr oj ect
( 0704- 0267) , Washi ngt on, DC 20503.
PLEASE DO NOT RETURN YOUR COMPLETED FORM TO EI THER OF
THESE ADDRESSES.
RETURN COMPLETED FORM TO YOUR CONTRACTI NG OFFI CI AL
1. CONTRACTOR NAME 2. CONTRACTOR ADDRESS
3. BUSI NESS UNI T
4. RFP/ CONTRACT PI I N NUMBER 5. PERFORMANCE PERI OD
6. DI STRI BUTI ON OF FACI LI TI ES CAPI TAL COST OF MONEY

POOL

ALLOCATI ON
BASE
FACI LI TI ES CAPI TAL COST OF
MONEY
c.
a. b. FACTOR AMOUNT
Mat er i al $90, 000 . 00500 $450
Engi neer i ng $74, 000 . 01500 $1, 110
Manuf act ur i ng $150, 000 . 11000 $16, 500
G&A $700, 000 . 00124 $868

d. TOTAL $18, 928
e. TREASURY RATE %
f . FACI LI TI ES CAPI TAL EMPLOYED
( TOTAL DI VI DED BY TREASURY RATE)

7. DI STRI BUTI ON OF FACI LI TI ES CAPI TAL EMPLOYED
PERCENTAGE
a.
AMOUNT
b.
LAND %
BUI LDI NGS %
EQUI PMENT %
FACI LI TI ES CAPI TAL EMPLOYED 100%
DD For m1861, APR 95 PREVI OUS EDI TI ONS MAY BE USED

As you l ook at t he f or m, not e t hat Sect i on 6 of t he
f or mi s di vi ded i nt o f our col umns: pool , al l ocat i on base,
f act or , and amount . The f our col umns cor r espond t o
i nf or mat i on t hat you wi l l need t o cal cul at e your cost of
money obj ect i ve.
Pool. The pool col umn i s used t o i dent i f y t he name of
each pool . I dent i f yi ng t he pool by name f aci l i t at es
cal cul at i ons by assur i ng t hat al l appr opr i at e pool s
ar e consi der ed and t he appr opr i at e f act or i s used i n
maki ng each cal cul at i on.
Allocation Base. The al l ocat i on base i s t he base val ue
f or t he account i ng per i od f r omyour pr i ci ng posi t i on.
I f you have mor e t han one negot i at i on posi t i on - such
as a mi ni mum, a maxi mum, and an obj ect i ve - you woul d
have a di f f er ent f or mf or each posi t i on and each
ng per i od. account i
Factor. I n t hi s col umn, use t he Gover nment obj ect i ve
f or t he appr opr i at e cost of money f act or f or t he
account i ng per i od. I f t her e i s a f or war d pr i ci ng r at e
agr eement , use t he agr eed- t o r at e. I f t her e i s
di sagr eement over t he appr opr i at e r at e, use a
r easonabl e r at e based on t he avai l abl e i nf or mat i on.
Amount. The amount i s t he cost of money f or each pool
comput ed by mul t i pl yi ng t he amount i n t he al l ocat i on
base col umn by t he amount i n t he f act or col umn.
Af t er al l f act or s ar e appl i ed t o t he appr opr i at e bases,
t he amount s ar e t ot al ed t o det er mi ne t he t ot al f aci l i t i es
