Understanding Project Costs and Charges
Fiscal Year 2012
Introduction
The Volpe Center is a U.S. Department of Transportation resource for innovation in transportation and related activities. It develops integrated, multimodal approaches to critical transportation initiatives throughout the federal government, as well as for state, local, and foreign governments, and private organizations. We receive no federal appropriation; our funding is derived entirely from our project work for customers. This brochure explains how Volpe Center costs are charged to projects.
Charges Cover Only Costs
We charge customers only for the cost of the work we perform; i.e., no profit or fee. All customers are charged in the same manner, using generally accepted federal accounting practices and a sophisticated project accounting system.
Direct and Indirect CostsAbout 85% of Volpe expenditures are directly tied to specific projects: 83% for direct project charges and 2% for project acquisition support. The remaining 15% is for essential indirect support not directly attributed to individual projects.
Labor Costs and Charges- The primary resource Volpe brings to every project is our federal staff. A project's labor charges are the sum of all costs-direct and indirect-for each hour of work on the project by individual Volpe employees.
- Our labor cost per hour charged, as in any business, is determined by: employee compensation - salary, leave benefits (national holidays, vacation, and sick leave) and other benefits (retirement, insurance, etc.); and indirect costs - heat, light, administrative services (excluding project acquisition), management, and non-project-specific training and travel.
Combining employee compensation and indirect costs gives the fully loaded hourly labor cost as shown below.
Labor Cost for a Representative Employee*
| Compensation | $ per hour worked | $ per staff year (1,750 hrs) |
| Salary (for hours worked) | $ 47.92 | $ 83,860 |
| Leave benefits @ 20.2% of salary (national holidays, sick, vacation) | 9.68 | 16,940 |
| Other Benefits @ 32.3% of salary (retirement, insurance, awards, etc) | 15.48 | 27,090 |
| Total Compensation | $ 73.08 | $ 127,890 |
| Indirect @ 59.8% of compensation (facilities, training, management. All non-acquisition administrative services) | 43.70 | 76,478 |
| Total (2.45 of salary or 1.606 of total compensation) | $ 116.78 | $ 204,368 |
Volpe federal employee earning $100K base salary.
*Some calculations affected by rounding.
Project Costs and Charges
Project costs usually include not only Volpe labor, but also travel, project acquisitions, and overhead related to those acquisitions, as seen in the example below.
Overall Costs for a Representative Project
| Cost ($k) | |
| Labor (1,750 hrs X $117.37/hr) | 205 |
| Travel | 8 |
| Project Acquisitions | 500 |
| Acquisition Overhead @ 4.25% of project acquisitions | 21 |
| Total | $734 |
Labor/Compensation - Our federal staff receives standard federal salaries, retirement, insurance, and leave.
Travel - Volpe benefits from the mass purchasing power of the federal government, and enjoys negotiated air travel and hotel rates that are 20% to 70% below normal rates.
Project Acquisitions - We are skilled at competitively selecting and employing cost effective contractor support. More than 90% of our acquisitions are competitively awarded.
Acquisition Overhead - Our cost to let and administer project contracts is no more than 4.25% of the contracts' cost.
Financial Status Reports
Our financial management division regularly sends project cost summary reports to each customer's financial and accounting office. Volpe's project managers send more customized project status reports on an as needed basis.
Project Management
The Volpe Center has undertaken a series of initiatives to improve and maintain its project management capabilities. An important objective of the Center's project management improvement program is to reduce the variability of project management practices across the Center. Standardization of critical practices supports increased project efficiencies and management accountability, stronger alignment of customer expectations with project reporting, and more effective training of current and potential project managers.
Questions & Answers
Under what authority is the Volpe Center funded?
The Volpe Center is authorized by Congress to conduct business through its Working Capital Fund, 49 U.S.C. 328. Funds are sent from the cash accounts in Treasury that Volpe draws down upon. Non-DOT agencies that do not have an account with Treasury send their funds to the Federal Reserve who in turn sends it to the Volpe account in Treasury.
When do customers pay for Volpe support?
Customers must advance spending authority and cash before work begins. Both spending authority and cash may be advanced incrementally.
How and in what amounts are customer funds advanced to Volpe?
Funds are fully advanced to Volpe upon execution of the agreement under Department of Transportation guidelines. Advances for federal customers are collected via Treasury's IPAC system. Advances for non-federal customers are collected via check or wire transfer.
How does Volpe ensure the indirect and acquisition pool rates seldom go up during a fiscal year?
We establish indirect rates based on a budget approved by the Administrator of the Research and Innovative Technology Administration (RITA). During the fiscal year, indirect costs are monitored on a continuous basis and adjustments to expenditures are made as necessary in order to maintain the established overhead rates.
Is training charged to a specific project or to indirect?
In general, employees' time, travel, and tuition for training are charged to Volpe's indirect training account. Project-focused training is charged directly to projects.
Does Volpe have any preferential pricing practices?
No, all customers are charged in the same manner. We have no "discounts" or other special pricing arrangements.
Are funds tied to specific projects?
Yes, a project's funds may be used only for that project to ensure compliance with appropriation law and the intent of Congress.
Does Volpe guarantee its cost estimates?
No, initial project cost estimates are typically revised after work is initiated and defined in more detail. Work is performed on a best effort (not fixed price) basis. Since Volpe has no funds of its own, we are required to stop work if funds run out.
Do project funds expire at the end of each fiscal year?
No, under the provisions of the Working Capital Fund, project funds are available without regard to fiscal year. However, if a customer desires to limit the use of the funds to a specific time period, Volpe will accommodate such requests. Under current Department of Transportation policy, the period of performance for any agreement is limited to not more than five years.
What happens to unexpended funds on completed projects?
Funds are returned to the customer. Projects are reviewed annually to ensure funds on completed projects are returned.
Can customers terminate projects and have funds returned to them?
Yes, Volpe will return all unexpended funds (after project close-out costs have been covered).
How can customers be confident Volpe is charging them appropriately?
In addition to regularly sending our customers financial status reports, Volpe is audited regularly by DOT's Office of the Inspector General.
Contact Us
For additional information, call your project manager, or contact:
Chief Financial Officer
Volpe National Transportation Systems Center
55 Broadway, Cambridge, MA 02142
Phone: 617/494-2284
Fax: 617/494-3630
E-mail: William.Henrikson@dot.gov