31.205-32
Precontract costs
Precontract costs are only allowable if they would have been allowable after contract award and are necessary for contract performance.
Overview
FAR 31.205-32 addresses the allowability of precontract costs—expenses incurred by a contractor before the official start date of a contract. These costs are only allowable if they are directly related to the negotiation and anticipated award of the contract, and if incurring them was necessary to meet the proposed contract delivery schedule. Importantly, precontract costs are only allowable to the extent that they would have been allowable had they been incurred after the contract's effective date. Contractors should reference FAR 31.109 for further guidance on advance agreements regarding such costs.
Key Rules
- Definition of Precontract Costs
- Costs incurred before the contract's effective date, directly related to negotiation and in anticipation of award, and necessary for meeting delivery schedules.
- Allowability Standard
- Precontract costs are allowable only if they would have been allowable after contract award.
- Reference to Advance Agreements
- Contractors and contracting officers may use advance agreements (see FAR 31.109) to clarify the treatment of precontract costs.
Responsibilities
- Contracting Officers: Must determine if precontract costs meet allowability criteria and may negotiate advance agreements.
- Contractors: Must document and justify precontract costs, ensuring they meet the same standards as post-award costs.
- Agencies: Should provide oversight to ensure compliance with allowability standards.
Practical Implications
- This rule allows contractors to recover necessary costs incurred before contract award, but only under strict conditions.
- Contractors must carefully track and justify precontract costs, as improper claims can lead to disallowance.
- Advance agreements are a best practice to avoid disputes over precontract cost allowability.