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                            31.205-47 Costs related to legal and other proceedings.
        
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FAC Number: 2024-03 Effective Date: 02/23/2024
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Subpart31.031.131.231.331.631.7
Section31.20131.20231.20331.20431.205
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31.205-47 Costs related to legal and other proceedings.31.205-47 Costs related to legal and other proceedings.       (a)                   *Definitions.* As used in this subsection-                *Costs* include, but are not                   limited to, administrative and clerical expenses; the costs of                   legal services, whether performed by in-house or private                   counsel; the costs of the services of accountants,                   consultants, or                   others retained by the contractor or subcontractor to assist                   it;                   costs of employees, officers, and directors; and any similar                   costs incurred before, during, and after commencement of a                   judicial or administrative proceeding which bears a direct                   relationship to the proceeding.                *Fraud* means-(1) Acts of fraud or corruption or attempts to defraud the Government or to corrupt its agents;                                                                     (2) Acts which constitute a cause for debarment or suspension under  9.406-2(a) and  9.407-2(a); and                                                                     (3) Acts which violate the False Claims Act,   31 U.S.C., sections3729-3731, or   41 U.S.C. chapter 87, Kickbacks.                                                                         *Penalty* does not include restitution, reimbursement, or compensatory damages.                *Proceeding* includes an investigation.                                          (b) Costs incurred in connection with                   any proceeding brought by: a Federal, State, local, or foreign                   government for a violation of, or failure to comply with, law                   or regulation by the contractor or                   subcontractor                   (including its agents or employees) (  41 U.S.C. 4310 and   10 U.S.C. 3750); a contractor or                   subcontractor employee submitting a whistleblower complaint of                   reprisal in accordance with   41 U.S.C. 4712 or   10 U.S.C. 4701; or a third party in                   the name of the United States under the False Claims Act,   31 U.S.C.3730, are unallowable if                   the result is-(1) In a criminal proceeding, a                         conviction;                                                                     (2) In a civil or                         administrative proceeding, either                         a finding of contractor or subcontractor                         liability                         where the proceeding involves an allegation of fraud or                         similar misconduct; or imposition of a monetary penalty,                         or an order issued by the agency head to the contractor                         or subcontractor to take corrective action under   41 U.S.C. 4712 or   10 U.S.C. 4701, where the                         proceeding does not involve an allegation of fraud or                         similar misconduct;                                                                     (3) A final decision by an                         appropriate official of an executive agency to-                                                                                    (i) Debar or suspend the                               contractor or                               subcontractor;                                                                                       (ii) Rescind or void a                               contract; or                                                                                       (iii) Terminate a                               contract for default by reason of a violation or                               failure to comply with a law or regulation.                                                                                                                          (4) Disposition of the matter                         by consent or compromise if the proceeding could have                         led to any of the outcomes listed in paragraphs (b)(1)                         through (3) of this subsection (but see paragraphs (c)                         and (d) of this subsection); or                                                                     (5) Not covered by paragraphs                         (b)(1) through (4) of this subsection, but where the                         underlying alleged contractor misconduct was the same as                         that which led to a different proceeding whose costs are                         unallowable by reason of paragraphs (b)(1) through (4)                         of this subsection.                                                                                                   (c)                                                         (1) To the extent they are not                         otherwise unallowable, costs incurred in connection with                         any proceeding under paragraph (b) of this subsection                         commenced by the United States that is resolved by                         consent or compromise pursuant to an agreement entered                         into between                         the contractor or                         subcontractor                         and the United States, and which are unallowable solely                         because of paragraph (b) of this subsection, may be                         allowed to the extent specifically provided in such                         agreement                                                            (2)                                                                           (i) In the event of a                               settlement of any proceeding brought by a third                               party under the False Claims Act in which the                               United States did not intervene, reasonable costs incurred                               by the contractor or                               subcontractor                               in connection with such a proceeding that are not                               otherwise unallowable by regulation or by separate                               agreement with the United States may be allowed if                               the contracting officer, in consultation with his                               or her legal advisor, determines that there was                               very little likelihood that the third party would                               have been successful on the merits.                                                                              (ii) In the event of disposition by consent or compromise of a proceeding brought by a whistleblower for alleged reprisal in accordance with   41 U.S.C. 4712 or                                     10 U.S.C. 4701, reasonable costs incurred by a contractor or subcontractor in connection with such a proceeding that are not otherwise unallowable by regulation or by agreement with the United States may be allowed if the contracting officer, in consultation with his or her legal advisor, determined that there was very little likelihood that the claimant would have been successful on the merits.                                                                                                                            (d) 						            To the extent that they are not otherwise unallowable, costs incurred in connection with any proceeding under paragraph (b) of this subsection commenced by a State, local, or foreign government may be allowable when the contracting officer (or other official specified in agency procedures) determines, that the costs were incurred either:                                                         (1) As a direct result of a                         specific term or condition of a Federal                         contract or subcontract;                         or                                                            (2) 								                As a result of compliance with specific written direction of the cognizant contracting officer.                                                                             (e) 						            Costs incurred in connection with proceedings described in paragraph (b) of this subsection, but which are not made unallowable by that paragraph, may be allowable to the extent that:                                                         (1) 								                The costs are reasonable in relation to the activities required to deal with the proceeding and the underlying cause of action;                                                            (2) 								                The costs are not otherwise recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise; and                                                            (3) 								                The percentage of costs allowed does not exceed the percentage determined to be appropriate considering the complexity of procurement litigation, generally accepted principles governing the award of legal fees in civil actions involving the United States as a party, and such other factors as may be appropriate. Such percentage shall not exceed 80 percent. Agreements reached under paragraph (c) of this subsection shall be subject to this limitation. If, however, an agreement described in paragraph (c)(1) of this subsection explicitly states the amount of otherwise allowable incurred legal fees and limits the allowable recovery to 80 percent or less of the stated legal fees, no additional limitation need be applied. The amount of reimbursement allowed for legal costs in connection with any proceeding described in paragraph (c)(2) of this subsection shall be determined by the cognizant contracting officer, but shall not exceed 80 percent of otherwise allowable legal costs incurred.                                                                             (f) Costs not covered elsewhere in                   this subsection are unallowable if incurred in connection                   with the                   following:                                                         (1) 								                Defense against Federal Government claims or appeals or the prosecution of claims or appeals against the Federal Government (see  2.101).                                                            (2) 								                Organization, reorganization, (including mergers and acquisitions) or resisting mergers and acquisitions (see also  31.205-27).                                                            (3) 								                Defense of antitrust suits.                                                            (4) Defense of suits brought by                         employees or ex-employees of the                         contractor or                         subcontractor                         under section 2 of the Major Fraud Act of 1988 where the contractor or                         subcontractor was found liable or settled.                                                            (5)                         Costs                         of legal, accounting, and consultant services and                         directly associated costs incurred in connection with                         the defense or prosecution of lawsuits or appeals                         between contractors or subcontractors arising from                         either—                                                                           (i)                               An agreement or                               contract concerning a teaming arrangement, a joint                               venture, or similar arrangement of shared                               interest; or                                                                              (ii)                               Dual sourcing,                               coproduction, or similar programs, are                               unallowable, except when—                                                                                             (A)                                     Incurred                                     as a result of compliance with specific                                     terms and conditions of the contract or                                     subcontract or written instructions from the                                     contracting officer; or                                                                                                (B)                                     When                                     agreed to in writing by the contracting                                     officer.                                                                                                                                                                      (6) Patent infringement litigation, unless otherwise provided for in the contract or subcontract.                                                            (7) Representation of, or assistance to, individuals, groups, or legal entities which the contractor or subcontractor is not legally bound to provide, arising from an action where the participant was convicted of violation of a law or regulation or was found liable in a civil or administrative proceeding.                                                            (8) 								                Protests of Federal Government solicitations or contract awards, or the defense against protests of such solicitations or contract awards, unless the costs of defending against a protest are incurred pursuant to a written request from the cognizant contracting officer.                                                            (9) A Congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition as described in paragraphs (b)(1) through (5) of this section (see                               10 U.S.C. 3744(a)(17)).                                                                             (g) Costs which may be unallowable under  31.205-47, including directly associated costs, shall be segregated and accounted for by the contractor or subcontractor separately. During the pendency of any proceeding covered by paragraph (b) and paragraphs (f)(4) and (f)(7) of this subsection, the contracting officer shall generally withhold payment of such costs. However, if in the best interests of the Government, the contracting officer may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreement by the contractor or subcontractor to repay all unallowable costs, plus interest, if the costs are subsequently determined to be unallowable.    **Parent topic:**  31.205 Selected costs.
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