31.103 Contracts with commercial organizations
Source: FAR 31.103 on acquisition.gov
FAR 31.103 requires commercial organizations to follow FAR subpart 31.2 cost principles for pricing, reimbursement, and contract modifications when cost analysis is performed.
Overview
FAR 31.103 establishes the cost principles and procedures applicable to contracts and contract modifications with commercial organizations, excluding educational institutions, construction and architect-engineer contracts, state and local governments, and nonprofit organizations. It mandates the use of the cost principles in FAR subpart 31.2 and any relevant agency supplements for pricing negotiated contracts involving supplies, services, or research when cost analysis is required. The section also requires these principles to be incorporated by reference in contracts to determine reimbursable costs, negotiate indirect cost rates, handle contract terminations, revise prices for certain fixed-price contracts, and price contract modifications.
Key Rules
- Applicability of Cost Principles
- Use FAR subpart 31.2 and agency supplements for pricing and cost analysis in contracts with commercial organizations.
- Incorporation by Reference
- Contracting officers must reference these cost principles in contracts as the basis for determining reimbursable costs, negotiating indirect cost rates, handling terminations, price revisions, and modifications.
Responsibilities
- Contracting Officers: Must ensure cost principles are applied and referenced in relevant contracts and modifications; responsible for cost analysis and compliance with agency supplements.
- Contractors: Must comply with FAR subpart 31.2 cost principles in cost proposals, billing, and negotiations.
- Agencies: Oversee adherence to cost principles and ensure proper contract administration.
Practical Implications
- This section ensures consistency and fairness in determining allowable costs for commercial organizations in government contracts.
- It impacts how contractors prepare cost proposals and manage billing, especially for cost-reimbursement and time-and-materials contracts.
- Common pitfalls include failing to apply the correct cost principles or omitting required references in contracts, leading to disputes or disallowed costs.
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.
(a) The cost principles and procedures in subpart 31.2 and agency supplements shall be used in pricing negotiated supply, service, experimental, developmental, and research contracts and contract modifications with commercial organizations whenever cost analysis is performed as required by 15.404-1(c).
(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 under-
(i) Cost-reimbursement contracts and cost-reimbursement subcontracts under these contracts performed by commercial organizations and
(ii) The cost-reimbursement portion of time-and-materials contracts except when material is priced on a basis other than at cost (see 16.601(c)(3));
(2) Negotiating indirect cost rates (see subpart 42.7);
(3) Proposing, negotiating, or determining costs under terminated contracts (see 49.103 and 49.113);
(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.