52.216-11 Cost Contract-No Fee
Source: FAR 52.216-11 on acquisition.gov
FAR 52.216-11 ensures contractors are reimbursed only for allowable costs with no fee, and allows the government to withhold a reserve to protect its interests near contract completion.
Overview
FAR 52.216-11, "Cost Contract-No Fee," is a clause used in cost-reimbursement contracts where the contractor is not paid a fee and the contract is not a cost-sharing agreement. This clause is typically inserted when the government wants to reimburse allowable costs only, without any profit or fee to the contractor. It also establishes a mechanism for the Contracting Officer to withhold a portion of allowable costs after 80% of the estimated contract cost has been paid, to protect the government’s interests. For nonprofit organizations, the maximum reserve may be reduced from $100,000 to $10,000. An alternate version allows for deletion of the withholding provision in certain research and development contracts with educational or nonprofit institutions if the Contracting Officer determines withholding is unnecessary.
Key Rules
- No Fee Payment
- The contractor will not receive any fee for performing the contract; only allowable costs will be reimbursed.
- Withholding of Allowable Costs
- After 80% of the estimated cost is paid, the Contracting Officer may withhold further payments to establish a reserve (up to 1% of the estimated cost or $100,000, whichever is less; $10,000 for nonprofits).
- Alternate I for Nonprofits/Educational Institutions
- For certain R&D contracts with nonprofits or educational institutions, the withholding provision can be omitted if deemed unnecessary by the Contracting Officer.
Responsibilities
- Contracting Officers: Must insert this clause in applicable contracts, determine if withholding is necessary, and set appropriate reserve amounts. For nonprofits, may adjust the reserve limit or use Alternate I.
- Contractors: Must comply with the no-fee provision and be aware of potential withholding of allowable costs as specified.
- Agencies: Ensure proper clause usage and oversight of payment withholdings.
Practical Implications
- This clause ensures contractors are reimbursed only for costs, with no profit, and protects the government by allowing withholding of funds near contract completion. Contractors should plan for potential cash flow impacts due to withheld payments. Nonprofits and educational institutions may benefit from reduced or eliminated withholding, easing administrative burden.
As prescribed in 16.307(e), insert the clause in solicitations and contracts when a cost-reimbursement contract is contemplated that provides no fee and is not a cost-sharing contract. This clause may be modified by substituting "$10,000" in lieu of "$100,000" as the maximum reserve in paragraph (b) if the Contractor is a nonprofit organization.
Cost Contract-No Fee (Apr 1984)
(a) The Government shall not pay the Contractor a fee for performing this contract.
(b) After payment of 80 percent of the total estimated cost shown in the Schedule, the Contracting Officer may withhold further payment of allowable cost until a reserve is set aside in an amount that the Contracting Officer considers necessary to protect the Government’s interest. This reserve shall not exceed onepercent of the total estimated cost shown in the Schedule or $100,000, whichever is less.
(End of clause)
Alternate I (Apr 1984). In a contract for research and development with an educational institution or a nonprofit organization, for which the Contracting Officer has determined that withholding of a portion of allowable costs is not required, delete paragraph (b) of the basic clause.