31.202
Direct costs
Direct costs must be consistently and accurately charged to the appropriate contract, with minor exceptions allowed only if applied uniformly and without material impact.
Overview
FAR 31.202 defines what constitutes a direct cost in government contracting and sets rules for how such costs must be allocated to contracts. The section ensures that costs are consistently and appropriately charged as either direct or indirect, preventing double-counting or misallocation. It also allows for practical exceptions for minor costs, provided consistency and materiality are maintained.
Key Rules
- Direct Cost Allocation
- Costs that are directly attributable to a specific contract (or other final cost objective) must be charged directly to that contract and not included in indirect cost pools.
- Consistency Requirement
- Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect across all contracts.
- Minor Dollar Amount Exception
- Contractors may treat minor direct costs as indirect if this is done consistently and does not materially affect the allocation results.
Responsibilities
- Contracting Officers: Ensure contractors' cost allocation practices comply with these rules and review cost proposals for proper classification.
- Contractors: Maintain consistent accounting practices, properly classify costs, and document any exceptions for minor costs.
- Agencies: Oversee contractor compliance and audit cost allocation as needed.
Practical Implications
- This section prevents improper charging of costs to contracts, ensuring fairness and accuracy in cost reimbursement.
- Contractors must have robust accounting systems to distinguish between direct and indirect costs.
- Misclassification or inconsistent treatment can lead to audit findings, disallowed costs, or contract disputes.