16.301-3
Limitations
Cost-reimbursement contracts are only permitted under strict conditions and are never allowed for commercial products or services.
Overview
FAR 16.301-3 outlines the strict limitations and prerequisites for using cost-reimbursement contracts in federal acquisitions. This section ensures that such contracts are only used when absolutely necessary and when both the government and contractor can manage the associated risks and requirements. It mandates consideration of specific factors, approval of a written acquisition plan, verification of the contractor’s accounting system, and confirmation of adequate government resources for contract management and surveillance. Importantly, it explicitly prohibits the use of cost-reimbursement contracts for commercial products and services.
Key Rules
- Consideration of Factors (16.104)
- Contracting officers must evaluate the factors in FAR 16.104 before selecting a cost-reimbursement contract.
- Acquisition Plan Approval
- A written acquisition plan must be approved and signed at least one level above the contracting officer.
- Adequate Contractor Accounting System
- The contractor’s accounting system must be sufficient to determine costs applicable to the contract or order.
- Government Resources and Surveillance
- The government must have adequate resources to award and manage the contract, including effective surveillance during performance.
- Prohibition for Commercial Items
- Cost-reimbursement contracts cannot be used for acquiring commercial products or services.
Responsibilities
- Contracting Officers: Ensure all prerequisites are met, obtain necessary approvals, and confirm contractor accounting adequacy.
- Contractors: Maintain an adequate accounting system and be prepared for government surveillance.
- Agencies: Provide sufficient resources for contract management and oversight.
Practical Implications
- This section exists to minimize risk and ensure accountability in cost-reimbursement contracting.
- It impacts daily contracting by requiring rigorous planning, documentation, and oversight.
- Common pitfalls include inadequate planning, insufficient government resources, or using this contract type for commercial acquisitions, all of which can lead to noncompliance.