Requirements
FAR 31.603 requires contracts with State, local, and tribal governments to follow OMB Uniform Guidance for cost allowability and strictly prohibits specific categories of unallowable costs.
Overview
FAR 31.603 establishes the requirements for determining allowable costs under contracts with State, local, and Indian tribal governments. It directs that such contracts must follow the cost principles set forth in the OMB Uniform Guidance at 2 CFR part 200, subpart E and relevant appendices, as in effect on the contract date. The section also lists specific cost items that are categorically unallowable, regardless of agency or contract specifics, including entertainment, lobbying, certain legal defense costs, fines and penalties, club memberships, alcoholic beverages, donations, promotional expenses, excessive travel costs, golden parachute payments, certain insurance, and specific severance payments. The regulation emphasizes that agencies should not impose additional restrictions beyond those listed, ensuring consistency and clarity in cost allowability for these contracts.
Key Rules
- Reference to OMB Uniform Guidance
- Allowable costs are determined by the OMB Uniform Guidance (2 CFR part 200, subpart E and appendices V and VII) as of the contract date.
- Prohibition on Additional Restrictions
- Agencies should not add further restrictions on individual cost items beyond those specified.
- List of Unallowable Costs
- Explicitly identifies 16 categories of unallowable costs, including entertainment, lobbying, legal defense in fraud cases, fines, club memberships, alcohol, donations, promotional expenses, excessive travel, golden parachute payments, certain insurance, and specific severance payments.
Responsibilities
- Contracting Officers: Must apply OMB Uniform Guidance for cost allowability and enforce the listed unallowable costs.
- Contractors: Must ensure claimed costs comply with OMB Uniform Guidance and avoid the specified unallowable costs.
- Agencies: Should not impose additional cost restrictions and must ensure compliance with statutory prohibitions.
Practical Implications
- This section ensures uniformity and clarity in cost allowability for contracts with State, local, and tribal governments.
- Contractors must be vigilant in excluding the listed unallowable costs from their billings.
- Common pitfalls include inadvertently claiming costs for entertainment, lobbying, or excessive travel, which can lead to disallowances or penalties.