Transcript Certified Federal Contracts Manager NCMA

Certified Federal Contracts Manager
NCMA
Federal Acquisition Regulation
FAR PARTS: 30-36
https://www.acquisition.gov/far/
Instructor: W. Ryan, Manager
Procurement and Grants Office (PGO)
Office of Policy Oversight and Evaluation
CDC PGO
Feb-April, 2010
Contents
Cost Accounting Standards – Part 30
Contract Cost Principles and Procedures – Part 31
Contract Financing – Part 32
PGO
NCMA
Contract Financing, p. 79
Contract Financing
Considerations: Order of Preference
1. Private financing, no government
guarantee
Private financial institution may
submit a loan guarantee to
the Federal Reserve Bank
Dept. of Defense
Dept. of Energy
Dept. of Commerce
Dept. of Revenue
Seven Presidentially designated
guaranteeing agencies
Dept. of Agriculture
General Services Admin.
National Aeronautics and Space
Administration
PGO
Contract Financing
Order of Preference Considerations, cont.
2. Progress payments based on incurred costs (see FAR 32)
3. Advanced Payments (least desirable of financing options)
Not measured by performance
Made in anticipation of performance
If granted, specific banking arrangements must be made and the
Government is entitled to the interest accrued.
PGO
FAR Part 30
The Cost Accounting Standards (CAS) Administration
Cost Accounting Basics
Overhead -- General & Administrative Costs (G&A) –
Cost of Money – Allocable Costs – Allowable Costs –
Home Office – Direct – Indirect – Cost Accounting
Standards – GAAP – Standard Costing
GENERAL AND ADMINISTRATIVE COSTS (Upper management)
OVERHEADS (HEAT, LIGHT, RENT, DEPRECIATION, PROP TAX,
ETC.)
Contract
Contract
Contract
Contract
Contract
Cost Accounting Basics
Accountants struggle with the classification of values.
One Professor at Pace U, perhaps the Foremost
Accounting program in the world, has argued that
Accounting belongs in the Faculty of Philosophy, not
Business
Wherever Accounting belongs academically, when
applied to Government contracts, accounting fictions
can yield very real costs and profits.
Cost Accounting Basics
Accounting Regulatory Bodies:
• American Institute of Certified Public Accountants
The first law establishing the CPA designation was in New York on April 17, 1896
• Securities and Exchange Commission
• Financial Accounting Standards Board -- AICPA, SEC,
INDUSTRY
• Internal Revenue Service
• Cost Accounting Standards Board (Only on
Government Contracts)
• State and Foreign Regulatory Boards
Cost Accounting Basics
Generally Accepted Accounting Principles (GAAP) derive
from the AICPA Standards and FASB Rules
Securities and Exchange Commission:
The SEC has statutory authority to establish financial
accounting and reporting standards for publicly held
companies under the Securities Exchange Act of 1934.
Throughout its history, however, the Commission’s
policy has been to rely on the private sector for this
function to the extent that the private sector
demonstrates ability to fulfill the responsibility in the
public interest.
Cost Accounting Basics
Virtually all of the emphasis on Accounting derives from
the regulation of public statements, so that investors
and lenders can gain a true picture of the profitability of
a company and its future prospects.
Cost Accounting was not neglected entirely, but was only
of interest to the regulatory bodies in how it affected
profitability and the valuation of assets. One segment
of the CPA examination, a very difficult segment, deals
with industrial cost accounting
Cost Accounting Basics
Cost Accounting is of great interest to the US
Government, since the negotiated price of contracts is
often based on cost. In addition, the consideration for
many contract modifications is based on costs, and
there are many cost reimbursable contracts written.
Determining Costs could be an extremely complicated
process, and the cost determination could have a
direct affect on the price of the product or service.
Cost Accounting Basics
During the 1960s, Admiral Hyman G. Rickover, father of
the nuclear submarine program, recognized the fact
that the lack of cost accounting standards prevented
the Navy from negotiating on a consistent, fair basis
with its contractors.
Due largely to his influence, the Cost Accounting
Standards Board was established in 1970
Cost Accounting Basics
The original CASB was established in 1970 as an agency of Congress in accordance
with a provision of Public Law 91-379. It was authorized to (1) promulgate cost
accounting standards designed to achieve uniformity and consistency in the cost
accounting principles followed by defense contractors and subcontractors under
Federal contracts in excess of $100,000 and (2) establish regulations to require
defense contractors and subcontractors, as a condition of contracting, to disclose
in writing their cost accounting practices, to follow the disclosed practices
consistently and to complywith duly promulgated cost accounting standards.
b. The original CASB promulgated 19 standards and associated rules, regulations and
interpretations. It went out of existence on September 30, 1980.
c. On November 17, 1988, President Reagan signed Public Law 100-679 which
reestablished the CASB. The new CASB is located within the Office of Federal
Procurement Policy (OFPP) which is under the Office of Management and Budget
(OMB). The CASB consists of five members: the Administrator of OFPP who is the
Chairman and one member each from DoD, GSA, industry and the private sector
(generally expected to be from the accounting profession).
Cost Accounting Basics
Simply:
If a contract is above a certain dollar value or the total
value of smaller contracts exceed that value,
companies become subject to CAS.
$50 million makes the company subject to full CAS
$7.5 million makes the company subject to modified CAS
A “CAS Covered Contract” is a contract arising from FAR
part 15
Cost Accounting Basics
Disclosure Statement (FORM CASB DS-2 (REV 10/94) )
• A comprehensive description of cost accounting
methodology.
• Rigorous Process
• The Disclosure Statement must be approved by the
Cognizant Federal Agency Official (CFAO) – usually a
Contracting Officer, sometimes an Administrative
Contracting Officer .
• Any changes have to be negotiated based on cost
impact, audited and agreed-to by the CFAO
Cost Accounting Standards
Administration 30.000
30.000 Scope of part.
This part describes policies and procedures for applying the Cost Accounting
Standards Board (CASB) rules and regulations (48 CFR Chapter 99
(FAR Appendix)) to negotiated contracts and subcontracts. This part does
not apply to sealed bid contracts or to any contract with a small business
concern (see 48 CFR 9903.201-1(b) (FAR Appendix) for these and other
exemptions).
PGO
30.001 Definitions.
“Affected CAS-covered contract or subcontract” means a contract or
subcontract subject to Cost Accounting Standards (CAS) rules and
regulations for which a contractor or subcontractor—
(1) Used one cost accounting practice to estimate costs and a changed
cost accounting practice to accumulate and report costs under the
contract or subcontract; or
(2) Used a noncompliant practice for purposes of estimating or
accumulating and reporting costs under the contract or subcontract.
“Cognizant Federal agency official (CFAO)” means the contracting officer
assigned by the cognizant Federal agency to administer the CAS.
PGO
30.001 Definitions.
“Required change” means—
(1) A change in cost accounting practice that a contractor is required to
make in order to comply with applicable Standards, modifications or
interpretations thereto, that subsequently becomes applicable to an
existing CAS-covered contract or subcontract due to the receipt of
another CAS-covered contract or subcontract; or
(2) A prospective change to a disclosed or established cost accounting
practice when the CFAO determines that the former practice was in
compliance with applicable CAS and the change is necessary for the
contractor to remain in compliance.
“Unilateral change” means a change in cost accounting practice from one
compliant practice to another compliant practice that a contractor with a
CAS-covered contract(s) or subcontract(s) elects to make that has not been
deemed a desirable change by the CFAO and for which the Government
will pay no aggregate increased costs.
PGO
Subpart 30.1—General
30.101 Cost Accounting Standards.
(a) Public Law 100-679 (41 U.S.C. 422) requires certain contractors and
subcontractors to comply with Cost Accounting Standards (CAS) and to
disclose in writing and follow consistently their cost accounting practices.
(b) Contracts that refer to this Part 30 for the purpose of applying the policies,
procedures, standards and regulations promulgated by the CASB pursuant
to Public Law 100-679, shall be deemed to refer to the CAS, and any other
regulations promulgated by the CASB (see 48 CFR Chapter 99), all of
which are hereby incorporated in this Part 30.
PGO
30.101 Cost Accounting Standards.
(c) The Appendix to the FAR loose-leaf edition contains—
(1) Cost Accounting Standards and Cost Accounting Standards Board
Rules and Regulations Recodified by the Cost Accounting Standards
Board at 48 CFR Chapter 99; and
(2) The following preambles:
(i) Part I—Preambles to the Cost Accounting Standards Published by
the Cost Accounting Standards Board.
(ii) Part II—Preambles to the Related Rules and Regulations
Published by the Cost Accounting Standards Board.
(iii) Part III—Preambles Published under the FAR System.
PGO
30.101 Cost Accounting Standards,
cont.
(d) The preambles are not regulatory but are intended to explain why the
Standards and related Rules and Regulations were written, and to provide
rationale for positions taken relative to issues raised in the public
comments. The preambles are printed in chronological order to provide an
administrative history.
PGO
Cost Accounting Standards, cont.
A company may be subject to "full" CAS coverage (required to follow all 19
standards), "modified" CAS coverage (required to follow only Standards
401, 402, 405, and 406), or be exempt. A company under "full" coverage is
not subject to a standard where it does not apply (e.g., a company which
does not use standard costing does not have to comply with CAS 407).
"Full" coverage applies only when a company receives either one CAS-covered
contract of US$50 million or more, or a number of smaller CAS-covered
contracts totaling US$50 million. In addition to complying with all 19
standards (where applicable), the company must also file a CAS Disclosure
Statement, which spells out the company's accounting practices (such as if
certain costs are treated as direct contract charges or as part of overhead
expense). There are two versions of the CAS Disclosure Statement: DS-1
applies to commercial companies while DS-2 applies to educational
institutions.
"Modified" coverage applies when a company receives a single CAS-covered
contract of US$7.5 million or more.
PGO
Cost Accounting Standards, cont.
In some instances, a contract may be exempt from CAS standards:
Contracts awarded to small businesses are exempt from CAS, regardless of
contract size
Any contract less than US$7.5 million is exempt, provided the company has
not been awarded a contract greater than US$7.5 million, and also any
contract less than US$650,000 is always exempt
Contracts for commercial items
Contracts awarded under sealed bid procedures, or where "adequate price
competition" was available (the latter meaning where at least two
companies had the ability to bid and perform on a contract, even if only one
bid was later received)
Contracts where the price is set by law or regulation
Contracts awarded to foreign governments
Contracts where performance will be performed entirely outside the United
States (including territories and possessions)
PGO
Subpart 30.2—CAS Program
Requirements
30.201 Contract requirements.
Title 48 CFR 9903.201-1 (FAR Appendix) describes the rules for determining whether a
proposed contract or subcontract is exempt from CAS. Negotiated contracts not
exempt in accordance with 48 CFR 9903.201-1(b) shall be subject to CAS. A CAScovered contract may be subject to either full or modified coverage. The rules for
determining whether full or modified coverage applies are in 48 CFR 9903.201-2
(FAR Appendix).
