How to Complete DD Form 1861: Facilities Capital Cost of Money

To complete DD Form 1861, list your indirect cost pools in the same order they appear on your CASB Cost of Money Form (CASB-CMF) and cost proposal, enter the contract-specific allocation base for each pool by contract year, multiply each base by the corresponding cost of money factor from your CASB-CMF, sum the results to get total contract facilities capital cost of money, and then divide that total by the Treasury rate to derive facilities capital employed. The form travels with your price proposal, and the contracting officer uses it alongside DD Form 1547 to set the profit objective.¹

What to Have in Front of You Before You Start

DD Form 1861 pulls numbers from three other places. If any of them is missing or inconsistent, the form will not tie out.

Your completed CASB-CMF. This business-unit-level form calculates cost of money factors by indirect cost pool. DD Form 1861 applies those factors to a specific contract. It also requires distribution percentages of land, buildings, and equipment that do not appear on the CASB-CMF itself.²
The current Treasury cost of money rate. The Secretary of the Treasury sets a semi-annual rate that multiplies through every FCCOM calculation. For January through June 2026, that rate is 4.125%. DCAA publishes the rates, and they change every six months.³⁴
Your evaluated cost proposal. You need the contract-specific allocation base amounts (direct labor hours, direct labor dollars, machine hours, or whatever base each overhead pool uses) broken out by contract year.
Net book value of facilities capital. Asset records showing the average net book value of tangible and intangible capital assigned to each indirect cost pool. CAS 414 requires this to be an average of beginning and ending balances for the cost accounting period, not a year-end snapshot. A simple average of the two is acceptable unless there was a major fluctuation during the period, in which case a more frequent calculation is needed.⁵

The blank form is available from the Department of Defense Executive Services Directorate at esd.whs.mil.⁶

Filling Out the Form Step by Step

The form works left to right: identify pools, apply allocation bases, multiply through, and derive facilities capital employed. The DFARS completion instructions set the sequence.⁷

Step 1: List Your Overhead Pools

Enter every indirect cost pool and any direct-charging service centers using the same structure that appears on both your cost proposal and your CASB-CMF. If the cost proposal separates manufacturing overhead, engineering overhead, and G&A into distinct pools, DD Form 1861 must mirror that structure. The units of measure for each allocation base have to match across all three documents. Using direct labor hours on the CASB-CMF and direct labor dollars on DD Form 1861 for the same pool will draw an audit question.

Step 2: Enter the Contract Allocation Bases

For each pool, pull the contract-specific allocation base from your evaluated cost breakdown or prenegotiation cost objective. Split the figures out by year when the contract runs across multiple periods. If manufacturing overhead uses direct labor hours and the contract estimates 12,000 hours in year one and 8,000 in year two, those go on the year-one and year-two lines for that pool.

Step 3: Calculate the Cost of Money for the Contract

Multiply each pool’s allocation base by that pool’s cost of money factor from the CASB-CMF. The factor itself was derived by dividing the facilities capital allocated to that pool by its total allocation base, then multiplying by the Treasury rate.⁸ The product for each pool is that pool’s contract facilities capital cost of money for that year. Sum all pools for one year, then sum all years for the total contract figure.

A quick worked example. Say the fabrication overhead pool has a cost of money factor of 0.018 and the contract calls for $600,000 of direct labor allocated to that pool. The cost of money for that pool on this contract is $10,800. Run the same calculation for every remaining pool and add the results.

Step 4: Derive Facilities Capital Employed

The final step converts the total contract cost of money back into a capital-employed figure that flows to DD Form 1547. Divide total contract facilities capital cost of money by the Treasury rate used in Column 1 of your CASB-CMF.⁷ Continuing the example: $10,800 divided by 4.125% is approximately $261,818. That figure moves to DD Form 1547, where the contracting officer applies it to the facilities capital component of the profit objective.

Assets Still Under Construction

Cost of money on capital assets your business unit is building, fabricating, or developing for its own use is handled under CAS 417, not CAS 414. It gets capitalized into the acquisition cost of the asset rather than claimed as a period expense. The Treasury rate still applies, but the investment base is the accumulated cost of the asset during each accounting period.⁹ Once the asset is in service and sits in your indirect cost pool at its capitalized value (with the CAS 417 cost of money folded in), it flows through DD Form 1861 the normal way.

Propose It or Lose It

Completing the form correctly is not enough on its own. FAR 31.205-10 makes cost of money allowable only when it is measured under CAS 414 and the estimated amount is specifically identified and proposed in the cost proposal for the contract. Omit DD Form 1861 from the proposal package and you cannot claim facilities capital cost of money during performance. There is no post-award fix. The same rule applies to CAS 417 cost of money on assets under construction.¹⁰

What Happens After You Submit It

DD Form 1861 is filed as a supporting document inside the price proposal, not separately. The contracting officer will normally route the proposal to the Defense Contract Audit Agency for a forward pricing audit. DCAA treats these as time-sensitive and generally aims to finish them within 45 to 60 days, because they have to be done before negotiations begin.¹¹

Expect the auditor to ask for general ledger detail, depreciation schedules, asset registers, and your CASB Disclosure Statement. They will check that the Treasury rate on the form matches the applicable period, that the overhead pool structure on DD Form 1861 matches both your CASB-CMF and your cost proposal, that net book values tie to accounting records, and that the allocation base figures are consistent with the contract’s estimated level of effort. If they find errors, they issue a report recommending adjustments. The contracting officer is not bound by those recommendations but uses them as a starting point for negotiation.

Getting the Numbers Wrong

If certified cost or pricing data turn out to be inaccurate, incomplete, or not current after award, the government can reduce the contract price by the amount the price was inflated because of the defective data, including any related profit or fee.¹² On top of the price reduction, the government can recover interest on overpayments at the underpayment rate set under 26 U.S.C. 6621(a)(2).

When the defective data was submitted knowingly, the government can also seek a penalty equal to the full amount of the overpayment.¹² An overstated net book value or the wrong Treasury rate on DD Form 1861, if it materially raises the price, can end up costing two to three times the error. Reconcile every figure to source records before certifying.

1
eCFR. 48 CFR 215.404-71-4 – Facilities Capital Employed
2
Acquisition.GOV. PGI 215.404-71-4 Facilities Capital Employed
3
Office of the Law Revision Counsel. 41 USC 7109 – Interest
4
Bureau of the Fiscal Service. Prompt Payment
5
Legal Information Institute. 48 CFR Appendix A to Part 9904.414 – Instructions for Form CASB CMF
6
Executive Services Directorate. DD1861
7
Defense Acquisition Regulations System, DoD. 48 CFR 215.404-71-4 – Facilities Capital Employed
8
eCFR. 48 CFR 9904.414-50 – Techniques for Application
9
Defense Contract Audit Agency (DCAA). Selected Areas of Cost – Cost of Money
10
Acquisition.GOV. FAR 31.205-10 – Cost of Money
11
Defense Contract Audit Agency. Common DCAA Audits: Forward Pricing
12
Acquisition.GOV. FAR 15.407-1 – Defective Certified Cost or Pricing Data