Be alert for major nonrecurring costs which should not be used for projection purposes. Schedule overhead expenses by months so that unusual month to month fluctuations can be readily detected and analyzed, if practical. Perform adequate test checks of indirect labor accounts to ascertain that direct type labor is not being charged to overhead accounts. Test sensitive accounts to determine acceptability under Design Contract Compensation Procedures. Examples are contingencies, fines and penalties, contributions, entertainment, bad debts, certain legal expenses, etc. 5.
Review accounts to assure that expenses are allocable to the proposed work.
Make tests to insure that cost data and statements presented by the Contractor agree with accounting records. If there is duplication, the indirect expenses should be removed from the overhead pool as being duplicative in nature. Examine the content of problem areas such as losses on other contracts or ventures, costs applicable to other business ventures of the principals, improper amortization periods, etc. Carefully analyze indirect labor costs. Indirect functions should be understood and correlated with the direct labor in the proposal.