30.201-3 Solicitation provisions.
(a) The contracting officer shall insert the provision at 52.230-1, Cost Accounting
Standards Notices and Certification, in solicitations for proposed contracts subject to
CAS as specified in 48 CFR 9903.201 (FAR Appendix).
(b) If an award to an educational institution is contemplated prior to July 1, 1997, the
contracting officer shall insert the basic provision set forth at 52.230-1 with its
Alternate I, unless the contract is to be performed by a Federally Funded Research
and Development Center (FFRDC) (see 48 CFR 9903.201-2(c)(5) (FAR Appendix)),
or the provision at 48 CFR 9903.201-2(c)(6) (FAR Appendix) applies.
(c) Insert the provision at FAR 52.230-7, Proposal Disclosure—Cost Accounting Practice
Changes, in solicitations for contracts subject to CAS as specified in 48 CFR
9903.201 (FAR Appendix).
PGO
CAS Program Requirements
30.201-5 Waiver.
The head of the agency—
(1) May waive the applicability of CAS for a particular contract or
subcontract under the conditions listed in paragraph (b) of this
subsection; and
(2) Must not delegate this waiver authority to any official in the agency
below the senior contract policymaking level.
PGO
CAS Program Requirements
30.201-5 Waiver, cont.
(b) The head of the agency may grant a waiver when one of the following
conditions exists:
(1) The contract or subcontract value is less than $15,000,000, and the
head of the agency determines, in writing, that the segment of the
contractor or subcontractor that will perform the contract or
subcontract—
(i) Is primarily engaged in the sale of commercial items; and
(ii) Has no contracts or subcontracts that are subject to CAS.
PGO
CAS Program Requirements
30.201-5 Waiver, cont.
(2) The head of the agency determines that exceptional circumstances
exist whereby a waiver of CAS is necessary to meet the needs of the
agency. Exceptional circumstances exist only when the benefits to be
derived from waiving the CAS outweigh the risk associated with the
waiver. The determination that exceptional circumstances exist must—
(i) Be set forth in writing; and
(ii) Include a statement of the specific circumstances that justify
granting the waiver.
PGO
30.202-6 Responsibilities.
(a) The contracting officer is responsible for determining when a proposed
contract may require CAS coverage and for including the appropriate notice
in the solicitation. The contracting officer must then ensure that the offeror
has made the required solicitation certifications and that required Disclosure
Statements are submitted. (Also see 48 CFR 9903.201-3 and 9903.202
(FAR Appendix).)
(b) The contracting officer shall not award a CAS-covered contract until the
Cognizant Federal Agency Official (CFAO) has made a written
determination that a required Disclosure Statement is adequate unless, in
order to protect the Government's interest, the agency head, on a
nondelegable basis, authorizes award without obtaining submission of the
required Disclosure Statement (see 48 CFR 9903.202-2). In this event, the
contractor shall submit the required Disclosure Statement and the CFAO
shall make a determination of adequacy as soon as possible after the
award.
PGO
30.202-6 Responsibilities, cont.
(c) The cognizant auditor is responsible for conducting reviews of Disclosure
Statements for adequacy and compliance.
(d) The CFAO is responsible for issuing determinations of adequacy and
compliance of the Disclosure Statement.
30.202-8 Subcontractor Disclosure Statements.
(a) When the Government requires determinations of adequacy of
subcontractor disclosure statements, the CFAO for the subcontractor shall
provide this determination to the CFAO for the contractor or next higher-tier
subcontractor. The higher-tier CFAO shall not change the determination of
the lower-tier CFAO.
(b) Any determination that it is impractical to secure a subcontractor’s
Disclosure Statement must be made in accordance with 48 CFR 9903.2022 (FAR Appendix).
PGO
Cost Accounting Standards
30.3 CAS Rules and Regulations [Reserved]
30.4 Cost Accounting Standards [Reserved]
30.5 Cost Accounting Standards for Educational Institutions [Reserved]
PGO
Cost Accounting Standards
Standard Title
401 Consistency in Estimating, Accumulating and Reporting Costs
402 Consistency in Allocating Costs Incurred for the Same Purpose
403 Allocation of Home Office Expenses to Segments
404 Capitalization of Tangible Assets
405 Accounting for Unallowable Costs
406 Cost Accounting Period
407 Use of Standard Costs for Direct Material and Direct Labor
408 Accounting for Costs of Compensated Personal Absence
409 Depreciation of Tangible Capital Assets
410 Allocation of Business Unit General and Administrative Expenses to Final
Cost Objectives
411 Accounting for Acquisition Costs of Material
412 Composition and Measurement of Pension Costs
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Cost Accounting Standards
413 Adjustment and Allocation of Pension Cost
414 Cost of Money as an Element of the Cost of Facilities Capital
415 Accounting for the Cost of Deferred Compensation
416 Accounting for Insurance Cost
417 Cost of Money as an Element of the Cost of Capital Assets Under
Construction
418 Allocation of Direct and Indirect Costs
419 unused
420 Accounting for Independent Research and Development Costs and Bid
and Proposal Costs (IR&D and B&P)
PGO
Subpart 30.6—CAS Administration
30.601 Responsibility.
(a) The CFAO shall perform CAS administration for all contracts and
subcontracts in a business unit, even when the contracting officer retains
other administration functions. The CFAO shall make all CAS-related
required determinations and findings (see Subpart 1.7) for all CAS-covered
contracts and subcontracts, including—
(1) Whether a change in cost accounting practice or noncompliance has
occurred; and
(2) If a change in cost accounting practice or noncompliance has occurred,
how any resulting cost impacts are resolved.
PGO
30.601 Responsibility.
(b) Within 30 days after the award of any new contract subject to CAS, the
contracting officer making the award shall request the CFAO to perform
administration for CAS matters (see Subpart 42.2). For subcontract awards,
the contractor awarding the subcontract must follow the procedures at
52.230-6(l), (m), and (n).
(c) In performing CAS administration, the CFAO shall request and consider the
advice of the auditor as appropriate (see 1.602-2).
PGO
30.602 Materiality.
(a) In determining materiality, the CFAO shall use the criteria in 48 CFR 9903.305 (FAR
Appendix).
(b) A CFAO determination of materiality—
(c) When the CFAO determines the cost impact is immaterial, the CFAO shall—
(1) Make no contract adjustments and conclude the cost impact process;
(2) Document the rationale for the determination; and
PGO
30.602 Materiality.
(3) In the case of noncompliance issues, inform the contractor that—
(i) The noncompliance should be corrected; and
(ii) If the noncompliance is not corrected, the Government reserves
the right to make appropriate contract adjustments should the cost
impact become material in the future.
(d) For required, unilateral, and desirable changes, and CAS noncompliances,
when the amount involved is material, the CFAO shall follow the applicable
provisions in 30.603, 30.604, 30.605, and 30.606.
PGO
30.606 Resolving cost impacts.
(a) General.
(1) The CFAO shall coordinate with the affected contracting officers before
negotiating and resolving the cost impact when the estimated cost
impact on any of their contracts is at least $100,000. However, the
CFAO has the sole authority for negotiating and resolving the cost
impact.
(2) The CFAO may resolve a cost impact attributed to a change in cost
accounting practice or a noncompliance by adjusting a single contract,
several but not all contracts, all contracts, or any other suitable method.
(3) In resolving the cost impact, the CFAO—
(i) Shall not combine the cost impacts . . .
(4) For desirable changes, the CFAO should consider the estimated cost
impact of associated management actions on contract costs in
resolving the cost impact.
PGO
30.606 Resolving cost impacts.
(b) Negotiations. The CFAO shall—
(1) Negotiate and resolve the cost impact on behalf of all Government
agencies; and
(2) At the conclusion of negotiations, prepare a negotiation memorandum
and send copies to the auditor and affected contracting officers.
PGO
30.607 Subcontract administration.
When a negotiated CAS price adjustment or a determination of noncompliance
is required at the subcontract level, the CFAO for the subcontractor shall
furnish a copy of the negotiation memorandum or the determination to the
CFAO for the contractor of the next higher-tier subcontractor. The CFAO of
the contractor or the next higher-tier subcontractor shall not change the
determination of the CFAO for the lower-tier subcontractor. If the
subcontractor refuses to submit a GDM or DCI proposal, remedies are
made at the prime contractor level.
PGO
Part 31—Contract Cost Principles and
Procedures
31.000 Scope of part.
This part contains cost principles and procedures for—
(a) The pricing of contracts, subcontracts, and
modifications to contracts and subcontracts whenever
cost analysis is performed (see 15.404-1(c)); and
(b) The determination, negotiation, or allowance of costs
when required by a contract clause.
31.101 Objectives.
In recognition of differing organizational characteristics, the cost principles and
procedures in the succeeding subparts are grouped basically by
organizational type; e.g., commercial concerns and educational institutions.
•
The overall objective is to provide that, to the extent practicable, all
organizations of similar types doing similar work will follow the same cost
principles and procedures. To achieve this uniformity, individual deviations
concerning cost principles require advance approval of the agency head or
designee.
•
Class deviations for the civilian agencies require advance approval of the
Civilian Agency Acquisition Council. . .
•
Class deviations for the Department of Defense require advance approval of
the Director of Defense Procurement, Office of the Under Secretary of
Defense for Acquisition, Technology, and Logistics.
PGO
31.102 Fixed-price contracts.
The applicable subparts of Part 31 shall be used in the pricing of fixed-price
contracts, subcontracts, and modifications to contracts and subcontracts
whenever
(a) cost analysis is performed, or
(b) a fixed-price contract clause requires the determination or negotiation of
costs. However, application of cost principles to fixed-price contracts and
subcontracts shall not be construed as a requirement to negotiate
agreements on individual elements of cost in arriving at agreement on the
total price.
The final price accepted by the parties reflects agreement only on the
total price. Further, notwithstanding the mandatory use of cost principles,
the objective will continue to be to negotiate prices that are fair and
reasonable, cost and other factors considered.
