Executive Summary

Facilities Capital Cost of Money (FCCM) is a cost of capital allowance provided under the Federal Acquisition Regulation (FAR) 31.205-10. Despite its clear regulatory foundation and potential to improve contractor cash flow and cost recovery, FCCM remains significantly underutilized in U.S. Government contracts—particularly by small and mid-sized contractors. This case study explores FCCM’s regulatory basis, reasons for its underuse, its impact on contractors, and recommendations to improve adoption.

Background: What is FCCM?

FCCM is a form of imputed cost, not based on actual expenses but on a calculated opportunity cost for the capital invested in facilities used for government work. Unlike interest, which is unallowable per FAR 31.205-20, FCCM is explicitly allowable under FAR 31.205-10, provided the contractor meets certain conditions:

• Has an approved cost accounting system
• Proposes and uses a Facilities Capital Cost of Money rate derived from Form CASB-CMF
• Applies the rate only to assets that are allocated to government contracts

It is a non-cash cost that can be included in proposals and cost reimbursements, effectively compensating contractors for using their capital facilities in the performance of government work.

Problem Statement: Why is FCCM Underutilized?

Despite its benefits, a 2021 Defense Contract Audit Agency (DCAA) review revealed that fewer than 15% of audited contractors claimed FCCM in their proposals. The reasons include:

1. Lack of Awareness: Many contractors, especially small businesses, are unaware FCCM exists or believe they are not eligible to claim it.
2. Perceived Complexity: The requirement to complete CASB-CMF forms and maintain supporting records deters many potential claimants.
3. Misinterpretation of Allowability: Some contractors mistakenly believe FCCM is a form of interest and therefore unallowable.
4. Disuse in Fixed-Price Contracts: Many contractors using fixed-price or T&M contracts fail to include FCCM in proposals—even though it can still be proposed and recovered if supported.
5. Inadequate Support from Government Buyers: Government acquisition professionals rarely inquire or encourage the inclusion of FCCM during negotiations, focusing instead on direct and indirect costs.

Case Example: XYZ Precision Manufacturing, Inc.

Company Profile:

• Small business, 125 employees
• Specializes in machined aerospace components
• Regular subcontractor to major DoD primes
• Operates a $6.2M facility in the Northeast U.S.

Scenario:
In FY2022, XYZ bid on multiple cost-reimbursable and FFP government subcontracts but did not propose FCCM. An internal review conducted in early 2023 revealed the company could have recovered approximately $110,000 annually if it had properly included FCCM in proposals. The CFO acknowledged this omission was due to unfamiliarity with the CASB-CMF form and lack of training on allowability provisions.

Corrective Action Taken:

• XYZ engaged a government contract compliance consultant to help complete Form CASB-CMF.
• Revised accounting procedures to integrate FCCM into all future cost proposals.
• Trained pricing and proposal staff on FAR Part 31 and DFARS compliance topics.

Outcome:

• Within one year, XYZ successfully recovered $93,000 in FCCM on a follow-on Navy contract.
• The additional cost recovery improved internal ROI calculations and cash forecasting.
• The company now treats FCCM as a standard part of its pricing and cost accounting process.

Implications of FCCM Underuse

• Contractor Margin Compression: Contractors lose out on a legitimate recovery of capital costs, particularly in facilities-intensive industries like aerospace and shipbuilding.
• Reduced Incentive to Invest: The lack of FCCM consideration may disincentivize private investment in infrastructure used for federal work.
• Skewed Cost Structures: Contractors not claiming FCCM may underprice contracts, giving an artificial pricing advantage to competitors while weakening their own long-term financial health

Recommendations for Government and Industry

For Contractors:

• Educate proposal and finance teams on FCCM and FAR 31.205-10.
• Use available DCAA templates and tools (e.g., CASB-CMF) to prepare cost of money rates.
• Incorporate FCCM as a standard component of forward pricing and incurred cost submissions.

For Government Agencies:

• Include FCCM as a point of discussion during proposal evaluations and audits.
• Encourage small businesses to consult PTACs, DCMA, or SBA for FCCM training.
• Publish simplified guides for FCCM calculation and eligibility.

Conclusion

FCCM is a valuable but often overlooked mechanism for ensuring fair cost recovery in federal contracts. Its underutilization reflects both knowledge gaps and process aversion. With modest education and system enhancements, contractors—especially small and mid-sized manufacturers—can unlock additional revenue and better align their pricing strategies with regulatory entitlements. Promoting broader awareness and usage of FCCM is a mutually beneficial step for both government and industry.