Government contractor facilities advisor: CAM audit for leased office portfolio
Government contractors rent office space across federal hubs. Think Northern Virginia, Maryland, Huntsville, San Diego, and Colorado Springs. There are dozens more. Their office portfolios are large. Their leases are complex. Most sit in Class A multi-tenant office buildings. The leases are full-service or modified-gross, with operating cost parts built in. Those facility costs flow straight into DCAA-audited indirect cost rates. DCAA is the Defense Contract Audit Agency. An indirect cost rate spreads overhead costs across contracts.
I built CAMAudit to find overcharges in lease papers contractors already hold. CAM means Common Area Maintenance, the shared building costs a tenant pays. For advisors who serve these contractors, a yearly CAM review is solid cost work. It cuts the contractor's costs. It also helps their DCAA standing. This article covers the lease setups contractors face. It covers the CAM overcharge patterns most common in these markets. And it covers how white-label delivery works. White-label means you deliver under your own brand.
Indirect cost rate: In government contracting, an indirect cost rate is the ratio of indirect costs (overhead, G&A, fringe benefits) to a direct cost base (direct labor, direct materials, or total direct costs). The rate is used to allocate indirect costs across government contracts. Facility costs, including CAM charges on commercial office leases, are typically included in the overhead or G&A indirect cost pool. Overcharges that inflate facility cost inflate the indirect cost rate, which is audited by DCAA on cost-reimbursement contracts.
Where these contractors rent
Government contractors fill a specific slice of the office market. Their leases tend to need a few things.
- Lots of space for cleared staff, secure networks, and project teams
- Strong security, which limits which buildings work
- A spot near the government customer, like the Pentagon or a base
- Long terms to spread out SCIF buildout and special infrastructure costs
A SCIF is a Sensitive Compartmented Information Facility. It is a secure room for classified work. These needs push the leases into set buildings in set markets. Think Rosslyn, Tysons Corner, Bethesda, Huntsville Research Park, and Sorrento Valley. Big landlords and property managers run these buildings. They send detailed yearly CAM bills, and the bills can get complex.
A big, skilled landlord does not lower the overcharge risk. These managers use the same billing system across hundreds of tenants. So one method error spreads across a whole portfolio at once. A common one is a management fee on the wrong cost base. Another is a gross-up at the wrong level. A management fee is the landlord's charge to run the building. A gross-up adjusts costs as if the building were full.
How CAM charges hit DCAA cost rates
Federal Acquisition Regulation (FAR) Part 31 sets which costs a contract can cover. FAR 31.202 covers direct costs. FAR 31.203 covers indirect costs. Together they sort facility costs into pools.
The overhead pool comes first. Facility costs like rent, CAM, and utilities go here when they tie to one business unit. Say a contractor has units in separate offices. Each office's rent space cost flows into that unit's overhead pool.
The G&A pool comes next. G&A stands for General and Administrative. Facility costs that do not tie to one unit go here. For a contractor with one main headquarters, the headquarters cost is often a G&A cost.
| Indirect cost pool | Facility cost | DCAA audit timing |
|---|---|---|
| Overhead | Costs tied to one office | Yearly cost audit |
| G&A | Corporate or HQ costs | Yearly cost audit |
| Fringe | Usually not included | N/A |
DCAA auditors check facility costs during yearly cost audits. Some costs go past what the lease requires. CAM overcharges are one example. The auditor may disallow that extra amount. FAR 31.201-2 backs this. It says allowed costs must be fair and tied to the work. A CAM audit on file shows the contractor checked its costs against the lease. That helps the contractor defend the audit.
The errors we see most in these markets
Most defense contractors cluster in Northern Virginia and Maryland. The buildings there are Class A and Class B, with many tenants. The leases are full-service or modified gross-up. Here are the errors we see most.
Gross-up violation comes up a lot. These leases often have a gross-up rule. It kicks in when the building drops below 90% to 95% full. The rule should protect tenants from high per-foot costs when space sits empty. But it gets applied wrong often. During COVID, many buildings sat well below that level. The rule should have evened out costs then. It often was not used right.
Controllable expense cap violation is common too. Many leases cap how much controllable costs can rise each year. The cap is often 5% to 6%. Landlords sometimes go past it when prices spike. Say a contractor signed a multi-year lease before 2022. Overcharges from 2022 to 2024 may be recoverable under that cap.
Base year error hits modified gross leases. These leases set a base year cost level. That level fixes the tenant's yearly obligation. The error can include costs that should be left out. Or it can use the wrong year-end total. Either way, it raises the tenant's payment for the rest of the lease.
Landlord overhead charges show up as well. Big REITs and property managers sometimes pass on extra costs. That can include regional overhead, asset management fees, and corporate support. A REIT is a company that owns lots of real estate. Standard lease language often does not allow these charges.
"Government contractors are uniquely positioned: they have legal, finance, and compliance infrastructure that can act on CAM audit findings quickly. After testing reconciliation samples through CAMAudit from published audit cases in federal contracting markets, the gross-up and controllable cap violations were the highest-frequency findings." - Angel Campa, Founder, CAMAudit
How to rank which offices to audit first
Say a contractor has 15 offices across three markets. You can rank them. Use the factors below to spot the high-risk ones.
| Priority factor | High-risk sign |
|---|---|
| Yearly rent space cost | Above $500,000 per office |
| Lease type | Modified gross or full service with a cost cap |
| Unreviewed bill years | 3 or more |
| Lease age | Signed 2015 to 2022 |
| Building owner | Large REIT or PE-owned portfolio |
| DCAA audit status | Recent cost audit that looked at facility costs |
An office that scores high on 3 or more factors goes first. A 15-office portfolio usually has 5 to 8 offices that hit this mark.
