Management Fees for Nonprofit DoD Contractors

Establishment of the profit or management fee paid to a Department of Defense contractor is governed by the Department's weighted guidelines profit policy. The weighted guidelines are used primarily with profit-seeking firms, whose earnings are subject to tax. Consequently a downward adjustment of management fee is necessary for nonprofit organizations receiving such fees. A percentage adjustment is recommended; i.e., the weighted guidelines profit calculation would be multiplied by a percentage factor. The percentage factor should reflect the effective corporation tax rate. The report does not address the additional adjustment presently applied to fees for Federal Contract Research Centers.