capi t al cost of money appl i cabl e t o t hat account i ng per i od.
Calculating Contract Facilities Capital Employed. I n t he
DoD, t he DD For m1861 i s al so used t o cal cul at e f aci l i t i es
capi t al empl oyed. Thi s ser ves as an est i mat e of t he
cont r act or f aci l i t y i nvest ment r equi r ed t o compl et e t he
cont r act ef f or t per f or med dur i ng t he account i ng per i od .
Remember t hat t he t ot al busi ness- uni t f aci l i t i es
capi t al cost of money f or each pool i s cal cul at ed by
mul t i pl yi ng t he net book val ue of f aci l i t i es capi t al by t he
cur r ent Tr easur y- det er mi ned cost of money r at e.
To cal cul at e t he f aci l i t i es capi t al empl oyed on t he
cont r act dur i ng each account i ng per i od, you r ever se t he
pr ocess - - di vi de t he cont r act f aci l i t i es cost of capi t al
f or t he account i ng per i od by t he cur r ent cost of money
r at e.
The f i gur e bel ow demonst r at es t he f aci l i t i es capi t al
empl oyed cal cul at i on usi ng t he f aci l i t i es capi t al cost of
money cal cul at i ons f r omt he f i gur e above and an 8. 0 per cent
cost of money r at e:
CONTRACT FACI LI TI ES CAPI TAL COST OF MONEY For mAppr oved
OMB No. 0704-
0267
Expi r es Mar
31, 1998
Publ i c r epor t i ng bur den f or t hi s col l ect i on of
i nf or mat i on i s est i mat ed t o aver age 10 hour s per
r esponse, i ncl udi ng t he t i me f or r evi ewi ng i nst r uct i ons,
sear chi ng exi st i ng dat a sour ces, gat her i ng and
mai nt ai ni ng t he dat a needed, and compl et i ng and
r evi ewi ng t he col l ect i on of i nf or mat i on. Send comment s
r egar di ng t hi s bur den est i mat e or any ot her aspect of
t hi s col l ect i on of i nf or mat i on, i ncl udi ng suggest i ons
f or r educi ng t hi s bur den, t o Washi ngt on Headquar t er s
Ser vi ces, Di r ect or at e f or I nf or mat i on Oper at i ons and
Repor t s, 1215 J ef f er son Davi s Hi ghway, Sui t e 1204,
Ar l i ngt on, VA 22202- 4302, and t o t he Of f i ce of
Management and Budget , Paper wor k Reduct i on Pr oj ect
( 0704- 0267) , Washi ngt on, DC 20503.
PLEASE DO NOT RETURN YOUR COMPLETED FORM TO EI THER OF
THESE ADDRESSES.
RETURN COMPLETED FORM TO YOUR CONTRACTI NG OFFI CI AL
1. CONTRACTOR NAME 2. CONTRACTOR ADDRESS
3. BUSI NESS UNI T
4. RFP/ CONTRACT PI I N NUMBER 5. PERFORMANCE PERI OD
6. DI STRI BUTI ON OF FACI LI TI ES CAPI TAL COST OF MONEY

