FAR Cost Principles Guide

1 Version: January 2017. Thru FAC 2005-95. FAR cost Principles Guide (Chronology of cost Principle Revisions Issued in Federal Acquisition Circulars (FACs) Since 1984). TABLE OF CONTENTS. FAR Section Title Page No. FAR -- Composition of Total Costs 1. FAR -- Determining Allowability 2. FAR -- Determining Reasonableness 3. FAR -- Determining Allocability 4. FAR Credits 5. FAR -- Accounting for Unallowable Costs 6. FAR -- Construction and Architect-Engineer Contracts 8. FAR -- Direct Costs 8. FAR -- Indirect Costs 9. FAR -- Application of Principles and Procedures 13. FAR -- Public Relations and Advertising Costs 14. FAR -- Automatic Data Processing Equipment Leasing Costs 20. FAR -- Bad Debts 24. FAR Bonding Costs 24. FAR -- Civil Defense Costs 24. FAR -- Compensation for Personal Services 25.

2 FAR -- Contingencies 72. FAR -- Contributions or Donations 73. FAR -- Reserved 73. FAR -- cost of Money 75. FAR Depreciation 79. FAR -- Economic Planning Costs 87. FAR -- Employee Morale, Health, Welfare, Food Service, 88. And Dormitory Costs and Credits FAR -- Entertainment Costs 92. FAR -- Fines and Penalties, and Mischarging Costs 92. FAR -- Gains and Losses On Disposition or Impairment Of 93. Depreciable Property Or Other Capital Assets FAR -- Idle Facilities and Idle Capacity Costs 96. FAR -- Independent Research And Development and Bid 98. And Proposal Costs FAR -- Insurance and Indemnification 111. FAR -- Interest and Other Financial Costs 116. FAR -- Labor Relations Costs 118. FAR -- Lobbying and Political Activity Costs 118. FAR -- Losses on Other Contracts 123. Index Version: January 2017.

3 Thru FAC 2005-95. FAR cost Principles Guide (Chronology of cost Principle Revisions Issued in Federal Acquisition Circulars (FACs) Since 1984). TABLE OF CONTENTS. FAR Section Title Page No. FAR -- Reserved 123. FAR -- Manufacturing and Production Engineering Costs 124. FAR -- Material Costs 125. FAR -- Organization Costs 129. FAR -- Other Business Expenses 130. FAR -- Plant Protection Costs 130. FAR -- Patent Costs 130. FAR -- Plant Reconversion Costs 131. FAR -- Precontract Costs 131. FAR -- Professional and Consultant Service Costs 132. FAR -- Recruitment Costs 138. FAR -- Relocation Costs 139. FAR -- Rental Costs 145. FAR -- Royalties and Other Costs For Use Of Patents 146. FAR -- Selling Costs 147. FAR -- Service and Warranty Costs 153. FAR -- Special Tooling and Special Test Equipment Costs 153.

4 FAR Taxes 154. FAR -- Termination Costs 156. FAR -- Trade, business, Technical And Professional 159. Activity Costs FAR -- Training and Educational Costs 160. FAR -- Transportation Costs 164. FAR -- Travel Costs 165. FAR Costs Related to Legal and Other Proceedings 172. FAR -- Deferred Research And Development Costs 181. FAR Goodwill 181. FAR -- Executive lobbying Costs 182. FAR -- Costs of Alcoholic Beverages 182. FAR -- Asset Valuations Resulting From Business 182. Combinations Index Version: January 2017. Thru FAC 2005-95. FAR cost Principles Guide (Chronology of cost Principle Revisions Issued in Federal Acquisition Circulars (FACs) Since 1984). FAR -- Composition of Total Costs 1984 FAR (Effective 1 April 1984). The total cost of a contract is the sum of the allowable direct and indirect costs allocable to the contract, incurred or to be incurred, less any allocable credits, plus any allocable cost of money pursuant to 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, including standard costs properly adjusted for applicable variances.

5 See (b) and (c) for cost Accounting Standards (CAS) requirements. FAC 90-23 (Effective 27 February 1995). (a) The total cost of a contract is the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred, less any allocable credits, plus any allocable cost of money pursuant to 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, including standard costs properly adjusted for applicable variances. See (b) and (c) for cost Accounting Standards (CAS) requirements. (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.

6 FAC 2001-22 (Effective May 5, 2004). Revise paragraph (a) to read as follows: (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 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. 1. Version: January 2017. Thru FAC 2005-95. FAR cost Principles Guide (Chronology of cost Principle Revisions Issued in Federal Acquisition Circulars (FACs) Since 1984). FAR -- Determining Allowability 1984 FAR (Effective 1 April 1984). (a) The factors to be considered in determining whether a cost is allowable include the following: (1) Reasonableness.

7 (2) Allocability. (3) Standards promulgated by the CAS Board, if applicable; otherwise, generally accepted accounting Principles and practices appropriate to the particular circumstances. (4) Terms of the contract. (5) Any limitations set forth in this subpart. (b) Certain cost Principles in this subpart incorporate the measurement, assignment, and allowability 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.

8 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. (c) When contractor accounting practices are inconsistent with this subpart , costs resulting from such inconsistent practices shall not be allowed in excess of the amount that would have resulted from using practices consistent with this subpart. FAC 90-12 (Effective 31 August 1992). Revise second sentence of paragraph (b) to read as follows: 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 48 CFR 9903).

9 2. Version: January 2017. Thru FAC 2005-95. FAR cost Principles Guide (Chronology of cost Principle Revisions Issued in Federal Acquisition Circulars (FACs) Since 1984). FAC 90-39 (Effective 19 August 1996). Add paragraph (d) as follows: (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 which is inadequately supported. FAC 2001-22 (Effective May 5, 2004). Revise paragraph (a) and (c) to read as follows: (a) A cost is allowable only when the cost complies with all of the following requirements: (1) Reasonableness.

10 (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. (c) When contractor accounting practices are inconsistent with this subpart , costs resulting from such inconsistent practices in excess of the amount that would have resulted from using practices consistent with this subpart are unallowable. Revise paragraph (d) replacing the word which with the word that.. FAR -- Determining Reasonableness 1984 FAR (Effective 1 April 1984). 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.