How is the indirect cost (IDC rate) for a subcontract determined?

The determination of the indirect cost (IDC) rate for a subcontract is typically based on the subcontractor's normal rate. This means that the subcontractor will use its established indirect cost rate, which has been calculated based on its own accounting practices and cost allocation methods. Each subcontractor may have different rates depending on their organizational structure, overhead costs, and general expenses that need to be covered.

Using the subcontractor's normal rate ensures that the costs reflected in the subcontract are accurate and aligned with the actual expenses incurred by the subcontractor. This practice allows for consistency and fairness in the allocation of costs for the services rendered under the subcontract.

In contrast, other options suggest varying methods that are less aligned with the actual incurred costs or the subcontractor's specific situation. For example, relying solely on the prime recipient's rate or the prime award agreement may not accurately reflect the true indirect costs faced by the subcontractor. Such approaches could result in discrepancies and potential issues in funding and reimbursement. Ultimately, using the subcontractor's normal rate facilitates more precise cost management and accountability in contract performance.