PGO
31.103 Contracts with commercial
organizations.
This category includes all contracts and contract modifications for
• supplies,
• services, or
• experimental,
• developmental, or research work negotiated with organizations other than
educational institutions (see 31.104),
• construction and architect-engineer contracts (see 31.105),
State and local governments (see 31.107) and nonprofit organizations (see
31.108) on the basis of cost.
PGO
31.103 Contracts with commercial organizations.
b) In addition, the contracting officer shall incorporate the
cost principles and procedures in Subpart 31.2 and agency
supplements by reference in contracts with commercial
organizations as the basis for—
(1) Determining reimbursable
costs . . .
(2) Negotiating indirect cost rates
(see Subpart 42.7);
(3) Proposing, negotiating, or
determining costs under
terminated contracts (see
49.103 and 49.113);
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(4) Price revision of fixed-price
incentive contracts (see 16.204
and 16.403);
(5) Price redetermination of price
redetermination contracts (see
16.205 and 16.206); and
(6) Pricing changes and other
contract modifications.
Unallowable Costs
Specific Costs Not Allowable.— (1) The following costs are not allowable
under a covered contract:
(A) Costs of entertainment, including amusement, diversion, and social
activities and any costs directly associated with such costs (such as tickets to
shows or sports events, meals, lodging, rentals, transportation, and gratuities).
(B) Costs incurred to influence (directly or indirectly) legislative action on any
matter pending before Congress, a State legislature, or a legislative body of a
political subdivision of a State.
(C) Costs incurred in defense of any civil or criminal fraud proceeding or similar
proceeding (including filing of any false certification) brought by the United
States where the contractor is found liable or has pleaded nolo contendere to a
charge of fraud or similar proceeding (including filing of a false certification).
PGO
Unallowable Costs
(D) Payments of fines and penalties resulting from violations of, or failure to
comply with, Federal, State, local, or foreign laws and regulations, except when
incurred as a result of compliance with specific terms and conditions of the
contract or specific written instructions from the contracting officer authorizing in
advance such payments in accordance with applicable provisions of the Federal
Acquisition Regulation.
(E) Costs of membership in any social, dining, or country club or organization.
(F) Costs of alcoholic beverages.
(G) Contributions or donations, regardless of the recipient.
(H) Costs of advertising designed to promote the contractor or its products.
(I) Costs of promotional items and memorabilia, including models, gifts, and
souvenirs.
(J) Costs for travel by commercial aircraft which exceed the amount of the
standard commercial fare.
PGO
Unallowable Costs
(K) Costs incurred in making any payment (commonly known as a “golden
parachute payment”) which is— (i) in an amount in excess of the normal
severance pay paid by the contractor to an employee upon termination of
employment; and
(ii) is paid to the employee contingent upon, and following, a change in
management control over, or ownership of, the contractor or a substantial
portion of the contractor’s assets.
(L) Costs of commercial insurance that protects against the costs of the
contractor for correction of the contractor’s own defects in materials or
workmanship.
(M) Costs of severance pay paid by the contractor to foreign nationals employed
by the contractor under a service contract performed outside the United States,
to the extent that the amount of severance pay paid in any case exceeds the
amount paid in the industry involved under the customary or prevailing practice
for firms in that industry providing similar services in the United States, as
determined under the Federal Acquisition Regulation.
PGO
Unallowable Costs
(N) Costs of severance pay paid by the contractor to a foreign national
employed by the contractor under a service contract performed in a foreign
country if the termination of the employment of the foreign national is the result
of the closing of, or the curtailment of activities at, a United States military facility
in that country at the request of the government of that country.
(O) Costs incurred by a contractor in connection with any criminal, civil, or
administrative proceeding commenced by the United States or a State, to the
extent provided in subsection (k).
(P) Costs of compensation of senior executives of contractors for a fiscal year,
regardless of the contract funding source, to the extent that such compensation
exceeds the benchmark compensation amount determined applicable for the
fiscal year by the Administrator for Federal Procurement Policy under section 39
of the Office of Federal Procurement Policy Act (41 U.S.C. 435).
PGO
31.104 Contracts with educational
institutions.
This category includes all contracts and contract modifications for research and
development, training, and other work performed by educational institutions.
(a) The contracting officer shall incorporate the cost principles and procedures
in Subpart 31.3 by reference in cost-reimbursement contracts with
educational institutions as the basis for—
(1) Determining reimbursable costs under the contracts and costreimbursement subcontracts thereunder performed by educational
institutions;
(2) Negotiating indirect cost rates; and
(3) Settling costs of cost-reimbursement terminated contracts (see
Subpart 49.3 and 49.109-7).
PGO
31.104 Contracts with educational
institutions.
(b) The cost principles in this subpart are to be used as a guide in evaluating
costs in connection with negotiating fixed-price contracts and termination
settlements.
OMB CIRCULAR A-21, ENTITLED "PRINCIPLES FOR DETERMINING
COSTS APPLICABLE TO GRANTS, CONTRACTS AND OTHER
AGREEMENTS WITH EDUCATIONAL INSTITUTIONS", SETS FORTH
THE GOVERNING RULES FOR DETERMINING THE VARIOUS COSTS
THAT CAN BE CHARGED TO GRANTS AND CONTRACTS, AND FOR
ESTABLISHING WHETHER THOSE COSTS MAY BE CHARGED
DIRECTLY, OR CHARGED THROUGH THE APPLICATION OF THE
INSTITUTION'S FACILITIES AND ADMINISTRATION (INDIRECT COST)
RATE. INCORPORATED IN THE CIRCULAR SPECIFICALLY, AND BY
REFERENCE AS WELL, ARE FOUR COST ACCOUNTING STANDARDS
(CAS) WHICH UNIVERSITIES ARE REQUIRED TO COMPLY WITH.
PGO
Unallowable Costs Ed. Institutions
1. Advertising and public relations costs
2. Alcoholic beverages
3. Alumni/ae activities
4. Bad debts
5. Civil defense costs
6. Commencement and convocation costs
7. Communication costs
8. Compensation for personal services
9. Contingency provisions
10. Deans of faculty and graduate schools
11. Defense and prosecution of criminal and civil proceedings, claims,
appeals and
patent infringement
12. Depreciation and use allowances
13. Donations and contributions
14. Employee morale, health, and welfare costs and credits
15. Entertainment costs
16. Equipment and other capital expenditures
17. Executive lobbying costs
PGO
Unallowable Costs Ed. Institutions
18. Fines and penalties
19. Goods or services for personal use
20. Housing and personal living expenses
21. Insurance and indemnification
22. Interest, fund raising, and investment management costs
23. Labor relations costs
24. Lobbying
25. Losses on other sponsored agreements or contracts
26. Maintenance and repair costs
27. Material costs
28. Memberships, subscriptions and professional activity costs
29. Patent costs
30. Plant security costs
31. Preagreement costs
32. Professional services costs
33. Profits and losses on disposition of plant equipment or other capital
assets
PGO
Unallowable Costs Ed. Institutions
34. Proposal costs
35. Rearrangement and alteration costs
36. Reconversion costs
37. Recruiting costs
38. Rental cost of buildings and equipment
39. Royalties and other costs for use of patents
40. Sabbatical leave costs
41. Scholarships and student aid costs
42. Selling and marketing
43. Severance pay
44. Specialized service facilities
45. Student activity costs
46. Taxes
47. Transportation costs
48. Travel costs
49. Termination costs applicable to sponsored agreements
50. Trustees
PGO
NCMA
Architect, Engineering, and Construction Service
P. 59
Architect, Engineering, and Construction
Services Specialized Language
Design – “Defining a construction requirement, including the functional
relationships to be use: Producing the technical specifications and
drawings; and preparing the construction cost estimate.”
Design-bid-build – “The traditional construction delivery method where design
and construction are sequential and contracted for separately with two
contracts and two contractors.”
Design-build – “Combining the design and construction requirements in a single
contract with one contractor.”
Two-phase design-build – “A selection procedure that selects a number of
offerors based on qualifications in the first phase to submit detailed
proposals for evaluation and award in the second phase.”
PGO
7.2.1 Architect, Engineering Services
•
Professional services of an architectural or engineering nature, as defined
by applicable state law, which the state law requires to be performed by a
registered architect or engineer;
•
Professional architectural or engineering services associated with the
design or construction of real property;
•
Other professional architectural or engineering services related to studies,
investigations, surveying, mapping, soils engineering, construction phase
conceptual design, and similar tasks that require performance by registered
architect, engineer, and their employees; and
•
Professional surveying and mapping services, when the mapping services
are associated with the construction or alteration of real property.
PGO
7.2.2 Construction Services
•
Presolicitation notice. A presolicitation notice contains sufficient detail to
identify the nature, volume, location and schedule for the requirement. The
notices are usually issued well in advance of the invitation to bid in order to
stimulate the interest of the greatest number of prospective bidders.
•
Invitation for bids. The invitation should allow sufficient time for bidders to
perform the many tasks and issues associated with the bid process,
including site inspection, collection of required subcontracting bids,
examination of plans and specifications, and preparation of the required
estimates.
•
Prebid Conferences. Prebid conferences often are held to ensure that all
prospective bidders have a clear and complete understanding of all aspects
of the requirement.
PGO
7.2.2 Construction Services
•
Notice of Award (NOA)
•
Preconstruction Orientation. A preconstruction conference often is held with
the successful offeror, before the construction effort begins, to again ensure
that there is complete understanding of all issues related to the effort.
PGO
FAR 31, cont.
31.105 Construction and architect-engineer
contracts.
31.105 Construction and architectengineer contracts.
(a) This category includes all contracts and contract modifications negotiated
on the basis of cost with organizations other than educational institutions
(see 31.104), State and local governments (see 31.107), and nonprofit
organizations except those exempted under OMB Circular A-122 (see
31.108) for construction management or construction, alteration or repair of
buildings, bridges, roads, or other kinds of real property. It also includes
architect-engineer contracts related to construction projects. It does not
include contracts for vessels, aircraft, or other kinds of personal property.
(b) Except as otherwise provided in (d) of this section, the cost principles and
procedures in Subpart 31.2 shall be used in the pricing of contracts and
contract modifications in this category if cost analysis is performed as
required by 15.404-1(c).
