31.205-10 Cost of money
Source: FAR 31.205-10 on acquisition.gov
Cost of money is an allowable imputed cost if measured, allocated, and proposed according to CAS and FAR requirements, but actual interest costs are never allowable.
Overview
FAR 31.205-10 addresses the allowability of "cost of money" as an imputed cost in government contracts. Cost of money is not considered interest on borrowings but is an incurred cost for both cost-reimbursement and certain fixed-price contracts. It specifically refers to facilities capital cost of money and cost of money for capital assets under construction, as defined by Cost Accounting Standards (CAS) 414 and 417. The regulation allows cost of money as a contract cost if it is measured, assigned, and allocated according to these CAS standards, the requirements of FAR 31.205-52 are met, and the estimated amount is specifically identified and proposed in cost proposals. Importantly, actual interest costs cannot be substituted for the calculated imputed cost of money.
Key Rules
- Definition and Scope
- Cost of money is an imputed cost, not actual interest, and applies to facilities and capital assets under construction.
- Allowability Conditions
- Allowable only if measured and allocated per CAS 414/417, FAR 31.205-52 is followed, and the cost is specifically proposed in contract cost proposals.
- Prohibition on Actual Interest
- Actual interest costs are not allowable in place of imputed cost of money.
Responsibilities
- Contracting Officers: Ensure contractors comply with CAS 414/417 and FAR 31.205-52, and verify cost proposals include specifically identified cost of money.
- Contractors: Properly measure, allocate, and propose cost of money in accordance with CAS and FAR requirements; do not claim actual interest costs.
- Agencies: Oversee compliance and review cost proposals for proper inclusion of cost of money.
Practical Implications
- This section ensures contractors can recover the opportunity cost of capital tied up in facilities and assets, but only under strict measurement and proposal requirements. Failure to follow CAS or to specifically propose the cost can result in disallowance. Contractors must avoid claiming actual interest as a substitute, a common compliance pitfall.
(a) General. Cost of money-
(1) Is an imputed cost that is not a form of interest on borrowings (see 31.205-20);
(2) Is an "incurred cost" for cost-reimbursement purposes under applicable cost-reimbursement contracts and for progress payment purposes under fixed-price contracts; and
(3) Refers to-
(i) Facilities capital cost of money (48 CFR9904.414); and
(ii) Cost of money as an element of the cost of capital assets under construction (48 CFR9904.417).
(b) Cost of money is allowable, provided-
(1) It is measured, assigned, and allocated to contracts in accordance with 48 CFR9904.414 or measured and added to the cost of capital assets under construction in accordance with 48 CFR9904.417, as applicable;
(2) The requirements of 31.205-52, which limit the allowability of cost of money, are followed; and
(3) The estimated facilities capital cost of money is specifically identified and proposed in cost proposals relating to the contract under which the cost is to be claimed.
(c) Actual interest cost in lieu of the calculated imputed cost of money is unallowable.