During 2013, the Federal Highway Administration (FHWA) entered into a test period of a national indirect cost rate “safe harbor” rate.  This safe harbor rate was approved for use by eligible consultants on a test evaluation basis for ten selected state DOT’s, which Michigan DOT was one of them.  The FHWA established safe harbor rate (110%) was generally significantly lower than the industry average rate and was optional for those firms not having a compliant overhead rate.  The safe harbor rate was effective July 1, 2013, through June 30, 2016.  Consulting firms who satisfied certain criteria were able to utilize this safe harbor rate in order so that they could create a contract cost history during the test period to use as a base for development of an overhead cost rate in the future.

MDOT issued Consultant Advisory 2016-3 on March 18, 2016, to notify consultants utilizing this “safe harbor” rate that FHWA has not extended the program and the MDOT will not approve the “safe harbor” rate beyond June 30, 2016.  Consultants who currently have been approved to utilize the “safe harbor” rate and who wish to remain prequalified with MDOT past June 30, 2016, must either submit an Overhead Rate Compilation or a CPA FAR Compliant Overhead Rate Audit.  All consultants who are currently approved to use the “safe harbor” rate must be under contract by June 30, 2016, in order to use the “safe harbor” rate and the rate will apply until the contract is completed.

If your firm would like to stay compliant with the MDOT prequalification program and is in need of an Overhead Rate Compilation or a CPA FAR Compliant Overhead Rate Audit, please contact me or one of the other FAR Compliant knowledge experts here at Somerset.