The U.S. DOT Volpe’s Project Costs
The U.S. DOT Volpe Center is a unique federal organization that is 100 percent funded by sponsor projects.
The U.S. DOT Volpe Center is a federal fee-for-service research and innovation center in the U.S. DOT. We are authorized by Congress to conduct business through a Working Capital Fund (49 U.S.C. 328). As a research and innovation center that receives no Congressional appropriations, the U.S. DOT Volpe Center's continued success depends on the delivery of quality solutions to our sponsors, who provide our sole source of revenue through project agreements.
The U.S. DOT Volpe Center maintains its own facility in Cambridge, MA. Unlike many comparable federal organizations, the U.S. DOT Volpe Center receives no base funding or agency support to offset facility operations and maintenance costs.
The U.S. DOT Volpe Center's employees are compensated the same as other federal employees.
The U.S. DOT Volpe Center's staff is compensated according to the federal locality pay tables used for all federal employees, and our labor costs include the same employee benefits, such as health and life insurance, received by other federal employees. A sponsor is charged labor costs for only the time that U.S. DOT Volpe Center staff spends working on the sponsor's project. These are direct labor costs.
For example, a GS-13 employee who is paid $55.72 per hour and receives another $37.33 in federal benefits has a direct labor cost of $93.05 per hour.
The U.S. DOT Volpe Center's essential administrative functions are covered through overhead charges.
In addition to direct labor costs, the U.S. DOT Volpe Center costs include expenses for administrative services that are essential to operate an organization, including human resources, information technology, facilities, financial services, legal services, building services, and utility costs. These are indirect costs. Since we receive no funding other than what comes through project agreements with our sponsors, we recover these indirect costs by charging sponsors an overhead rate that is shared among all projects. This rate is charged only on direct labor costs.
The U.S. DOT Volpe Center's overhead rate in 2022 is 64 percent of direct labor charges. With the example of a GS-13 employee who has a direct labor cost of $93.05 per hour, an overhead charge of 64 percent (or $59.55) on that compensation brings his or her total hourly cost to $152.60. Another way of looking at this is that 39 percent of a sponsor's cost for Volpe labor is for indirect expenses.
Projects that require the U.S. DOT Volpe Center to procure materials or support services are charged an acquisition services fee of 6.5 percent of the contract obligation amount to cover the costs of the U.S. DOT Volpe Center's acquisitions staff, who provide our procurement services.
Thus, a project that costs $200,000 in U.S. DOT Volpe Center direct labor costs and $300,000 in contractor costs would be charged an indirect cost of $128,000 ($200,000 x 64%) and an acquisition fee of $19,500 ($300,000 x 6.5%), resulting in a total cost of $647,500.
The U.S. DOT Volpe Center’s costs compare favorably with those of other service providers.
While the U.S. DOT Volpe center does not compete with other service providers, our sponsors have asked how our costs compare to organizations that provide similar services. It is difficult to make comparisons due to the variety of accounting practices used in these organizations. One measure of comparison is the "wrap rate," which is the total hourly rate burdened with indirect charges divided by the unburdened hourly rate.
For the U.S. DOT Volpe Center, illustrated using the GS-13 example above, our wrap rate is 2.74, as shown below:
The total labor costs for other service providers can include, in addition to employee benefits and overhead, a general and administrative expense rate, a cost-of-money charge, and a profit fee. U.S. DOT Volpe Center costs include none of these additional fees.
In benchmarking other service providers of similar size and budget as the U.S DOT Volpe Center, we have usually found wrap rates (total labor cost divided by labor rate) to be higher than the U.S. DOT Volpe Center's rate of 2.74 with several organizations having wrap rates over 3.0. In addition to frequently having higher wrap rates, private sector service providers often have higher labor rates than do federal agencies.
While the U.S. DOT Volpe Center's costs are comparable and often favorable, our primary value to our sponsors is that we are a federal center, working for the public good.
The U.S. DOT Volpe Center is a federal resource guided by a deep understanding of federal responsibilities, objectives, and practices. We have institutional knowledge of the global transportation system and diverse stakeholder perspectives. We are fundamentally committed to advancing U.S. DOT's strategic goals and helping sponsors develop and advance transportation systems that best serve the public. As such, we are driven by public interest—not profit.
Frequently Asked Questions
Does the U.S. DOT Volpe Center guarantee its cost estimates?
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 the U.S. DOT Volpe center has no funds of its own, our staff are required to stop work if funds run out or expire.
When do customers pay for U.S. DOT Volpe Center support?
Customers must advance spending authority and cash before work begins. Both spending authority and cash may be advanced incrementally.
How are customer funds advanced to the U.S. DOT Volpe Center?
Funds are advanced to the U.S. DOT Volpe Center upon execution of the agreement under U.S. DOT guidelines. Advances for federal customers are collected via Treasury's Intra-Governmental Payment and Collection System. Advances for non-federal customers are collected via check or wire transfer. Funding amounts can be advanced incrementally.
Can funds for one project be used towards work on another project?
No. Project funds may be used only for the specific project for which the funds were advanced.
Does the U.S. DOT Volpe Center have any preferential pricing practices?
No. All customers are charged in the same manner. We have no "discounts" or other special pricing arrangements.
What happens to unexpended funds on completed projects?
Funds are returned to the customer. Projects are reviewed annually to ensure that funds on completed projects are returned.
Can customers terminate projects and have funds returned to them?
Yes. Customers can terminate projects and request the return of all unexpended funds, after project close-out costs have been covered.
Is the same overhead rate charged for U.S. DOT Volpe Center off-site employees as U.S. DOT Volpe Center on-site employees?
No. Some U.S. DOT Volpe Center employees are based in Washington, D.C., or other locations. Since off-site employees do not occupy office space at the U.S. DOT Volpe Center, the logistics costs for these employees are less than for on-site employees. Hence, the indirect rate for off-site employees is 51 percent, versus 64 percent for on-site employees. The salary rates for off-site employees are based on the prevailing locality rates at their duty locations, which could be more or less than the rate in the Boston metro area.