GovCon Wednesday’s
A Guide for Government Contractors Managing Change
Estimated Read Time: 8 minutes
If you’re a government contractor working under cost-type or T&M contracts, your indirect costs rarely stay the same from January to December. New hires, infrastructure upgrades, and evolving fringe benefits can all disrupt your original cost assumptions.
The good news? Your Provisional Billing Rate (PBR) isn’t set in stone.
In this article Part 9 of VSINGH CPA’s 10-part series on indirect rate strategy we’ll cover how and when you can update your PBR during the fiscal year, why it matters, and how to avoid billing and compliance pitfalls in the process.
Mid-Year Adjustments Are Allowed Under FAR 42.704
FAR 42.704 gives contracting officers and DCAA the authority to revise provisional billing rates as needed when:
The contractor’s cost experience or expected conditions change significantly
Updated cost data becomes available
A contractor requests an adjustment due to a material shift in operations
These revisions are not automatic. You must submit documentation that justifies the new rate usually in the form of updated projections or actual cost data year-to-date. The assigned DCAA auditor or Administrative Contracting Officer (ACO) will review your submission and either approve the revised rate or recommend modifications.
What Triggers a Mid-Year Update?
Here are common scenarios that may justify revising your PBR mid-year:
Rapid growth or headcount changes that materially alter fringe or overhead rates
Facility changes, such as opening a new office or shifting to remote work
Adjustments to accounting practices or indirect pool allocations
M&A activity that brings in new contracts, personnel, or cost structures
If any of these apply, it’s in your best interest to initiate a conversation with your contracting officer or DCAA auditor as early as possible.
Why It Matters
An outdated PBR can skew your monthly invoices and increase year-end reconciliation burdens. Here’s how:
Overstated PBRs may result in overbilling the government requiring you to repay funds later and drawing unwanted audit scrutiny.
Understated PBRs can lead to months of under-recovered costs, stressing your cash flow.
By aligning your PBR with real-time costs, you improve billing accuracy, forecast reliability, and audit preparedness.
Best Practices for Submitting a PBR Revision
Document everything: Keep thorough records of cost changes, justification for rate revisions, and how the new rates were calculated.
Coordinate with stakeholders: Ensure accounting, contracts, and billing teams are aligned on the timing and impact of the revised rate.
Confirm requirements: Check in with your ACO or auditor before submitting to make sure your documentation meets expectations.
What’s Next in the Series?
✅Part 1: Intro to PBR
✅Part 2: Do I Need a PBR? And How Do I Get One Approved?
✅Part 3: What Goes Into a PBR? Breaking Down the Numbers
✅Part 4: How Do I Calculate My Provisional Billing Rate?
✅ Part 5: What Happens After I Submit My PBR?
✅Part 6: Common PBR Mistakes – And How to Avoid Them
✅Part 7: How PBRs Impact My Invoicing and Cash Flow
✅Part 8: Year End ICS
✅ Part 9: Can I Update My PBR During the Year?
🔟Part 10: Are You Audit-Ready? Supporting Your PBR with Documentation
Is your current PBR still serving your business?
If you’re unsure, we can help assess your current indirect rate setup and identify when a mid-year update is warranted.
📩 Reach out to VSINGH CPA for a mid-year PBR review before compliance issues surface.
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