36.205 Statutory cost limitations
Source: FAR 36.205 on acquisition.gov
Construction contracts must strictly adhere to statutory cost limitations, with offers structured to reflect all costs and avoid unbalanced pricing, or risk rejection.
Overview
FAR 36.205 establishes requirements for adhering to statutory cost limitations in construction contracts. It prohibits awarding contracts that exceed legal cost caps unless a written waiver is obtained, and mandates that solicitations clearly state these limitations for each affected item. Offers must include separately-priced schedules reflecting all direct and indirect costs plus profit. The regulation requires rejection of offers that exceed statutory limits or are materially unbalanced, unless specific exemptions apply or separate awards for compliant items are permitted. This ensures transparency, compliance with legal funding restrictions, and prevents manipulation of pricing structures.
Key Rules
- Adherence to Statutory Cost Limits
- Construction contracts cannot exceed statutory cost limits unless a written waiver is granted.
- Solicitation Requirements
- Solicitations must specify cost limits for each item, require separately-priced schedules, and ensure all costs and profit are apportioned.
- Offer Evaluation and Rejection
- Offers exceeding statutory limits or containing materially unbalanced pricing must be rejected, unless exemptions or separate awards are justified.
Responsibilities
- Contracting Officers: Ensure solicitations and awards comply with statutory cost limits, obtain waivers if needed, and reject non-compliant or unbalanced offers.
- Contractors: Submit offers with separately-priced schedules, accurately apportioning all costs and profit, and avoid unbalanced pricing.
- Agencies: Oversee compliance, grant waivers when justified, and enforce statutory limitations.
Practical Implications
- This section ensures government construction contracts remain within legal funding boundaries and prevents cost manipulation.
- Contractors must carefully structure bids to comply with cost limitations and avoid unbalanced pricing.
- Non-compliance can result in offer rejection, making attention to detail in pricing and documentation critical.
(a) Contracts for construction shall not be awarded at a cost to the Government-
(1) In excess of statutory cost limitations, unless applicable limitations can be and are waived in writing for the particular contract; or
(2) Which, with allowances for Government-imposed contingencies and overhead, exceeds the statutory authorization.
(b) Solicitations containing one or more items subject to statutory cost limitations shall state-
(1) The applicable cost limitation for each affected item in a separate schedule;
(2) That an offer which does not contain separately-priced schedules will not be considered; and
(3) That the price on each schedule shall include an approximate apportionment of all estimated direct costs, allocable indirect costs, and profit.
(c) The Government shall reject an offer if its prices exceed applicable statutory limitations, unless laws or agency procedures provide pertinent exemptions. However, if it is in the Government’s interest, the contracting officer may include a provision in the solicitation which permits the award of separate contracts for individual items whose prices are within or subject to applicable statutory limitations.
(d) The Government shall also reject an offer if its prices are within statutory limitations only because it is materially unbalanced. An offer is unbalanced if its prices are significantly less than cost for some work, and overstated for other work.