16.303
Cost-sharing contracts
Cost-sharing contracts require contractors to absorb part of the costs and forgo any fee, making them suitable only when substantial non-monetary benefits are expected.
Overview
- FAR 16.303 defines cost-sharing contracts as a type of cost-reimbursement contract where the contractor is reimbursed for only a portion of allowable costs and receives no fee. This arrangement is typically used when the contractor expects to gain substantial benefits beyond the contract itself, such as technical knowledge or commercial opportunities, and is willing to absorb part of the costs. The section also references limitations and requirements found in FAR 16.301-3, which must be considered before using this contract type.
Key Rules
- Definition of Cost-Sharing Contract
- Contractor is reimbursed for an agreed portion of allowable costs and receives no fee.
- Appropriate Use
- Used when the contractor expects substantial compensating benefits and agrees to share costs.
- Limitations
- Must comply with the requirements and limitations in FAR 16.301-3.
Responsibilities
- Contracting Officers: Ensure the contract is suitable for cost-sharing, confirm the contractor's willingness and ability to absorb costs, and verify compliance with FAR 16.301-3.
- Contractors: Agree to absorb a portion of costs and understand that no fee will be paid; must comply with cost-reimbursement requirements.
- Agencies: Oversee proper application and ensure compliance with all relevant FAR provisions.
Practical Implications
- Cost-sharing contracts are designed to encourage contractor investment in projects with mutual benefit, such as research and development. Contractors must be prepared to absorb some costs and forgo profit, while agencies must ensure the arrangement is justified and compliant. Misapplication or misunderstanding of cost-sharing terms can lead to disputes or disallowed costs.