POOL

ALLOCATI ON
BASE
FACI LI TI ES CAPI TAL COST OF
MONEY
c.
a. b. FACTOR AMOUNT
Mat er i al $90, 000 . 00500 $450
Engi neer i ng $74, 000 . 01500 $1, 110
Manuf act ur i ng $150, 000 . 11000 $16, 500
G&A $700, 000 . 00124 $868

d. TOTAL $18, 928
e. TREASURY RATE 8. 0 %
f . FACI LI TI ES CAPI TAL EMPLOYED
( TOTAL DI VI DED BY TREASURY RATE)
$236, 600
7. DI STRI BUTI ON OF FACI LI TI ES CAPI TAL EMPLOYED
PERCENTAGE
a.
AMOUNT
b.
LAND %
BUI LDI NGS %
EQUI PMENT %
FACI LI TI ES CAPI TAL EMPLOYED 100%
DD For m1861, APR 95 PREVI OUS EDI TI ONS MAY BE USED

Distributing Facilities Capital Employed. To encour age
cont r act or i nvest ment i n pr oduct i ve f aci l i t i es, t he DoD
wei ght ed gui del i nes met hod of pr of i t / f ee anal ysi s pr ovi des
di f f er ent pr of i t wei ght s f or each di f f er ent t ype of
f aci l i t y - - l and, bui l di ngs, and equi pment . To f aci l i t at e
pr of i t / f ee cal cul at i ons, one mor e ser i es of cal cul at i ons i s
r equi r ed bef or e t he f aci l i t i es capi t al empl oyed can be used
i n DoD wei ght ed gui del i nes.
Di st r i but i ng Faci l i t i es Capi t al Empl oyed ( cont ) DD For m
1861, Sect i on 7 i s used t o est i mat e t he amount of each t ype
of f aci l i t y empl oyed on t he cont r act . The per cent age
assi gned t o each t ype of f aci l i t y i n Sect i on 7 i s equal t o
t he over al l per cent age of cont r act or net book val ue
i nvest ed i n t hat t ype of f aci l i t y. Per cent ages ar e pr oposed
by t he cont r act or and subj ect t o Gover nment r evi ew. Of
cour se, t he sumof al l per cent ages must equal 100 per cent .
To est i mat e t he val ue of each t ype of f aci l i t y empl oyed
on t he cont r act , mul t i pl y t he t ot al f aci l i t i es capi t al
empl oyed by t he appr opr i at e per cent age. The r esul t i s t he
est i mat ed amount of t hat t ype of f aci l i t y empl oyed on t he
cont r act dur i ng t he account i ng per i od. The sumof al l t hr ee
amount s must equal t he t ot al f aci l i t i es capi t al empl oyed
dur i ng t he account i ng per i od. Some adj ust ment may be
r equi r ed t o compensat e f or r oundi ng er r or i n t he var i ous
cal cul at i ons.
The f i gur e bel ow demonst r at es di st r i but i on of t he
f aci l i t i es capi t al empl oyed assumi ng t hat over al l
cont r act or f aci l i t i es capi t al i s 20 per cent l and, 50
per cent bui l di ngs, and 30 per cent equi pment :
CONTRACT FACI LI TI ES CAPI TAL COST OF MONEY For mAppr oved
OMB No. 0704-
0267
Expi r es Mar
31, 1998
Publ i c r epor t i ng bur den f or t hi s col l ect i on of
i nf or mat i on i s est i mat ed t o aver age 10 hour s per
r esponse, i ncl udi ng t he t i me f or r evi ewi ng i nst r uct i ons,
sear chi ng exi st i ng dat a sour ces, gat her i ng and
mai nt ai ni ng t he dat a needed, and compl et i ng and
r evi ewi ng t he col l ect i on of i nf or mat i on. Send comment s
r egar di ng t hi s bur den est i mat e or any ot her aspect of
t hi s col l ect i on of i nf or mat i on, i ncl udi ng suggest i ons
f or r educi ng t hi s bur den, t o Washi ngt on Headquar t er s
Ser vi ces, Di r ect or at e f or I nf or mat i on Oper at i ons and
Repor t s, 1215 J ef f er son Davi s Hi ghway, Sui t e 1204,
Ar l i ngt on, VA 22202- 4302, and t o t he Of f i ce of
Management and Budget , Paper wor k Reduct i on Pr oj ect
( 0704- 0267) , Washi ngt on, DC 20503.
PLEASE DO NOT RETURN YOUR COMPLETED FORM TO EI THER OF
THESE ADDRESSES.
RETURN COMPLETED FORM TO YOUR CONTRACTI NG OFFI CI AL
1. CONTRACTOR NAME 2. CONTRACTOR ADDRESS
3. BUSI NESS UNI T
4. RFP/ CONTRACT PI I N NUMBER 5. PERFORMANCE PERI OD
6. DI STRI BUTI ON OF FACI LI TI ES CAPI TAL COST OF MONEY

POOL

ALLOCATI ON
BASE
FACI LI TI ES CAPI TAL COST OF
MONEY
c.
a. b. FACTOR AMOUNT
Mat er i al $90, 000 . 00500 $450
Engi neer i ng $74, 000 . 01500 $1, 110
Manuf act ur i ng $150, 000 . 11000 $16, 500
G&A $700, 000 . 00124 $868

d. TOTAL $18, 928
e. TREASURY RATE 8. 0 %
f . FACI LI TI ES CAPI TAL EMPLOYED
( TOTAL DI VI DED BY TREASURY RATE)
$236, 600
7. DI STRI BUTI ON OF FACI LI TI ES CAPI TAL EMPLOYED
PERCENTAGE
a.
AMOUNT
b.
LAND 20. 0 % $47, 320
BUI LDI NGS 50. 0 % $118, 300
EQUI PMENT 30. 0 % $70, 980
FACI LI TI ES CAPI TAL EMPLOYED 100. 0 % $236, 600
DD For m1861, APR 95 PREVI OUS EDI TI ONS MAY BE USED