General Notice To Defence Contractors No. 1 (Issue 2)
27 June 1980 COSTED CONTRACTS - CONTRACTORS' CERTIFIED COST STATEMENTS 1. This Notice outlines the procedure to be followed by Contractors in submitting certified cost statements in respect of contracts to be priced by reference to ascertained costs. New Contracts 2. a) With the exception of some contracts of small value, in respect of which simpler alternative arrangements are agreed, all contracts to be priced on ascertained costs will contain the following clause:"Certified Cost Statement. When submitting his request for final settlement in respect of this contract, a Contractor shall forward to the appropriate Contracts Branch a certified cost statement in accordance with Appendices A and B to General Notice to Defence Contractors No. 1." b) In contracts which are expected to exceed £250,000 in value or two years in duration, and in such other contracts as may be agreed, the following clause will also be included:"Interim Certified Cost Statements. During the currency of the contract, the Contractor shall at the end of his financial year forward to the appropriate Contracts Branch an interim certified cost statement covering work done during that year in the form set out in Appendices A and B to General Notice to Contractors No. 1. Such statements shall be provided not later than ............. months after the end of the year in question." The period stated in this clause will be agreed with Contractors on individual contracts and will have regard to their cost accounting system and their accounting work load. Existing Contracts 3. For existing contracts to be priced by reference to ascertained costs, Contractors are asked to submit all future statements of costs in accordance with this General Notice, unless specifically agreed otherwise.
Use of Estimated Figures 4. Certified cost statements (whether final or interim) may in future include declared estimated figures covering any minimal amounts of direct charges which cannot be determined accurately without undue delay. As a guide, amounts may be regarded as minimal if they do not exceed in total 2% of the value of the interim cost statement, or £25,000 or 2% of the final cost statement, whichever is the less. Progress Payments 5. Failure to provide interim certified cost statements within the agreed time limit may, after reasonable notice has been given, result in progress payments under the contract concerned being withheld. If there should be protracted delay in submission of cost statements the Ministry may require repayment of progress payments made previously under the contract concerned. Provisional Statements 6. In appropriate: cases, which will be identified in the contracts concerned, Contractors will be required to furnish provisional statements of the total costs incurred for the purpose of interim financial adjustment under contracts the prices of which are redeterminable in the light of incurred costs. General 7. The form of the Certificate and Statement of Cost in Appendices A and B may be varied only be agreement with the Principal Director of Accountancy Services to whom any request for further information should be addressed. [signed] Director General of Defence Contracts
APPENDIX A TO GENERAL NOTICE TO DEFENCE CONTRACTORS NO 1 (Issue 2)
Specimen Cost Certificate Contractor: ................................................... Contract No: ..................................................
1. We certify that the costs, excluding profit, incurred on the above contract amount to £.............., made up as shown in Appendix B. (NOTE: In the case of interim certificates, the amount shown should not include the value of commitments entered into for which expenditure has not actually been incurred). 2. The period of work was from .......………………... to ....…………………....
3. The costs have been computed in accordance with the Questionnaire on Method of Allocation of Costs and any amendments thereto appropriate to the period of work agreed with the Ministry of Defence (or any other appropriate Department). 4. EITHER: The costs do not include any sub-contract or bought-out supply the individual value of which exceeds £25,000; OR: Sub-contracts or supplies the individual value of which exceeds £25,000 are as follows (or per list attached, where numerous). Name of Sub-contractor or supplier Amount 5. The costs do not include any charges relating to orders for any part of the work under the contract placed with subsidiary companies or firms the individual value of which exceeds £10,000. OR: The costs include charges relating to orders for work placed with subsidiary companies or firms the individual value of which exceeds £10,000 as listed below: OR: The costs include charges relating to orders for work placed with subsidiary companies or firms all of which are listed below: Name of Subsidiary Company or Firm Amount 6. EITHER:
No direct charges based on estimates are included in the costs; OR: Direct charges based on estimates are included in the costs as follows : Brief Details Value 7. EITHER: No items of a. special or unusual nature (eg of a capital nature) are included; OR: The following items of a special or unusual nature are included:Particulars Amount £ 8. Overheads have been included as follows:Rate Status
Year (See Note 1) ………………………… …………………………
………………………………. ……………………………….
…………………………… ……………………………
9. Allowance has been made for all credits to which the Ministry of Defence is entitled under this contract and no charge is included for items, procured or manufactured against and charged to a previous contract, retained for use on other, work. 10. Jigs and tools and/or test equipment included in the costs were acquired for the special purpose of this contract and properly authorised in accordance with the terms of the contract. A register is maintained of all acquisitions and (where required by the contract) a valued list thereof is attached. No grant from Government funds, eg Regional Development Grant has been made or claimed in respect thereof.
(NOTE: Where Jigs, Tools, etc are, by arrangement, subject to a special method of recovery, the basis should be stated). 11. Action with regard to redundant and surplus parts and/or materials has been taken in accordance with the terms of the contract. Where required by the contract, a valued lists of the surplus materials and/or components covered by the costs is attached (OR has already been supplied to ……………………). 12. All Forms 640 related to the contract for the period of this certificate are available for inspection, filed in date order. The final (latest in the case of interim certificates) Form 640 is:Serial No dated 13. To the best of our knowledge and belief the costs certified in paragraph 1 above and shown in Appendix B attached have been reasonably and properly incurred in accordance with the requirements and conditions of the contract and they are in agreement with our books, accounts and other documentation and records. Signed …………………………………… * Finance Director …………………………………… * Director
(*Or other signatories as authorised by PFG Note 1: State for each year whether rates are actual or estimated, and whether they are agreed rates.
APPENDIX B TO GENERAL NOTICE TO DEFENCE CONTRACTORS NO 1 (Issue 2)
Statement of Cost Notes: It is not practicable to give a specimen layout, but the statement should incorporate the following essential features:a) Costs should be summarised in contractors' financial years, and under each element of cost (Materials, Direct Charges, etc, Direct Labour and
Overheads), and separately under functions, (eg Design, Manufacture, Tooling), as may be applicable. b) The total cost should be related where required to separate items of the contract (or to item groupings, as may be agreed). c) Where there are differential overhead rates, these should be quoted and the direct labour (or other base figures, according to the method of overhead recovery) together with the relative overheads should be shown for each appropriate function or department, so that, in conjunction with the reference made to overhead rates in the Certificate, the calculation of the overheads in the Appendix may readily be followed, eg where departmental labour and overheads are expressed as hourly rates the hours expended in each department together with the hourly rates for labour and overheads should be detailed in the statement.