What is a FAR overhead rate?
Technically known as a firm’s “indirect cost rate,” the more familiarly known “overhead rate” is the percentage of general expenses that consultants can bill to contracting government agencies. More specifically, it is the ratio of allowable indirect costs to total allocable direct labor costs. What does a FAR overhead rate include? Overhead is the sum of a firm’s indirect costs. A firm’s FAR overhead rate is the ratio of indirect costs to direct labor costs, based upon provisions in the Federal Acquisition Regulation and Cost Accounting Standards. Why do I need it audited? Government agencies base reimbursements to firms on their audited FAR overhead rates.