PGO
31.105 Construction and architectengineer contracts.
(c) In addition, the contracting officer shall incorporate the cost principles and
procedures in Subpart 31.2 (as modified by (d) of this section by reference
in contracts in this category as the basis for—
(1) Determining reimbursable costs under cost-reimbursement contracts,
including cost-reimbursement subcontracts thereunder;
(2) Negotiating indirect cost rates;
(3) Proposing, negotiating, or determining costs under terminated
contracts;
(4) Price revision of fixed-price incentive contracts; and
(5) Pricing changes and other contract modifications.
PGO
31.105 Construction and architectengineer contracts.
(d) Except as otherwise provided in this paragraph (d), the allowability of costs
for construction and architect-engineer contracts shall be determined in
accordance with Subpart 31.2.
(1) Because of widely varying factors such as the nature, size, duration,
and location of the construction project, advance agreements as set
forth in 31.109, for such items as home office overhead, partners’
compensation, employment of consultants, and equipment usage
costs, are particularly important in construction and architect-engineer
contracts.
When appropriate, they serve to express the parties’ understanding
and avoid possible subsequent disputes or disallowances.
PGO
31.105 Construction and architectengineer contracts.
(d)(2) “Construction equipment,” as used in this section, means equipment
(including marine equipment) in sound workable condition, either
owned or controlled by the contractor or the subcontractor at any tier,
or obtained from a commercial rental source, and furnished for use
under Government contracts.
(i) Allowable ownership and operating costs shall be determined as
follows:
(A) Actual cost data shall be used when such data can be
determined for both ownership and operations costs for each
piece of equipment, or groups of similar serial or series
equipment, from the contractor’s accounting records.
(B) Predetermined schedules of construction equipment use rates
(e.g., the Construction Equipment Ownership and Operating
Expense Schedule, published by the U.S. Army Corps of
Engineers, industry . . .
PGO
(d)(2)(i) Allowable ownership and operating
costs shall be determined as follows:
(C) When a schedule of predetermined use rates for construction
equipment is used to determine direct costs, all costs of equipment
that are included in the cost allowances provided by the schedule
shall be identified and eliminated from the contractor’s other direct
and indirect costs charged to the contract.
If the contractor’s accounting system provides for site or home
office overhead allocations, all costs which are included in the
equipment allowances may need to be included in any cost input
base before computing the contractor’s overhead rate.
In periods of suspension of work pursuant to a contract clause, the
allowance for equipment ownership shall not exceed an amount
for standby cost as determined by the schedule or contract
provision.
PGO
31.105 Construction and architectengineer contracts.
(d)(3) Costs incurred at the job site incident to performing the work, such as the
cost of superintendence, timekeeping and clerical work, engineering, utility
costs, supplies, material handling, restoration and cleanup, etc., are
allowable as direct or indirect costs, provided the accounting practice used
is in accordance with the contractor’s established and consistently followed
cost accounting practices for all work.
(d)(4) Rental and any other costs, less any applicable credits incurred in
acquiring the temporary use of land, structures, and facilities are allowable.
Costs, less any applicable credits, incurred in constructing or fabricating
structures and facilities of a temporary nature are allowable.
PGO
31.107 Contracts with State, local, and
federally recognized Indian tribal
governments.
(a) Subpart 31.6 provides principles and standards for determining costs
applicable to contracts with State, local, and federally recognized Indian
tribal governments. . . . They apply to all programs that involve contracts
with State, local, and federally recognized Indian tribal governments, except
contracts with—
(1) Publicly financed educational institutions subject to Subpart 31.3; or
(2) Publicly owned hospitals and other providers of medical care subject to
requirements promulgated by the sponsoring Government agencies.
(b) The Office of Management and Budget will approve any other exceptions in
particular cases when adequate justification is presented
PGO
Subpart 31.6—Contracts with State, Local, and
Federally Recognized Indian Tribal Governments
31.603 Requirements.
(a) Contracts that refer to this Subpart 31.6 for determining allowable costs
under contracts with State, local and Indian tribal governments shall be
deemed to refer to, and shall have the allowability of costs determined by
the contracting officer in accordance with, the revision of OMB Circular A-87
which is in effect on the date of the contract.
(b) Agencies are not expected to place additional restrictions on individual
items of cost. However, under 10 U.S.C. 2324(e) and 41 U.S.C. 256(e), the
following costs are unallowable:
PGO
Subpart 31.6—Contracts with State, Local, and
Federally Recognized Indian Tribal Governments
31.603(b) Unallowable
(1) Costs of entertainment, including
amusement, diversion, and social
activities, and any costs directly
associated with such costs (such
as tickets to shows or sports
events, meals, lodging, rentals,
transportation, and gratuities).
(2) Costs incurred to influence
(directly or indirectly) legislative
action on any matter pending
before Congress, a State
legislature, or a legislative body of
a political subdivision of a State.
PGO
(3) Costs incurred in defense of any
civil or criminal fraud proceeding or
similar proceeding (including filing of
any false certification) brought by the
United States where the contractor is
found liable or has pleaded nolo
contendere to a charge of fraud or
similar proceeding (including filing of
a false certification).
Subpart 31.6—Contracts with State, Local, and
Federally Recognized Indian Tribal Governments
31.603(b) Requirements.
(4) Payments of fines and penalties
resulting from violations of, or failure
to comply with, Federal, state, local,
or foreign laws and regulations,
except when incurred as a result of
compliance with specific terms and
conditions of the contract or specific
written instructions from the
contracting officer authorizing in
advance such payments in
accordance with applicable
regulations in the FAR or an
executive agency supplement to the
FAR.
PGO
(5) Costs of any membership in any
social, dining, or country club or
organization.
(6) Costs of alcoholic beverages.
(7) Contributions or donations,
regardless of the recipient.
(8) Costs of advertising designed to
promote the contractor or its
products.
Subpart 31.6—Contracts with State, Local, and
Federally Recognized Indian Tribal Governments
31.603(b) Requirements.
(9) Costs of promotional items and
memorabilia, including models, gifts, and
souvenirs.
(10) Costs for travel by commercial aircraft
which exceed the amount of the standard
commercial fare.
(11) Costs incurred in making any
payment (commonly known as a “golden
parachute payment”) which is
PGO
(12) Costs of commercial insurance that
protects against the costs of the contractor
for correction of the contractor’s own
defects in materials or workmanship.
(13) Costs of severance pay paid by the
contractor to foreign nationals employed
by the contractor under a service contract
performed outside the United States, to
the extent that the amount of the
severance pay paid in any case exceeds
the amount paid in the industry involved
under the customary or prevailing practice.
..
Subpart 31.6—Contracts with State, Local, and
Federally Recognized Indian Tribal Governments
31.603(b) Requirements.
(14) Costs of severance pay paid by the contractor to a foreign national
employed by the contractor under a service contract performed in a foreign
country if the termination of the employment of the foreign national is the
result of the closing of, or curtailment of activities at, a United States facility
in that country at the request of the government of that country.
(15) Costs incurred by a contractor in connection with any criminal, civil, or
administrative proceedings commenced by the United States or a State, to
the extent provided in 10 U.S.C. 2324(k) or 41 U.S.C. 256(k).
PGO
31.109 Advance agreements.
(a) The extent of allowability of the costs covered in this part applies broadly to
many accounting systems in varying contract situations. Thus, the
reasonableness, the allocability and the allowability under the specific cost
principles at Subparts 31.2, 31.3, 31.6, and 31.7 of certain costs may be
difficult to determine. To avoid possible subsequent disallowance or dispute
based on unreasonableness, unallocability or unallowability under the
specific cost principles at Subparts 31.2, 31.3, 31.6, and 31.7, contracting
officers and contractors should seek advance agreement on the treatment
of special or unusual costs and on statistical sampling methodologies at
31.201-6(c). However, an advance agreement is not an absolute
requirement and the absence of an advance agreement on any cost will not,
in itself, affect the reasonableness, allocability or the allowability under the
specific cost principles at Subparts 31.2, 31.3, 31.6, and 31.7 of that cost.
PGO
31.109 Advance agreements.
(b) Advance agreements may be negotiated either before or during a contract
but should be negotiated before incurrence of the costs involved. The
agreements must be in writing, executed by both contracting parties, and
incorporated into applicable current and future contracts. An advance
agreement shall contain a statement of its applicability and duration.
(c) The contracting officer is not authorized by this 31.109 to agree to a
treatment of costs inconsistent with this part. For example, an advance
agreement may not provide that, notwithstanding 31.205-20, interest is
allowable.
(d) Advance agreements may be negotiated with a particular contractor for a
single contract, a group of contracts, or all the contracts of a contracting
office, an agency, or several agencies.
PGO
31.109 Advance agreements.
(e) The cognizant administrative contracting officer (ACO), or other contracting officer
established in Part 42, shall negotiate advance agreements except that an advance
agreement affecting only one contract, or class of contracts from a single contracting
office, shall be negotiated by a contracting officer in the contracting office, or an ACO
when delegated by the contracting officer. When the negotiation authority is
delegated, the ACO shall coordinate the proposed agreement with the contracting
officer before executing the advance agreement.
(f) Before negotiating an advance agreement, the Government negotiator shall—
(1) Determine if other contracting offices inside the agency or in other agencies have
a significant unliquidated dollar balance in contracts with the same contractor;
(2) Inform any such office or agency of the matters under consideration for
negotiation; and
(3) As appropriate, invite the office or agency and the responsible audit agency to
participate in prenegotiation discussions and/or in the subsequent negotiations.
PGO
31.109 Advance agreements.
(g) Upon completion of the negotiation, the sponsor shall prepare and distribute
to other interested agencies and offices, including the audit agency, copies
of the executed agreement and a memorandum providing the information
specified in 15.406-3, as applicable.
PGO
31.109 Advance agreements.
h) Examples for which advance agreements may be particularly important
are—
(1) Compensation for personal services, including but not limited to
allowances for off-site pay, incentive pay, location allowances, hardship
pay, cost of living differential, and termination of defined benefit
pension plans;
(2) Use charges for fully depreciated assets;
(3) Deferred maintenance costs;
(4) Precontract costs;
PGO
31.109 Advance agreements.
(5) Independent research and development and bid and proposal costs;
(6) Royalties and other costs for use of patents;
(7) Selling and distribution costs;
(8) Travel and relocation costs, as related to special or mass personnel
movements, as related to travel via contractor-owned, -leased, or -chartered
aircraft; or as related to maximum per diem rates;
(9) Costs of idle facilities and idle capacity;
(10) Severance pay to employees on support service contracts;
PGO
31.109 Advance agreements.
(11) Plant reconversion;
(12) Professional services (e.g., legal, accounting, and engineering);
(13) General and administrative costs (e.g., corporate, division, or branch allocations)
attributable to the general management, supervision, and conduct of the contractor’s
business as a whole. These costs are particularly significant in construction, job-site,
architect-engineer, facilities, and Government-owned contractor operated (GOCO)
plant contracts (see 31.203(h));
(14) Costs of construction plant and equipment (see 31.105(d));
(15) Costs of public relations and advertising;
(16) Training and education costs (see 31.205-44(h)); and
(17) Statistical sampling methods (see 31.201-6(c)(4).
