36.205
Statutory cost limitations
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.