52.216-12 Cost-Sharing Contract-No Fee
Source: FAR 52.216-12 on acquisition.gov
FAR 52.216-12 ensures no fee is paid on cost-sharing contracts and allows the Government to withhold a reserve of allowable costs to protect its interests.
Overview
FAR 52.216-12 establishes the requirements for cost-sharing contracts where no fee is paid to the contractor. This clause is inserted into solicitations and contracts when a cost-sharing arrangement is contemplated, meaning the contractor shares in the costs of performance with the Government. The clause prohibits the payment of any fee to the contractor and allows the Contracting Officer to withhold a portion of allowable costs as a reserve to protect the Government’s interest once 80% of the Government’s share of the estimated cost has been paid. The reserve is capped at the lesser of 1% of the Government’s share or $100,000 (or $10,000 for nonprofit organizations). Alternate I removes the withholding provision for certain research and development contracts with educational institutions if deemed unnecessary by the Contracting Officer.
Key Rules
- No Fee Payment
- Contractors are not entitled to any fee for performing under a cost-sharing contract.
- Withholding Reserve
- After 80% of the Government’s share is paid, the Contracting Officer may withhold further payments to establish a reserve, not exceeding 1% of the Government’s share or $100,000 ($10,000 for nonprofits).
- Alternate I for Educational Institutions
- For R&D contracts with educational institutions, the withholding provision can be omitted if the Contracting Officer determines it is unnecessary.
Responsibilities
- Contracting Officers: Must include this clause in applicable contracts, determine if withholding is necessary, and set appropriate reserve amounts.
- Contractors: Must not expect or claim a fee, and must comply with any withholding of allowable costs as specified.
- Agencies: Ensure oversight of cost-sharing arrangements and proper application of the clause.
Practical Implications
- This clause ensures that contractors in cost-sharing arrangements do not receive a profit or fee, aligning with the intent of shared risk and investment. The withholding provision protects the Government’s financial interest, especially as contract costs near completion. Contractors should be aware of the potential for withheld payments and plan cash flow accordingly. Alternate I provides flexibility for educational institutions engaged in R&D.
As prescribed in 16.307(f), insert the following clause in solicitations and contracts when a cost-sharing contract is contemplated. This clause may be modified by substituting "$10,000" in lieu of "$100,000" as the maximum reserve in paragraph (b) if the contract is with a nonprofit organization.
Cost Sharing Contract-No Fee (Apr 1984)
(a) The Government shall not pay to the Contractor a fee for performing this contract.
(b) After paying 80 percent of the Government’s share of the total estimated cost of performance 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 Government’s share 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, for which the contracting officer has determined that withholding of a portion of allowable cost is not required, delete paragraph (b) of the basic clause.