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• 2/7/85 AC 150/5100-14A c. A cost plus a fixed payment proposal should be accompanied by the consultant's estimate. The estimate should detail the direct labor costs by categories of employees, work hours, and hourly rate; overhead; direct nonsalary expenses; and the fixed payment. d. The payment is fixed and does not vary no matter what the costs turn out to be. In most instances, however, a ceiling is applied which establishes an upper limit on the allowable costs. In establishing the upper limit, an allowance for contingencies should be included so that, as such contingencies are encountered, renegotiation of the upper limit will not be necessary. The intent of the upper limit is to ensure that the allowable costs do not exceed an agreed -upon ceiling without prior approval of the sponsor. (If Federal participation is desired in the increased cost, the sponsor must obtain the prior approval of the FAA.) Such contracts should contain provisions that provide for renegotiation of both the upper limit and the fixed payment if the scope of work described in the contract has changed. e. Any increase in costs should be fully justified by the consultant prior to approval by the sponsor. As the consultant is approaching the upper limit and it becomes apparent that the project cannot be completed within that limit, he/she should alert the sponsor. Approval must be obtained before the upper limit is exceeded. f. Overhead charges will vary according to the nature, type, diversity, size of firm, and number/amount of contracts currently held by the firm. The consultant should be prepared to validate the overhead costs with a certified statement from the sponsor's auditor, state's auditor, or consultant's accountant. If the consulting firm has been audited by an agency of the Federal Government within the previous 12 months, the overhead rate determined by this audit may be used. g. Fixed payment is in addition to reimbursement for salary, overhead, and direct nonsalary expenses. The consultant is paid a fixed amount for profit, willingness to serve, and assumption of responsibility. This may be an amount based on the estimated design cost of the project at the time the consultant is engaged and will vary with the scope of the services involved. 27. FIXED LUMP -SUM PAYMENT. a. The fixed lump -sum payment contract is normally used when the scope of work can be clearly and fully defined at the time the agreement for services is prepared. b. The fixed amount of compensation is determined by estimating the allowable costs such as salary, overhead, and direct nonsalary expenses plus a reasonable margin of profit -all expressed as a single lump sum. A lump sum proposal should be accompanied by the consultant's estimate. The estimate should detail the direct labor costs by categories of employees, work hours, and hourly rate; overhead; direct nonsalary expenses; and profit. Chap 4 Par 26 21