PGO
31.110 Indirect cost rate certification
and penalties on unallowable costs.
(a) Certain contracts require certification of the indirect cost rates proposed for
final payment purposes. See 42.703-2 for administrative procedures
regarding the certification provisions and the related contract clause
prescription.
(b) If unallowable costs are included in final indirect cost settlement proposals,
penalties may be assessed. See 42.709 for administrative procedures
regarding the penalty assessment provisions and the related contract
clause prescription.
PGO
Subpart 31.2—
Contracts with Commercial Organizations
Subpart 31.2—Contracts with
Commercial Organizations
31.201-1 Composition of total cost.
(a) The total cost, including standard costs properly adjusted for applicable
variances, of a contract is the sum of the direct and indirect costs allocable
to the contract, incurred or to be incurred, plus any allocable cost of money
pursuant to 31.205-10, less any allocable credits. In ascertaining what
constitutes a cost, any generally accepted method of determining or
estimating costs that is equitable and is consistently applied may be used.
(b) While the total cost of a contract includes all costs properly allocable to the
contract, the allowable costs to the Government are limited to those
allocable costs which are allowable pursuant to Part 31 and applicable
agency supplements.
PGO
Subpart 31.2—Contracts with
Commercial Organizations
31.201-2 Determining allowability.
(a) A cost is allowable only when the cost complies with all of the following
requirements:
(1) Reasonableness.
(2) Allocability.
(3) Standards promulgated by the CAS Board, if applicable, otherwise,
generally accepted accounting principles and practices appropriate to
the circumstances.
(4) Terms of the contract.
(5) Any limitations set forth in this subpart.
PGO
Subpart 31.2—Contracts with
Commercial Organizations
(b) Certain cost principles in this subpart incorporate the measurement,
assignment, and allocability rules of selected CAS and limit the allowability
of costs to the amounts determined using the criteria in those selected
standards. Only those CAS or portions of standards specifically made
applicable by the cost principles in this subpart are mandatory unless the
contract is CAS-covered (see Part 30).
Business units that are not otherwise subject to these standards under a
CAS clause are subject to the selected standards only for the purpose of
determining allowability of costs on Government contracts. Including the
selected standards in the cost principles does not subject the business unit
to any other CAS rules and regulations. The applicability of the CAS rules
and regulations is determined by the CAS clause, if any, in the contract and
the requirements of the standards themselves.
PGO
Subpart 31.2—Contracts with
Commercial Organizations
(c) When contractor accounting practices are inconsistent with this
Subpart 31.2, costs resulting from such inconsistent practices in excess of
the amount that would have resulted from using practices consistent with
this subpart are unallowable.
(d) A contractor is responsible for accounting for costs appropriately and for
maintaining records, including supporting documentation, adequate to
demonstrate that costs claimed have been incurred, are allocable to the
contract, and comply with applicable cost principles in this subpart and
agency supplements. The contracting officer may disallow all or part of a
claimed cost that is inadequately supported
PGO
31.201-3 Determining reasonableness.
(a) A cost is reasonable if, in its nature and amount, it does not exceed that
which would be incurred by a prudent person in the conduct of competitive
business. Reasonableness of specific costs must be examined with
particular care in connection with firms or their separate divisions that may
not be subject to effective competitive restraints.
No presumption of reasonableness shall be attached to the incurrence of
costs by a contractor. If an initial review of the facts results in a challenge of
a specific cost by the contracting officer or the contracting officer’s
representative, the burden of proof shall be upon the contractor to establish
that such cost is reasonable.
PGO
31.201-3 Determining reasonableness.
(b) What is reasonable depends upon a variety of considerations and
circumstances, including—
(1) Whether it is the type of cost generally recognized as ordinary and
necessary for the conduct of the contractor’s business or the contract
performance;
(2) Generally accepted sound business practices, arm’s-length bargaining,
and Federal and State laws and regulations;
(3) The contractor’s responsibilities to the Government, other customers,
the owners of the business, employees, and the public at large; and
(4) Any significant deviations from the contractor’s established practices.
PGO
31.201-4 Determining allocability.
A cost is allocable if it is assignable or chargeable to one or more cost
objectives on the basis of relative benefits received or other equitable
relationship. Subject to the foregoing, a cost is allocable to a Government
contract if it—
(a) Is incurred specifically for the contract;
(b) Benefits both the contract and other work, and can be distributed to them in
reasonable proportion to the benefits received; or
(c) Is necessary to the overall operation of the business, although a direct
relationship to any particular cost objective cannot be shown.
PGO
31.201-5 Credits.
The applicable portion of any income, rebate, allowance, or other credit relating
to any allowable cost and received by or accruing to the contractor shall be
credited to the Government either as a cost reduction or by cash refund.
See 31.205-6(j)(3) for rules governing refund or credit to the Government
associated with pension adjustments and asset reversions.
PGO
31.201-7 Construction and
architect-engineer contracts.
Specific principles and procedures for evaluating and determining costs in
connection with contracts and subcontracts for construction, and architectengineer contracts related to construction projects, are in 31.105. The
applicability of these principles and procedures is set forth in 31.000 and
31.100.
PGO
31.202 Direct costs.
(a) No final cost objective shall have allocated to it as a direct cost any cost, if
other costs incurred for the same purpose in like circumstances have been
included in any indirect cost pool to be allocated to that or any other final
cost objective. Direct costs of the contract shall be charged directly to the
contract. All costs specifically identified with other final cost objectives of the
contractor are direct costs of those cost objectives and are not to be
charged to the contract directly or indirectly.
(b) For reasons of practicality, the contractor may treat any direct cost of a
minor dollar amount as an indirect cost if the accounting treatment—
(1) Is consistently applied to all final cost objectives; and
(2) Produces substantially the same results as treating the cost as a direct
cost.
PGO
31.203 Indirect costs
(a) For contracts subject to full CAS coverage, allocation of indirect costs shall
be based on the applicable provisions. For all other contracts, the applicable
CAS provisions in paragraphs (b) through (h) of this section apply.
(b) After direct costs have been determined and charged directly to the contract
or other work, indirect costs are those remaining to be allocated to
intermediate or two or more final cost objectives. No final cost objective
shall have allocated to it as an indirect cost any cost, if other costs incurred
for the same purpose, in like circumstances, have been included as a direct
cost of that or any other final cost objective.
(c) The contractor shall accumulate indirect costs by logical cost groupings with
due consideration of the reasons for incurring such costs. . .
PGO
31.203 Indirect costs
(d) Once an appropriate base for allocating indirect costs has been accepted,
the contractor shall not fragment the base by removing individual elements.
All items properly includable in an indirect cost base shall bear a pro rata
share of indirect costs irrespective of their acceptance as Government
contract costs.
For example, when a cost input base is used for the allocation of G&A
costs, the contractor shall include in the base all items that would properly
be part of the cost input base, whether allowable or unallowable, and these
items shall bear their pro rata share of G&A costs.
(e) The method of allocating indirect costs may require revision when there is a
significant change in the nature of the business, the extent of
subcontracting, fixed-asset improvement programs, inventories, the volume
of sales and production, manufacturing processes, the contractor’s
products, or other relevant circumstances.
PGO
31.203 Indirect costs
(f) Separate cost groupings for costs allocable to offsite locations may be necessary to
permit equitable distribution of costs on the basis of the benefits accruing to the
several cost objectives.
(g) A base period for allocating indirect costs is the cost accounting period during which
such costs are incurred and accumulated for allocation to work performed in that
period.
(1) For contracts subject to full or modified CAS coverage, the contractor shall follow
the criteria and guidance in 48 CFR 9904.406 for selecting the cost accounting
periods to be used in allocating indirect costs.
(2) For contracts other than those subject to paragraph (g)(1) of this section, the
base period for allocating indirect costs shall be the contractor’s fiscal year used
for financial reporting purposes in accordance with generally accepted
accounting principles. The fiscal year will normally be 12 months, but a different
period may be appropriate (e.g., when a change in fiscal year occurs due to a
business combination or other circumstances).
PGO
31.203 Indirect costs
(h) Special care should be exercised in applying the principles of
paragraphs (c), (d), and (e) of this section when Government-owned
contractor-operated (GOCO) plants are involved. The distribution of
corporate, division or branch office G&A expenses to such plants operating
with little or no dependence on corporate administrative activities may
require more precise cost groupings, detailed accounts screening, and
carefully developed distribution bases.
(i) Indirect costs that meet the definition of “excessive pass-through charge” in
52.215-23, are unallowable.
PGO
31.204 Application of principles
and procedures.
(a) Costs are allowable to the extent they are reasonable, allocable, and determined to
be allowable under 31.201, 31.202, 31.203, and 31.205. These criteria apply to all of
the selected items that follow, even if particular guidance is provided for certain items
for emphasis or clarity.
(b)(1) For the following subcontract types, costs incurred as reimbursements or payments
to a subcontractor are allowable to the extent the reimbursements or payments are
for costs incurred by the subcontractor that are consistent with this part:
(i) Cost-reimbursement.
(ii) Fixed-price incentive.
(iii) Price redeterminable (i.e., fixed-price contracts with prospective price
redetermination and fixed-ceiling-price contracts with retroactive price
redetermination).
(2) The requirements of paragraph (b)(1) of this section apply to any tier above the
first firm-fixed-price subcontract or fixed-price subcontract with economic price
adjustment provisions.
PGO
31.204 Application of principles
and procedures.
(c) Costs incurred as payments under firm-fixed-price subcontracts or fixedprice subcontracts with economic price adjustment provisions or
modifications thereto, for which subcontract cost analysis was performed
are allowable if the price was negotiated in accordance with 31.102.
PGO
31.204 Application of principles
and procedures.
(d) Section 31.205 does not cover every element of cost. Failure to include any item of
cost does not imply that it is either allowable or unallowable.
