31.201-5
Credits
Contractors must credit the government for any income, rebates, or other credits related to allowable costs, either by reducing billed costs or issuing a cash refund.
Overview
FAR 31.201-5 requires contractors to credit the government for any income, rebates, allowances, or other credits that are related to allowable costs under a government contract. This means that if a contractor receives or accrues any such credits, they must either reduce the cost charged to the government or provide a cash refund. The regulation ensures that the government does not pay more than the net cost incurred by the contractor. Special rules apply to pension adjustments and asset reversions, which are addressed in FAR 31.205-6(j)(3).
Key Rules
- Credits Related to Allowable Costs
- Any credit (income, rebate, allowance, etc.) associated with allowable costs must be passed on to the government.
- Method of Crediting
- Credits must be provided either as a reduction in billed costs or as a cash refund to the government.
- Special Pension and Asset Rules
- Pension adjustments and asset reversions have specific rules referenced in FAR 31.205-6(j)(3).
Responsibilities
- Contracting Officers: Ensure contractors properly credit the government for applicable credits and verify compliance during cost reviews or audits.
- Contractors: Identify, track, and credit all applicable income, rebates, allowances, or other credits related to allowable costs.
- Agencies: Oversee contractor compliance and enforce cost accounting standards.
Practical Implications
- This rule prevents contractors from double-dipping by charging the government for costs that have been offset by credits.
- Contractors must have systems in place to identify and apply credits.
- Failure to properly credit the government can result in audit findings, repayment demands, or penalties.