Audit - Safe Harbor Indirect Cost Rate

The Safe Harbor indirect cost rate option is 110% of direct labor with a field rate, when applicable, of 80% of direct labor. Use of safe harbor rate is optional to the firm, and will not be subject to audit. Although the safe harbor rate is not auditable, the WSDOT or local agency agreement is still subject to audit based on the terms and conditions of the respective agreement.

FHWA Pilot Program - Washington State Selected to Participate
WSDOT is one of the ten states selected to participate in the “Safe Harbor” indirect cost rate (ICR) pilot program. FHWA developed the Safe Harbor Program to help remove potential financial barriers that may otherwise prevent or inhibit new, small, and disadvantaged architectural and engineering (A/E) consulting firms from entering the Federal-aid Highway Program (FAHP) funded State Administered engineering services market.

Firms performing work under agreements funded by federal grants are required to account for and bill costs in accordance with the Federal Cost Principles, 48 CFR Part 31 (FARs). Many of the new and/or small firms are unable to abide by these regulations, therefore, the Program will allow firms time to develop a cost history and implement the proper internal controls, accounting systems, and policies to become FAR compliant, while still being able to compete for and contract with state and local agencies on FAHP-funded projects. Safe Harbor provides eligible firms, who opt to use this program, with an indirect cost rate (ICR) for use in the billing rates until they have developed their own ICR.


Washington State Continuation of the Safe Harbor Program
Although the pilot program has been extended to July 31, 2017, through coordination with our local FHWA, WSDOT will continue to administer the Safe Harbor Program indefinitely in Washington State.

Who can qualify to use this Safe Harbor rate?

  • New and/or small A/E firms that have not had a FAR compliant indirect cost rate in the past 
  • Firms that are new to working with the government

When may the Safe Harbor rate apply?

  • Primes and sub-consultants, for use on WSDOT and local agency consulting agreements
  • The safe harbor rate may be applied to new agreements and new task orders
  • The WSDOT Internal Audit Office will be responsible for determining whether a firm is eligible to use the Safe Harbor rate

Steps to join the Safe Harbor Program

(Safe Harbor Document Checklist) (pdf 355 kb)

  • Complete the Timekeeping Training and provide the training certificate to WSDOT Audit.
  • Read the Pathway to Compliance (docx 30 kb) to ensure your firm can eventually meet the requirements to provide a FAR-compliant Indirect Cost Rate. As part of the Pathway to Compliance, firms entering the Safe Harbor Program agree to implement an accounting system capable of accumulating and tracking direct/indirect labor and other costs by contract, segregating indirect costs, and removing unallowable costs. We have also developed a Safe Harbor Program Timeline (pdf 492 kb) that outlines the typical milestones a firm may encounter.

After deciding to join the Safe Harbor Program, please submit the following completed documents to the WSDOT Internal Audit Office at ElterJ@wsdot.wa.gov:

Safe Harbor Indirect Cost Rate Certification Form (docx 18 kb)

Please contact the WSDOT Internal Audit Office, at 360-705-7799 or 360-705-7003 to determine what you should provide for the following:

  • Representative sampling of timesheets
  • Employee payroll register and/or proof of draws (depending on business structure) 

To facilitate the process, please schedule a meeting with the WSDOT Internal Audit Office.