The determination of allowability shall be based on the principles and standards in
this subpart and the treatment of similar or related selected items.
When more than one subsection in 31.205 is relevant to a contractor cost, the cost
shall be apportioned among the applicable subsections, and the determination of
allowability of each portion shall be based on the guidance contained in the
applicable subsection.
When a cost, to which more than one subsection in 31.205 is relevant, cannot be
apportioned, the determination of allowability shall be based on the guidance
contained in the subsection that most specifically deals with, or best captures the
essential nature of, the cost at issue.
PGO
31.205-4 Bonding costs.
(a) Bonding costs arise when the Government requires assurance against
financial loss to itself or others by reason of the act or default of the
contractor. They arise also in instances where the contractor requires
similar assurance. Included are such bonds as bid, performance, payment,
advance payment, infringement, and fidelity bonds.
(b) Costs of bonding required pursuant to the terms of the contract are
allowable.
(c) Costs of bonding required by the contractor in the general conduct of its
business are allowable to the extent that such bonding is in accordance with
sound business practice and the rates and premiums are reasonable under
the circumstances.
PGO
31.205-6 Compensation for personal
services.
(a) General. Compensation for personal services is allowable subject to the
following general criteria and additional requirements contained in other
parts of this cost principle:
(1) Compensation for personal services must be for work performed by the
employee in the current year and must not represent a retroactive
adjustment of prior years’ salaries or wages (but see paragraphs (g),
(h), (j), (k), (m), and (o) of this subsection).
(2) The total compensation for individual employees or job classes of
employees must be reasonable for the work performed; however,
specific restrictions on individual compensation elements apply when
prescribed.
(3) The compensation must be based upon and conform to the terms and
conditions of the contractor’s established compensation plan or practice
followed so consistently as to imply, in effect, an agreement to make the
payment.
PGO
31.205-6 Compensation for personal
services.
(4) No presumption of allowability will exist where the contractor introduces
major revisions of existing compensation plans or new plans and the
contractor has not provided the cognizant ACO, either before
implementation or within a reasonable period after it, an opportunity to
review the allowability of the changes.
(5) Costs that are unallowable under other paragraphs of this Subpart 31.2 are
not allowable under this subsection 31.205-6 solely on the basis that they
constitute compensation for personal services.
PGO
31.205-6 Compensation for personal
services.
(6)(i) Compensation costs for certain individuals give rise to the need for
special consideration. Such individuals include:
(A) Owners of closely held corporations, members of limited liability
companies, partners, sole proprietors, or members of their
immediate families; and
(B) Persons who are contractually committed to acquire a substantial
financial interest in the contractor’s enterprise.
(ii) For these individuals, compensation must—
(A) Be reasonable for the personal services rendered; and
(B) Not be a distribution of profits (which is not an allowable contract
cost).
(iii) For owners of closely held companies, compensation in excess of the
costs that are deductible as compensation under the Internal Revenue
Code (26 U.S.C.) and regulations under it is unallowable.
PGO
31.205-6 Compensation for personal
services.
(b) Reasonableness—
(1) Compensation pursuant to labor-management agreements.
(2) Compensation not covered by labor-management agreements.
PGO
31.205-7 Contingencies.
(a) “Contingency,” as used in this subpart, means a possible future event or
condition arising from presently known or unknown causes, the outcome of
which is indeterminable at the present time.
(b) Costs for contingencies are generally unallowable for historical costing
purposes because such costing deals with costs incurred and recorded on
the contractor’s books. However, in some cases, as for example,
terminations, a contingency factor may be recognized when it is applicable
to a past period to give recognition to minor unsettled factors in the interest
of expediting settlement.
PGO
31.205-7 Contingencies.
(c) In connection with estimates of future costs, contingencies fall into two
categories:
(1) Those that may arise from presently known and existing conditions,
(2) Those that may arise from presently known or unknown conditions, the
effect of which cannot be measured so precisely as to provide equitable
results to the contractor and to the Government; e.g., results of pending
litigation.
PGO
31.205-19 Insurance and
indemnification.
(a) Insurance by purchase or by self-insuring includes—
(1) Coverage the contractor is required to carry or to have approved, under
the terms of the contract; and
(2) Any other coverage the contractor maintains in connection with the
general conduct of its business.
(b) For purposes of applying the provisions of this subsection, the Government
considers insurance provided by captive insurers (insurers owned by or
under control of the contractor) as self-insurance, and charges for it shall
comply with the provisions applicable to self-insurance costs in this
subsection. However, if the captive insurer also sells insurance to the
general public in substantial quantities and it can be demonstrated that the
charge to the contractor is based on competitive market forces, the
Government will consider the insurance as purchased insurance.
PGO
31.205-19 Insurance and
indemnification.
(c) Whether or not the contract is subject to CAS, self-insurance charges are
allowable subject to paragraph (e) of this subsection and the following
limitations:
(d) Purchased insurance costs are allowable, subject to paragraph (e) of this
subsection and the following limitations:
(e) Self-insurance and purchased insurance costs are subject to the cost
limitations in the following paragraphs:
PGO
31.205-33 Professional and consultant
service costs.
(c) Costs of professional and consultant services performed
under any of the following circumstances are unallowable:
(1) Services to improperly obtain,
distribute, or use information or data
protected by law or regulation
(e.g., 52.215-1(e), Restriction on
Disclosure and Use of Data).
(3) Any other services obtained,
performed, or otherwise resulting in
violation of any statute or regulation
prohibiting improper business practices or
conflicts of interest.
(2) Services that are intended to
improperly influence the contents of
solicitations, the evaluation of proposals or
quotations, or the selection of sources for
contract award, whether award is by the
Government, or by a prime contractor or
subcontractor.
(4) Services performed which are not
consistent with the purpose and scope of
the services contracted for or otherwise
agreed to.
PGO
31.205-33 (d) In determining the allowability of costs
(including retainer fees) in a particular case, no single factor
or any special combination of factors is necessarily
determinative. However, the contracting officer shall
consider the following factors, among others:
(1) The nature and scope of the service rendered in relation to the service
required.
(2) The necessity of contracting for the service, considering the contractor’s
capability in the particular area.
(3) The past pattern of acquiring such services and their costs, particularly in
the years prior to the award of Government contracts.
(4) The impact of Government contracts on the contractor’s business.
PGO
31.205-33 (d) In determining the allowability of costs
(including retainer fees) in a particular case, no single factor
or any special combination of factors is necessarily
determinative. However, the contracting officer shall
consider the following factors, among others:
(5) Whether the proportion of Government work to the contractor’s total
business is such as to influence the contractor in favor of incurring the cost,
particularly when the services rendered are not of a continuing nature and
have little relationship to work under Government contracts.
(6) Whether the service can be performed more economically by employment
rather than by contracting.
(7) The qualifications of the individual or concern rendering the service and the
customary fee charged, especially on non-Government contracts.
(8) Adequacy of the contractual agreement for the service (e.g., description of
the service, estimate of time required, rate of compensation, termination
provisions).
PGO
31.205-35 Relocation costs.
(c) The following types of costs are unallowable:
(1) Loss on the sale of a home.
(2) Costs incident to acquiring a home in the new location as follows:
(3) Continuing mortgage principal payments on a residence being sold.
(4) Costs incident to furnishing equity or nonequity loans to employees or
making arrangements with lenders for employees to obtain lower-thanmarket rate mortgage loans.
PGO
31.205-41 Taxes.
(a) The following types of costs are allowable:
(1) Federal, State, and local taxes (see Part 29), . . . Fines and penalties
are not considered taxes.
(2) Taxes otherwise allowable under paragraph (a)(1) of this section, but
upon which a claim of illegality or erroneous assessment exists;
provided the contractor, before paying such taxes—
(3) Pursuant to paragraph (a)(2) of this section, the reasonable costs of
any action taken by the contractor at the direction or with the
concurrence of the contracting officer. Interest or penalties incurred by
the contractor for non-payment of any tax at the direction of the
contracting officer or by reason of the failure of the contracting officer to
ensure timely direction after a prompt request.
(4) The Environmental Tax found at section 59A of the Internal Revenue
Code, also called the “Superfund Tax.”
PGO
31.205-41 Taxes.
(b) The following types of costs are not allowable:
(1) Federal income and excess profits taxes.
(2) Taxes in connection with financing, refinancing, refunding operations,
or reorganizations (see 31.205-20 and 31.205-27).
(3) Taxes from which exemptions are available to the contractor directly, or
available to the contractor based on an exemption afforded the
Government, except when the contracting officer determines that the
administrative burden incident to obtaining the exemption outweighs the
corresponding benefits accruing to the Government. . .When partial
exemption from a tax is attributable to Government contract activity,
(4) Special assessments on land that represent capital improvements
PGO
31.205-41 Taxes.
(b) The following types of costs are not allowable:
(5) Taxes (including excises) on real or personal property, or on the value,
use, possession or sale thereof, which is used solely in connection with
work other than on Government contracts (see paragraph (c) of this
section).
(6) Any excise tax in subtitle D, Chapter 43 of the Internal Revenue Code
of 1986, as amended. That chapter includes excise taxes imposed in
connection with qualified pension plans, welfare plans, deferred
compensation plans, or other similar types of plans.
(7) Income tax accruals designed to account for the tax effects of
differences between taxable income and pretax income as reflected by
the books of account and financial statements.
PGO
31.205-41 Taxes.
(c) Taxes on property (see paragraph (b)(5) of this section) used solely in
connection with either non-Government or Government work should be
considered directly applicable to the respective category of work unless the
amounts involved are insignificant or comparable results would otherwise
be obtained; . . The cost of taxes incurred on property used in both
Government and non-Government work shall be apportioned to all such
work based upon the use of such property on the respective final cost
objectives.
(d) Any taxes, interest, or penalties that were allowed as contract costs and are
refunded to the contractor shall be credited or paid to the Government in the
manner it directs. If a contractor or subcontractor obtains a foreign tax credit
that reduces its U.S. Federal income tax because of the payment of any tax
or duty allowed as contract costs, and if those costs were reimbursed by a
foreign government, the amount of the reduction shall be paid to the
Treasurer of the United States at the time the Federal income tax return is
filed. . .
PGO
31.205-48 Research and development costs.
“Research and development,” as used in this subsection, means the type of
technical effort described in 31.205-18 but sponsored by a grant or required
in the performance of a contract. When costs are incurred in excess of either
the price of a contract or amount of a grant for research and development
effort, the excess is unallowable under any other Government contract.
