# DLAD PART 31 – CONTRACT COST PRINCIPLES AND PROCEDURES

- 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 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

(Revised April 19, 2013 through PROCLTR 2013-43)

31.109 Advance agreements.

31.109 Advance agreements.

(a) – (g) [Reserved.]

(h) (1) – (3) [Reserved.]

(h)(4)(S-90) Pre-contract costs. (See also FAR 31.205-32 and DLAD 17.74.)

(i) Pre-contract cost agreement may be used when:

(A) 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

(B) 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. The written agreement, signed by the Government and contractor, shall contain a limit or ceiling for pre-contract costs with a limit on the duration of time, as well as establish terms and conditions prior to issuance to the contractor.

(ii) The contracting officer shall ensure that a pre-contract cost agreement is reviewed for legal sufficiency and approved by the head of the contracting activity (HCA). The approval authority may be delegated to a level no lower than the Chief of the Contracting Office (CCO). The contracting officer shall] include the request for pre-contract cost agreement in the request for contract clearance.

(iii) The contracting officer shall obtain legal review before issuing the written pre-contract cost agreement to the contractor. The agreement must be signed by both parties. 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.

(iv)(A) 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 a date before the contract award date for the purpose of cost allowability for pre-contract costs, as set forth in the pre-contract cost agreement. Only pre-contract costs incurred on or after the date of the signed pre-contract cost agreement will be subject to reimbursement.

(B) State in the pre-contract cost agreement 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 a contract is not awarded, all incurred costs shall be at the contractor’s own risk.

(C) Refer to 17.74, if the use of a letter contract or undefinitized action is necessary, instead of an advance agreement.

(v) Insert a pre-contract cost clause substantially the same as at 52.231-9000, Pre-Contract Costs, in any resulting contract when the conditions for pre-contract costs apply and policy in this section have been followed. The contracting officer shall insure the required information is filled-in.

SUBPART 31.2 – CONTRACTS WITH COMMERCIAL ORGANIZATIONS

31.205-7 Contingencies.

(a) – (b) [Reserved.]

(c)(1) [Reserved.]

(c)(2)(S-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)(1) – (a)(2) [Reserved.]

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