# DLAD PART 31 – CONTRACT COST PRINCIPLES AND PROCEDURES

- SUBPART 31.1 – APPLICABILITY

- 31.109(h)(4)(90) Pre–Contract Costs.

- SUBPART 31.2 – CONTRACTS WITH COMMERCIAL ORGANIZATIONS

- 31.205-7 Contingencies.
- 31.205-10 Cost of money.
- 31.205-19 Interest and indemnification.

PART 31 – CONTRACT COST PRINCIPLES AND PROCEDURES

TABLE OF CONTENTS

SUBPART 31.1 – APPLICABILITY

31.109 Advance agreements.

SUBPART 31.2 – CONTRACTS WITH COMMERCIAL ORGANIZATIONS

31.205-7 Contingencies.

31.205-10 Cost of money.

31.205-19 Insurance and indemnification.

SUBPART 31.1 – APPLICABILITY

31.109(h)(4)(90) Pre–Contract Costs.

(a) Pre-contract cost agreement (also see FAR 31.205-32) may be used when:

(1) the prospective contractor elects to incur costs, at its own risk, before the effective date of a resulting contract in order meet the delivery schedule and requests pre-contract cost recognition; and

(2) the contracting officer agrees the government shall recognize pre-contract costs to the same extent as if incurred after the effective date of any resulting contract.

(b) Pre-contract cost agreements are approved at the same level and in the same manner as an Undefinitized Contract Action (UCA) (see 1.690-6(h)) at that dollar level and must be reviewed for legal sufficiency. Whenever possible, include the request for pre-contract cost agreement in the request for contract clearance.

(c) Obtain legal review before issuing the agreement. As a condition precedent to the use of a pre-contract cost agreement, the correct type of funds must be available upon issuance of the pre-contract cost agreement. While not legally necessary, prudent business acumen would dictate, that to the maximum extent possible, agreement on terms and conditions also be established prior to issuance of a pre-contract agreement.

(d) Obtain CCO approval, and, as applicable, legal review if the conditions in (4) apply, if the contracting officer plans to advise a prospective contractor of the government’s intent to use an effective date before the contract mailing (award) date.

(1) Approval level for the use of an early effective date is the CCO. After reaching agreement on terms, conditions, price, and if funds are available, the contracting officer may advise a prospective contractor in writing of the Government’s intent to use an effective date before the contract mailing (award) date. The early effective date shall not be earlier than the price agreement date.

(2) State in the notice to the contractor that any costs recognized in a resulting contract shall be limited to those allowable, allocable and reasonable costs that would normally be recognized if incurred after contract award. Also state that if there is no contract, all incurred costs shall be at the contractor’s own risk.

(3) Provide contractual coverage with a letter contract, or other appropriate undefinitized contractual action, if the Government intends to direct a prospective contractor, accept benefits of efforts, or make payments before definitive contract mailing date.

(4) Obtain legal review for early effective dates established more than 30 days prior to the envisioned contract award date.

(e) Insert a pre-contract cost clause substantially the same as at 52.231-9000, Pre-Contract Costs (Air Force DLR – Aviation Supply Chain), in any resulting contract.

SUBPART 31.2 – CONTRACTS WITH COMMERCIAL ORGANIZATIONS

31.205-7 Contingencies.

(c)(2)(90) When a negotiated fixed price type contract (including indefinite delivery, labor-hour, or time-and-materials contracts) is contemplated, whether to be awarded on a firm-priced or flexibly priced basis (includes economic and award fee bases), the following techniques should be considered to overcome contingencies described in FAR 31.205-7(c)(2) which present a substantial uncertainty and financial risk to the contractor and/or the Government:

(i) Applying a decrement factor for contingencies involving materials (see 15.401);

(ii) Delaying the award so that the contingent effect may reasonably be determined or the contingency resolved, and the contract priced accordingly;

(iii) Using a cost reimbursable type contract;

(iv) Segregating the contingency as a cost reimbursable line; or,

(v) When the contracting officer documents why each of the preceding techniques will not suffice, incorporating a reopener clause in the contract (see Subpart 17.92).

31.205-10 Cost of money.

(a)(1)(ii)(c) For information on the interest rate specified at this FAR cite, see 30.7001-2(e).

31.205-19 Interest and indemnification.

(a)(3)(i) For information on the interest rate specified at this FAR cite, see 30.7001-2(e).