How white-label delivery works
Here is the advisor flow for a contractor CAM audit.
Collect the documents. Ask the client for the signed lease and all amendments. Ask for this year's CAM bill. Ask for prior-year bills in the look-back window. Contractors keep central lease files for DCAA. So this step is faster than with smaller clients.
Upload and run the audit. Upload the documents to the CAMAudit portal. The CAM checks run on each file. Most uploads run through the full audit for each office.
Review the findings. Check the output against DCAA allowed-cost rules. For each finding, mark it as a direct or indirect cost. That frames the DCAA point right.
Deliver the report. Send the findings report under your firm's brand. Add a short DCAA and FAR note for any finding that touches an indirect cost pool.
Support the dispute. Help the contractor draft a letter to the landlord. Use the lease citations from the CAMAudit report as the proof.
How to price the work
Contractor clients are used to clear scope and clear fees. Two pricing models work well.
Charge a fixed price per office. This fits when the lease files are clean and the bill is standard. The range runs $1,500 to $2,000 per office. The price moves with lease complexity. It moves with the number of prior years. It moves with whether you draft the correction letter.
Charge time and materials with a ceiling. This fits complex leases. Think many amendments, SCIF terms, or odd cost-sharing deals. A ceiling caps the total. It gives you room to work without open-ended billing risk for the client.
Some contractors must document facility cost reviews for DCAA. For them, frame the CAM audit as a facilities cost verification study. That is a normal part of a contractor's cost control records.
Frequently Asked Questions
How do CAM charges affect a government contractor's indirect cost rate?
Government contractors allocate facility costs (including CAM) as indirect overhead expenses in their DCAA-approved indirect cost rate. Occupancy cost is typically a significant component of the overhead or G&A (General and Administrative) indirect cost pool. If the contractor is paying CAM overcharges, those overcharges inflate the indirect cost pool, which increases the indirect cost rate charged to government contracts. Recovering CAM overcharges reduces the indirect cost pool and can improve the contractor's competitive position on cost-plus and T&M contracts.
What DCAA implications arise from discovering a CAM overcharge on a government contractor office lease?
Under FAR 31.201-2 (Determining Allowability), contract costs must be reasonable, allocable, and compliant with applicable contract terms and standards. An overpaid CAM charge that exceeds the lease-contractual amount is arguably not "reasonable" under FAR standards because it exceeds what the tenant is obligated to pay. DCAA auditors who identify facility cost overcharges during incurred cost audits may disallow the excess amount. Proactive CAM audit and recovery documentation demonstrates cost management diligence that supports DCAA engagement.
What types of CAM overcharges are most common in government contractor office leases?
Government contractor office leases in Northern Virginia, Maryland, and other high-density federal contracting markets are typically in Class A and Class B multi-tenant office buildings. The most common overcharges in these lease structures are: gross-up violations (occupancy threshold and expense pool misapplication), controllable expense cap violations, base year errors (especially common in leases signed during high-inflation periods), and landlord overhead charges categorized as building operating expenses.
How does CAM audit interact with a GSA lease for a government contractor tenant?
Government contractors who lease space from the GSA (General Services Administration) rather than private landlords operate under a different lease structure: GSA leases are federal procurement contracts with standardized terms, and the annual operating cost adjustments are governed by the lease and the specific GSA lease solicitation. CAMAudit is designed for private commercial NNN leases, not GSA leases. For contractors in privately-owned commercial buildings (the majority of sublessor arrangements), standard CAM audit applies.
What is the SCIF (Sensitive Compartmented Information Facility) CAM consideration for cleared contractors?
SCIF buildouts and specially constructed secure areas within a leased commercial building sometimes involve cost-sharing arrangements with the landlord where accreditation, construction, and ongoing compliance costs are allocated between the parties. These specialized costs require careful review of the lease to determine what is recoverable CAM and what is borne by the tenant under separate agreement. CAMAudit reviews CAM line items for proper categorization, including whether security system or specialized infrastructure costs are properly classified.
Which government contractor facilities are highest-priority for CAM audit?
Priority by expected finding size: large office locations (above 10,000 SF) in multi-tenant Class A buildings in primary federal contracting markets (Northern Virginia, Maryland suburbs, DC proper, Huntsville, San Diego), locations with 3+ years of unreviewed reconciliations, leases that were negotiated during market disruption (lease terms set during COVID-era vacancy often include complex occupancy adjustments), and locations approaching lease expiration where findings would support renewal negotiation leverage.
How does white-label CAM audit delivery work for a government contractor facilities advisor?
The facilities advisor collects the lease documents and annual CAM reconciliation statements for the client's leased office locations. They upload to the CAMAudit portal; CAM checks produce a findings report with lease citations and dollar variances. The advisor delivers the report under their own firm branding as part of the facilities cost review engagement. The contractor uses the findings to dispute overcharges with the landlord and to document correct occupancy cost in their DCAA indirect cost submissions.