Global Withholding

Costpoint now enables you to enter and track global withholding on contracts.

In accordance with DFAR regulation 252.242-7005, government contractors must have business systems that are in compliance with the Department of Defense. If a Defense Contract Audit Agency (DCAA) audit finds a deficiency, the contractor is potentially subject to payment withholding on all invoices. It is the contractor’s responsibility to withhold the percentage specified by the contracting officer.  

Such withholding applies to interim payments under cost-reimbursement contracts, incentive type contracts, time-and-materials contracts, and performance-based payments. After the deficiencies are corrected, the contracting officer discontinues withholding of payments and authorizes the contractor to bill for monies previously withheld.

The DFAR regulation that this enhancement addresses is specific to DoD contracts, but can be made to apply to contracts with other government agencies as well.

See the "Enable Global Withholding" topic for more information.

Withholding Calculations

The billing withholding calculation is performed for all selected projects for which bills are being calculated that have the Subject to Withholding check box selected on the Global Withholding tab of the Manage Project Billing Information screen. The calculation is based on the billing withholding code assigned to each project on the Manage Project Billing Information screen.

Withholding is always calculated based only on the current total bill amount (before retainage or withholding) with no YTD or ITD true-ups. Retainage is not deducted from the amount before the withholding is calculated, and no withholding is done on sales tax or Other Charges amounts.

Withholding amounts can be reduced if a Maximum Withholding Percentage other than 100% is specified for the withholding code. See the documentation for the Maximum Total Percentage field on the Manage Billing Withholding codes screen for more information.

Withholding amounts can be edited on the Detail subtask of the Manage Standard Bills screen, in the same way that retainage can be edited.

Example #1

Total billed amount on current bill (before retainage or withholdings): $150,000.00

Retainage: 5% of total billed

Withholding: 10%, subject to a 20% maximum withholding

Calculation

Retainage = $150,000 x .05 = $7500.00

Withholding = $150,000 x .10 = $15,000.00

Withholding maximum verification: $150,000 x .20 = $30,000.00 maximum amount

Total retainage + withholding = $7500 + $15,000 = $22,500.00

$22,500.00 is less than $30,000.00 maximum, so no reduction of withholding is required.

The final withholding amount is $15,000.00.

Example #2

Total billed amount on current bill (before retainage or withholdings): $150,000.00

Retainage: 5% of total billed

Withholding:10%, subject to a 12% maximum withholding

Calculation

Retainage = $150,000 x .05 = $7,500.00

Withholding = $150,000 x .10 = $15,000.00

Withholding maximum verification: $150,000 x .12 = $18,000.00 maximum amount

Total retainage + withholding = $7500 + $15,000 = $22,500.00

$22,500.00 is greater than the $18,000.00 maximum, so withholding must be reduced by $4,500.00 (as long as that does NOT make the withholding negative).  

Final withholding amount is $15,000.00 - $4,500.00 = $10,500.00.

Example #3

Total billed amount on current bill (before retainage or withholdings): $150,000.00

Retainage:15% of total billed

Withholding: 10%, subject to a 12% maximum withholding

Calculation

Retainage = $150,000 x .15 = $22,500.00

Withholding = $150,000 x .10 = $15,000.00

Withholding maximum verification:  $150,000 x .12 = $18,000.00 maximum amount

Total retainage + withholding = $22,500 + $15,000 = $37,500.00

$37,500.00 is greater than the $18,000.00 maximum, so withholding must be reduced by $19,500.00 (as long as that does not make the withholding negative).  

Final withholding amount is calculated as $15,000.00 - $19,500.00 = -$4,500.00.  However, withholding cannot be negative, so withholding is reduced to 0.   

Retainage is not affected, and remains at the $22,500.00 amount, even though this is higher than the overall 12% maximum withholding percentage.

Retainage is never reduced by the maximum withholding percentage calculation.

Withholding Release Calculations

Costpoint calculates a current and an ITD withholding release amount, in billing currency and in functional currency, for projects whose invoices are being calculated, when the following conditions are met:

• The Release Withholdings check box is selected on the Calculate Standard Bills screen,
• The project is set up with the Subject to Withholding box selected on the Manage Project Billing Information screen,
• The billing withholding code assigned to the project on the Manage Project Billing Information screen falls into the range of withholding codes selected for withholding release on the Calculate Standard Bills screen, and
• The project has a positive net billing withholding amount in Billing History, calculated as ITD billing withholding minus ITD withholding release for posted bills.

Any calculated withholding release amount is added to the calculated standard bill as a separate line item, designated Withholding Release.  

Manual edits may be needed to achieve the desired withholding release amounts if prior withholding amounts were limited by the maximum percentage calculation. See the documentation for the Maximum Total Percentage field on the Manage Billing Withholding codes screen for more information.

Example #1

Total prior amount withheld in billing history: $10,000.00

Total prior withholding amount released in billing history: $0.00

Percent to release (selected on the Calculate Billings screen): 50%

Calculation

Withholding release amount = $10,000.00 x .5 = $5,000.00

Example #2

Total prior amount withheld in billing history: $56,000.00

Total prior withholding amount released in billing history: $28,000.00

Percent to release (selected on the Calculate Standard Billings screen): 100%

Calculation

Withholding release amount = ($56,000.00 - $28,000.00)  x 1.00 = $28,000.00

Notes Applicable to Both Withholding Release Calculation Examples

The calculation uses the net of amounts for withholding transaction type and withholding release transaction type in the BILLING_SUM table to derive the total prior withheld amount. The withholding release amount cannot exceed the total of the prior net withholdings. Withholding release is not calculated on the unposted current withholding amount on the current bill, but only on posted amounts in billing history. (The assumption is that, if a change is needed in the withholding percentage (based on the assigned withholding code), you have already changed the withholding code in the Manage Project Billing Information screen.)

The withholding release can appear on the same bill with regular withholding.