Understanding Variance Pricing

This section discusses:

• Variance rates.

• Variance pricing.

When a contract is awarded, a contractor can bill and recognize revenue for direct costs, indirect costs, and possibly fees associated with the performance of the contract. To calculate the indirect (overhead) costs associated with a government contract, a contractor utilizes provisional pricing rates. Provisional rates are estimates of actual costs that are incurred throughout the life of the contract. Provisional and rates are regulated and approved by the government, but may be subject to change throughout the life of a contract. Rate changes may be initiated by the government or the contractor. To manage rate changes, PeopleSoft Contracts uses PeopleSoft Project Costing's variance pricing functionality.