31.205-49 Goodwill.
Goodwill, an unidentifiable intangible asset, originates under the purchase
method of accounting for a business combination when the price paid by the
acquiring company exceeds the sum of the identifiable individual assets
acquired less liabilities assumed, based upon their fair values. The excess is
commonly referred to as goodwill. Goodwill may arise from the acquisition of
a company as a whole or a portion thereof. Any costs for amortization,
expensing, write-off, or write-down of goodwill (however represented) are
unallowable.
PGO
Subpart 31.6—Contracts with State, Local,
and Federally Recognized Indian Tribal
Governments
31.602 General.
Office of Management and Budget (OMB) Circular No. A-87, Cost Principles for
State and Local Governments, Revised, sets forth the principles for
determining the allowable costs of contracts and subcontracts with State,
local, and federally recognized Indian tribal governments. These principles
are for cost determination and are not intended to identify the circumstances
or dictate the extent of Federal and State or local participation in financing a
particular contract.
PGO
Subpart 31.7—Contracts with
Nonprofit Organizations
31.702 General.
Office of Management and Budget (OMB) Circular No. A-122, Cost Principles
for Nonprofit Organizations, sets forth principles for determining the costs
applicable to work performed by nonprofit organizations under contracts
(also applies to grants and other agreements) with the Government.
PGO
Part 32
Contract Financing
32.002 Applicability of subparts.
(a) The following sections and subparts of this part are applicable to all
purchases subject to Part 32:
(1) Sections 32.000 through 32.005.
(2) Subpart 32.3, Loan Guarantees for Defense Production.
(3) Subpart 32.6, Contract Debts.
(4) Subpart 32.7, Contract Funding.
(5) Subpart 32.8, Assignment of Claims.
(6) Subpart 32.9, Prompt Payment.
(7) Subpart 32.11, Electronic Funds Transfer.
PGO
32.002 Applicability of subparts.
(a) The following sections and subparts of this part are applicable to all
purchases subject to Part 32:
(b) Subpart 32.2, Commercial Item Purchase Financing, is applicable only to
purchases of commercial items under authority of Part 12.
(c) The following subparts of this part are applicable to all purchases made
under any authority other than Part 12:
(1) Subpart 32.1, Non-Commercial Item Purchase Financing.
(2) Subpart 32.4, Advance Payments For Non-Commercial Items.
(3) Subpart 32.5, Progress Payments Based on Costs.
(4) Subpart 32.10, Performance-Based Payments.
PGO
32.005 Consideration for contract
financing.
(a) Requirement. When a contract financing clause is included at the inception
of a contract, there shall be no separate consideration for the contract
financing clause. The value of the contract financing to the contractor is
expected to be reflected in either
(1) a bid or negotiated price that will be lower than such price would have
been in the absence of the contract financing, or
(2) contract terms and conditions, other than price, that are more beneficial
to the Government than they would have been in the absence of the
contract financing. Adequate new consideration is required for changes
to, or the addition of, contract financing after award.
PGO
32.005 Consideration for contract
financing.
(b) Amount of new consideration. The contractor may provide new
consideration by monetary or nonmonetary means, provided the value is
adequate. The fair and reasonable consideration should approximate the
amount by which the price would have been less had the contract financing
terms been contained in the initial contract. In the absence of definite
information on this point, the contracting officer should apply the following
criteria in evaluating whether the proposed new consideration is adequate:
(1) The value to the contractor of the anticipated amount and duration of
the contract financing at the imputed financial costs of the equivalent
working capital.
(2) The estimated profit rate to be earned through contract performance.
PGO
32.005 Consideration for contract
financing.
(c) Interest. Except as provided in Subpart 32.4, Advance Payments for NonCommercial Items, the contract shall not provide for any other type of
specific charges, such as interest, for contract financing.
PGO
32.104 Providing contract financing.
(a) Prudent contract financing can be a useful working tool in Government
acquisition by expediting the performance of essential contracts.
Contracting officers must consider the criteria in this part in determining
whether to include contract financing in solicitations and contracts. Resolve
reasonable doubts by including contract financing in the solicitation.
(b) If the contractor is a small business concern, the contracting officer must
give special attention to meeting the contractor’s contract financing need.
However, a contractor’s receipt of a certificate of competency from the
Small Business Administration has no bearing on the contractor’s need for
or entitlement to contract financing.
PGO
32.104 Providing contract financing.
(c) Subject to specific agency regulations and paragraph (d) of this section, the
contracting officer—
(d) Unless otherwise authorized by agency procedures, the contracting officer
may provide contract financing in the form of performance-based payments
(see Subpart 32.10) or customary progress payments (see Subpart 32.5) if
the following conditions are met:
PGO
32.108 Financial consultation.
Each contracting office should have available and use the services of contract
financing personnel competent to evaluate credit and financial problems. In
resolving any questions concerning—
(a) The financial capability of an offeror or contractor to perform a contract, or
(b) What form of contract financing is appropriate in a given case, the
contracting officer should consult the appropriate contract financing office.
PGO
32.110 Payment of subcontractors under
cost-reimbursement prime contracts.
. . . the contracting officer should accept the financing payments as
reimbursable costs of the prime contract only under the following conditions:
(a) The payments are made under the criteria in Subpart 32.5 for customary
progress payments based on costs, 32.202-1 for commercial item purchase
financing, or 32.1003 for performance-based payments, as applicable.
(b) . . . the payments do not exceed the progress payment rate in 32.501-1,
unless unusual progress payments to the subcontractor have been
approved in accordance with 32.501-2.
(c) . . . the subcontractor complies with the liquidation principles of 32.503-8,
32.503-9, and 32.503-10.
(d) If performance-based payments are made, the subcontractor complies with
the liquidation principles of 32.1004(d).
(e) The subcontract contains financing payments terms as prescribed in this
part.
PGO
Subpart 32.2
Commercial Item Purchase Financing
32.202-1 Policy.
(a) Use of financing in contracts. It is the responsibility of the contractor to
provide all resources needed for performance of the contract. Thus, for
purchases of commercial items, financing of the contract is normally the
contractor’s responsibility.
(b) Authorization
(c) Difference from non-commercial financing. Government financing of
commercial purchases under this subpart is expected to be different from
that used for non-commercial purchases under Subpart 32.1 and its related
subparts.
(d) Unusual contract financing. Any contract financing arrangement not in
accord with the requirements of agency regulations or this part is unusual
contract financing and requires advance approval in accordance with
agency procedures.
PGO
32.202-1 Policy, cont.
(e) Best interest of the Government. The statutes cited in 32.201 do not allow
contract financing by the Government unless it is in the best interest of the
United States. Agencies may establish standards to determine whether
contract financing is in the best interest of the Government. These
standards may be for certain types of procurements, certain types of items,
or certain dollar levels of procurements.
PGO
32.207 Administration and payment
of commercial financing payments.
(a) Responsibility. The contracting officer responsible for administration of the contract
shall be responsible for review and approval of contract financing requests.
(b) Approval of financing requests. Unless otherwise provided in agency regulations, or
by agreement with the appropriate payment official—
(1) The contracting officer shall be responsible for receiving, approving, and
transmitting all contract financing requests to the appropriate payment office; and
(2) Each approval shall specify the amount to be paid, necessary contractual
information, and the account(s) (see 32.206(d)) to be charged for the payment.
(c) Management of security. After contract award, the contracting officer responsible for
approving requests for financing payments shall be responsible for determining that
the security continues to be adequate. If the contractor’s financial condition is the
Government’s security, this contracting officer is also responsible for monitoring the
contractor’s financial condition.
PGO
32.410 Findings, determination, and
authorization.
(a) Each determination concerning advance payments shall be supported by
written findings (see 32.402(c)(1)(iii)).
(b) The following is an example of the format and text of findings,
determination, and authorization with alternative words, phrases, and
paragraphs to be selected to conform to the circumstances involved:
PGO
Subpart 32.5
Progress Payments Based on Costs
Subpart 32.5—Progress Payments Based on Costs
32.500 Scope of subpart.
This subpart prescribes policies, procedures, forms, solicitation provisions, and
contract clauses for providing contract financing through progress payments based
on costs. This subpart does not apply to—
(a) Payments under cost-reimbursement contracts, but see 32.110 for progress
payments made to subcontractors under cost-reimbursement prime contracts; or
(b) Contracts for construction or for shipbuilding or ship conversion, alteration, or
repair, when the contracts provide for progress payments based on a percentage
or stage of completion.
PGO
32.502-2 Contract finance office
clearance.
The contracting officer shall obtain the approval of the contract finance office or
other offices designated under agency procedures before taking any of the
following actions:
(a) Providing a progress payment rate higher than the customary rate (see
32.501-1).
(b) Deviating from the progress payments terms prescribed in this part.
(c) Providing progress payments to a contractor—
(1) Whose financial condition is in doubt;
(2) Who has had an advance payment request or loan guarantee denied
for financial reasons (or approved but withdrawn or lapsed) within the
previous 12 months; or
(3) Who is named in the consolidated list of contractors indebted to the
United States (known commonly as the “Hold-up List”).
PGO
32.503-8 Liquidation rates—
ordinary method.
The Government recoups progress payments through the deduction of
liquidations from payments that would otherwise be due to the contractor for
completed contract items. To determine the amount of the liquidation, the
contracting officer applies a liquidation rate to the contract price of contract
items delivered and accepted. The ordinary method is that the liquidation
rate is the same as the progress payment rate. At the beginning of a
contract, the contracting officer must use this method.
PGO
32.503-16 Risk of loss.
(a) Under the Progress Payments clause, and except for normal spoilage, the
contractor bears the risk for loss, theft, destruction, or damage to property
affected by the clause, even though title is vested in the Government,
unless the Government has expressly assumed this risk. . .
(b) If a loss occurs in connection with property for which the contractor bears
the risk, the contractor is obligated to repay to the Government the amount
of unliquidated progress payments based on costs allocable to the property.
(c) The contractor is not obligated to pay for the loss of property for which the
Government has assumed the risk of loss. . .
PGO
Subpart 32.6—Contract Debts
32.602 Responsibilities.
(a) The contracting officer has primary responsibility for identifying and
demanding payment of contract debts except those resulting from errors
made by the payment office. The contracting officer shall not collect contract
debts or otherwise agree to liquidate contract debts (e.g., offset the amount
of the debt against existing unpaid bills due the contractor, or allow
contractors to retain contract debts to cover amounts that may become
payable in future periods).
