16.301
General
FAR 16.301 establishes when and how cost-reimbursement contracts may be used, requiring adequate contractor accounting systems and government oversight to ensure proper cost control.
Overview
FAR 16.301 provides the foundational guidance for cost-reimbursement contracts, outlining their general description, appropriate application, and key limitations. This section establishes when and how cost-reimbursement contracts should be used, emphasizing that they are suitable when uncertainties in contract performance prevent accurate cost estimation at the outset. It also highlights the need for adequate contractor accounting systems and government oversight to ensure proper cost control and contract management. The section serves as the gateway to more detailed requirements found in subsequent subsections of Subpart 16.3.
Key Rules
- Description of Cost-Reimbursement Contracts
- These contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract, and may include payment of a fee (profit or incentive).
- Application
- Cost-reimbursement contracts are appropriate when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy for a fixed-price contract.
- Limitations
- Such contracts may only be used when the contractor’s accounting system is adequate for determining costs, and the government must provide appropriate oversight to ensure effective cost control.
Responsibilities
- Contracting Officers: Must determine suitability of cost-reimbursement contracts, ensure contractor accounting systems are adequate, and provide ongoing oversight.
- Contractors: Must maintain an adequate accounting system and comply with cost allowability and documentation requirements.
- Agencies: Must monitor contract performance and costs, and ensure compliance with FAR limitations.
Practical Implications
- This section exists to ensure cost-reimbursement contracts are only used when necessary and with proper controls.
- It impacts daily contracting by requiring careful justification, system adequacy checks, and ongoing oversight.
- Common pitfalls include inadequate accounting systems, insufficient oversight, and misuse of contract type.