The cost principles found in FAR (Federal Acquisition Regulations) Part 31 apply to many, but not all, contracting situations. For example, the cost principles do not apply in a competitive award situation or for procurement of commercial items. FAR 31.1 describes the situations where FAR Part 31 must be used in determining contract costs.
Pricing
FAR Part 31 must be used in the pricing of fixed-price contracts, subcontracts, and modifications to contracts and subcontracts whenever (i) cost analysis is performed or (ii) a fixed-price contract clause requires the determination or negotiation of costs (see FAR 31.102).
FAR Part 31 shall be used in pricing negotiated supply, service, experimental, developmental, and research contracts and contract modifications with commercial organizations whenever cost analysis is performed (see FAR 31.103(a)).
Reimbursement
FAR Part 31 is required as the basis for determining reimbursable costs under cost-reimbursable contracts and subcontracts (see FAR 31.103(b)(1)(i)).
FAR Part 31 is required as the basis for determining reimbursable costs for the reimbursable portion of time and material contracts (see FAR 31.103(b)(1)(ii)).
Other Situations
FAR Part 31 is required for negotiating indirect cost rates (see FAR 31103(b)(2)).
FAR Part 31 is required for proposing, negotiating, or determining costs under terminated contracts (see FAR 31.103(b)(3))
Finally, the cost principles found in FAR Part 31 apply when pricing changes and other contract modifications (see FAR 31.103(b)(6)). In this regard, modifications or requests for equitable adjustment to contracts awarded based on competition (or any method where cost analysis was not performed) must utilize FAR Part 31 cost principles, even where those cost principles were not used in determining the price of the original contract.
Information other than Certified Cost or Pricing Data
Some contracts are awarded based on data provided but not certified by contractors - information other than certified cost or pricing data. FAR Part 31 does not apply however, we have seen cases where the contracting officer will apply FAR Part 31 cost principles to such data. We advise contractors, when responding to a solicitation requiring information other than certified cost or pricing data, to use the same estimating techniques they would use when certified cost or pricing data is required.
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