U.S. Army Corps of Engineers: Building Overhead Costs into Projects and Customers' Views on Information Provided

A letter report issued by the Government Accountability Office with an abstract that begins "The U.S. Army Corps of Engineers (Corps) uses a multistep process to build overhead costs into projects. At the foundation of this process, Corps policy establishes two categories of costs to calculate overhead--general and administrative overhead expenses associated with district administrative offices, such as resource management, and technical overhead expenses associated with district technical offices, such as engineering. Using these two categories as a starting point, the Corps next calculates overhead rates as part of its annual budget process. Specifically, each district administrative and technical office develops operating budgets with overhead estimates, which are then consolidated and routed through district and division management, resulting in a final division-wide operating budget and overhead rates. The Corps then bills projects for overhead costs based on the number of hours its staff charge to projects. Overhead charges are not applied to hours worked by contracted labor, which represent a substantial amount of work. The Corps reports that it contracts out most of its design work and all of its construction work to private sector entities, such as architectural and engineering firms and construction companies. Finally, the Corps periodically monitors overhead costs and makes any necessary adjustments such as changing overhead rates, reducing expenditures, or providing rebates to customers. The Corps is able to monitor overhead because it tracks overhead costs separately from other project costs in its financial management system through specific overhead accounting codes.