(b) The payment office has primary responsibility for—
(1) Collecting contract debts identified by contracting officers;
(2) Identifying and collecting duplicate and erroneous payments; and
(3) Authorizing the liquidation of contract debts in accordance with agency
procedures.
PGO
Subpart 32.7
Contract Funding
32.702 Policy.
No officer or employee of the Government may create or authorize an
obligation in excess of the funds available, or in advance of appropriations
(Anti-Deficiency Act, 31 U.S.C. 1341), unless otherwise authorized by law.
Before executing any contract, the contracting officer shall—
(a) Obtain written assurance from responsible fiscal authority that
adequate funds are available or
(b) Expressly condition the contract upon availability of funds in
accordance with 32.703-2.
PGO
32.703 Contract funding
requirements.
32.703-1 General.
(a) If the contract is fully funded, funds are obligated to cover the price or
target price of a fixed-price contract or the estimated cost and any fee of
a cost-reimbursement contract.
(b) If the contract is incrementally funded, funds are obligated to cover the
amount allotted and any corresponding increment of fee.
PGO
32.703-2 Contracts conditioned
upon availability of funds.
(a) Fiscal year contracts. The contracting officer may initiate a contract action
properly chargeable to funds of the new fiscal year before these funds are
available, provided that the contract includes the clause at 52.232-18,
Availability of Funds (see 32.705-1(a)). This authority may be used only for
operation and maintenance and continuing services (e.g., rentals, utilities,
and supply items not financed by stock funds)—
(1) Necessary for normal operations; and
(2) For which Congress previously had consistently appropriated funds,
unless specific statutory authority exists permitting applicability to other
requirements.
PGO
32.703-2 Contracts conditioned
upon availability of funds.
(b) Indefinite-quantity or requirements contracts. A one-year indefinite-quantity
or requirements contract for services that is funded by annual
appropriations may extend beyond the fiscal year in which it begins;
provided, that—
(1) Any specified minimum quantities are certain to be ordered in the initial
fiscal year (see 37.106) and
(2) The contract includes the clause at 52.232-19, Availability of Funds for
the Next Fiscal Year (see 32.705-1(b)).
(c) Acceptance of supplies or services. The Government shall not accept
supplies or services under a contract conditioned upon the availability of
funds until the contracting officer has given the contractor notice, to be
confirmed in writing, that funds are available.
PGO
32.703-3 Contracts crossing fiscal years.
(a) A contract that is funded by annual appropriations may not cross fiscal
years, except in accordance with statutory authorization
(e.g., 41 U.S.C. 11a, 31 U.S.C. 1308, 42 U.S.C. 2459a, 42 U.S.C. 3515,
and paragraph (b) of this subsection), or when the contract calls for an end
product that cannot feasibly be subdivided for separate performance in each
fiscal year (e.g., contracts for expert or consultant services).
(b) The head of an executive agency, except NASA, may enter into a contract,
exercise an option, or place an order under a contract for severable
services for a period that begins in one fiscal year and ends in the next
fiscal year if the period of the contract awarded, option exercised, or order
placed does not exceed one year (10 U.S.C. 2410a and 41 U.S.C. 253l).
Funds made available for a fiscal year may be obligated for the total amount
of an action entered into under this authority.
PGO
32.803 Policies.
(a) Any assignment of claims that has been made under the Act to any type of
financing institution listed in 32.802(b) may thereafter be further assigned
and reassigned to any such institution if the conditions in 32.802(d) and (e)
continue to be met.
(b) A contract may prohibit the assignment of claims if the agency determines
the prohibition to be in the Government’s interest.
(c) Under a requirements or indefinite quantity type contract that authorizes
ordering and payment by multiple Government activities, amounts due for
individual orders for $1,000 or more may be assigned.
PGO
32.803 Policies.
(d) Any contract of a designated agency (see FAR 32.801), except a contract
under which full payment has been made, may include a no-setoff
commitment only when a determination of need is made by the head of the
agency
(e) When an assigned contract does not include a no-setoff commitment, the
Government may apply against payments to the assignee any liability of the
contractor to the Government arising independently of the assigned contract
if the liability existed at the time notice of the assignment was received even
though that liability had not yet matured so as to be due and payable.
PGO
Subpart 32.9—Prompt Payment
(a) General. Agency procedures must ensure that, when specifying due dates,
contracting officers give full consideration to the time reasonably required by
Government officials to fulfill their administrative responsibilities under the
contract.
(b) Payment due dates. Except as prescribed in paragraphs (c) through (f) of
this section, or as authorized in 32.908(a)(2) or (c)(2), the due date for
making an invoice payment is as follows:
(1) The later of the following two events:
(i) The 30th day after the designated billing office receives a proper
invoice from the contractor (except as provided in paragraph (b)(3)
of this section).
(ii) The 30th day after Government acceptance of supplies delivered
or services performed.
PGO
Subpart 32.9—Prompt Payment, cont.
(2) If the contract does not require submission of an invoice for payment
(e.g., periodic lease payments), the contracting officer must specify the
due date in the contract.
(3) If the designated billing office fails to annotate the invoice with the
actual date of receipt at the time of receipt, the invoice payment due
date is the 30th day after the date of the contractor's invoice, provided
the designated billing office receives a proper invoice and there is no
disagreement over quantity, quality, or contractor compliance with
contract requirements.
PGO
Subpart 32.9—Prompt Payment, cont.
(d) Construction contracts.
(1) The due date for making payments on construction contracts is as follows:
(i) The due date for making progress payments based on contracting
officer approval of the estimated amount and value of work or services
performed, including payments for reaching milestones in any project, is
14 days after the designated billing office receives a proper payment
request.
(ii) The due date for payment of any amounts retained by the contracting
officer in accordance with the clause at 52.232-5, Payments Under
Fixed-Price Construction Contracts, will be as specified in the contract
or . . The contracting officer must base the release of retained amounts
on the contracting officer’s determination that satisfactory progress has
been made.
(iii) The due date for final payments based on completion and acceptance
of all work (including any retained amounts), and payments for partial
deliveries that have been accepted by the Government (e.g., each
separate building, public work, or other division of the contract for which
the price is stated separately in the contract) is as follows:
PGO
Subpart 32.9—Prompt Payment, cont.
(e) Cost-reimbursement contracts for services. For purposes of computing late
payment interest penalties that may apply, the due date for making interim
payments on cost-reimbursement contracts for services is 30 days after the
date of receipt of a proper invoice.
(f) Food and specified items.
(g) Multiple payment due dates. Contracting officers may encourage, but not
require, contractors to submit separate invoices for products with different
payment due dates under the same contract or order. When an invoice
contains items with different payment due dates (i.e., a mixed invoice), the
payment office will, subject to agency policy—
(1) Pay the entire invoice on the earliest due date; or
(2) Split invoice payments, making payments by the applicable due dates.
PGO
Subpart 32.10
Performance-Based Payments
Performance-Based Payments
32.1001 Policy.
(a) Performance-based payments are the preferred Government financing
method when the contracting officer finds them practical, and the contractor
agrees to their use.
(b) Performance-based payments are contract financing payments that are not
payment for accepted items.
(c) Performance-based payments are fully recoverable, in the same manner as
progress payments, in the event of default.
(d) Performance-based payments are contract financing payments and,
therefore, are not subject to the interest-penalty provisions of prompt
payment . . .
PGO
Performance-Based Payments
32.1001 Policy.
(e) Performance-based payments shall not be used for—
(1) Payments under cost-reimbursement line items;
(2) Contracts for architect-engineer services or construction, or for
shipbuilding or ship conversion, alteration, or repair, when the
contracts provide for progress payments based upon a percentage
or stage of completion; or
(3) Contracts awarded through sealed bid procedures
PGO
Performance-Based Payments
32.1004 Procedures.
Performance-based payments may be made either on a whole contract or
on a deliverable item basis, unless otherwise prescribed by agency
regulations. Financing payments to be made on a whole contract basis are
applicable to the entire contract, and not to specific deliverable items.
Financing payments to be made on a deliverable item basis are applicable
to a specific individual deliverable item. (A deliverable item for these
purposes is a separate item with a distinct unit price. Thus, a contract line
item for 10 airplanes, with a unit price of $1,000,000 each, has 10
deliverable items-the separate planes. A contract line item for 1 lot of 10
airplanes, with a lot price of $10,000,000, has only one deliverable item-the
lot.)
PGO
Performance-Based Payments
32.1004 Procedures.
(a) Establishing performance bases.
(1) The basis for performance-based payments may be either specifically
described events (e.g., milestones) or some measurable criterion of
performance. Each event or performance criterion that will trigger a finance
payment shall be an integral and necessary part of contract performance
and shall be identified in the contract, along with a description of what
constitutes successful performance of the event or attainment of the
performance criterion.
(2) Events or criteria may be either severable or cumulative. The successful
completion of a severable event or criterion is independent of the
accomplishment of any other event or criterion. Conversely, the successful
accomplishment of a cumulative event or criterion is dependent upon the
previous accomplishment of another event. A contract may provide for more
than one series of severable and/or cumulative performance events or
criteria performed in parallel.
PGO
32.1004(a)(2) Procedures.
(i) The contract shall not permit payment for a cumulative event or criterion until the
dependent event or criterion has been successfully completed.
(ii) The contract shall specifically identify severable events or criteria.
(iii) The contract shall specifically identify cumulative events or criteria and identify
which events or criteria are preconditions for the successful achievement of each
event or criterion.
(iv) Because performance-based payments are contract financing, events or criteria
shall not serve as a vehicle to reward the contractor for completion of
performance levels over and above what is required for successful completion of
the contract.
(v) If payment of performance-based finance amounts is on a deliverable item basis,
each event or performance criterion shall be part of the performance necessary
for that deliverable item and shall be identified to a specific contract line item or
subline item.
PGO
32.1007 Administration and payment of
performance-based payments.
(a) Responsibility. The contracting officer responsible for administering
performance-based payments (see 42.302(a)(12)) for the contract shall
review and approve all performance-based payments for that contract.
(b) Approval of financing requests. Unless otherwise provided in agency
regulations, or by agreement with the appropriate payment official—
(1) The contracting officer shall be responsible for receiving, approving,
and transmitting all performance-based payment requests to the
appropriate payment office; and
(2) Each approval shall specify the amount to be paid, necessary
contractual information, and the appropriation account(s) (see
32.1004(c)) to be charged for the payment.
PGO
END PART I
PGO