Construction and architect-engineer contracts
FAR 31.105 requires construction and architect-engineer contracts to follow specific cost principles, with special attention to equipment costs and advance agreements to ensure only allowable expenses are reimbursed.
Overview
FAR 31.105 outlines the cost principles and procedures applicable to construction and architect-engineer contracts negotiated on the basis of cost, excluding contracts with educational institutions, state/local governments, and certain nonprofits. It mandates the use of FAR subpart 31.2 cost principles for pricing, cost determination, and contract modifications, with specific guidance for construction equipment costs, job site expenses, and temporary facilities. The section emphasizes the importance of advance agreements for items like home office overhead and equipment usage, and provides detailed rules for determining allowable costs for owned, rented, or scheduled-rate construction equipment. It also clarifies the treatment of direct and indirect job site costs and temporary land or facility use.
Key Rules
- Applicability
- Applies to cost-based construction and architect-engineer contracts (excluding certain organizations) for real property projects.
- Cost Principles
- Requires use of FAR 31.2 cost principles for pricing, indirect rates, terminations, price revisions, and modifications.
- Advance Agreements
- Strongly encourages advance agreements for overhead, compensation, consultants, and equipment costs to avoid disputes.
- Construction Equipment Costs
- Details methods for determining allowable costs for owned, rented, or scheduled-rate equipment, and prohibits unallowable costs via schedules.
- Job Site and Temporary Facility Costs
- Allows direct or indirect charging of job site and temporary facility costs if consistent with established accounting practices.
Responsibilities
- Contracting Officers: Must incorporate FAR 31.2 by reference, review equipment cost schedules, and encourage advance agreements.
- Contractors: Must follow established cost accounting practices, properly segregate equipment and job site costs, and exclude unallowable costs.
- Agencies: Should specify schedules for equipment rates when needed and ensure compliance with cost principles.
Practical Implications
- Ensures consistent, fair cost treatment for construction and architect-engineer contracts.
- Reduces disputes by clarifying allowable costs and encouraging advance agreements.
- Contractors must maintain robust accounting systems and documentation to support cost claims, especially for equipment and job site expenses.