31.105 Construction and architect-engineer

contracts.

(a) This category includes all contracts and contract modifications negotiated on the basis of cost

with organizations other than educational institutions (see 31.104), State and local governments (see

31.107), and nonprofit organizations except those exempted under OMB Uniform Guidance at 2 CFR

part 200, appendix VIII (see 31.108) for construction management or construction, alteration or

repair of buildings, bridges, roads, or other kinds of real property. It also includes architect-engineer

contracts related to construction projects. It does not include contracts for vessels, aircraft, or other

kinds of personal property.

(b) Except as otherwise provided in (d) of this section, the cost principles and procedures in subpart 

31.2 shall be used in the pricing of contracts and contract modifications in this category if cost

analysis is performed as required by 15.404-1(c).

(c) In addition, the contracting officer shall incorporate the cost principles and procedures in

subpart 31.2 (as modified by (d) of this section by reference in contracts in this category as the

basis for-

(1) Determining reimbursable costs under cost-reimbursement contracts, including costreimbursement subcontracts thereunder;

(2) Negotiating indirect cost rates;

(3) Proposing, negotiating, or determining costs under terminated contracts;

(4) Price revision of fixed-price incentive contracts; and

(5) Pricing changes and other contract modifications.

(d) Except as otherwise provided in this paragraph (d), the allowability of costs for construction and

architect-engineer contracts shall be determined in accordance with subpart 31.2.

(1) Because of widely varying factors such as the nature, size, duration, and location of the

construction project, advance agreements as set forth in 31.109, for such items as home office

overhead, partners’ compensation, employment of consultants, and equipment usage costs, are

particularly important in construction and architect-engineer contracts. When appropriate, they

serve to express the parties’ understanding and avoid possible subsequent disputes or

disallowances.

(2) "Construction equipment," as used in this section, means equipment (including marine

equipment) in sound workable condition, either owned or controlled by the contractor or the

subcontractor at any tier, or obtained from a commercial rental source, and furnished for use under

Government contracts.

(i) Allowable ownership and operating costs shall be determined as follows:

(A) Actual cost data shall be used when such data can be determined for both ownership and

operations costs for each piece of equipment, or groups of similar serial or series equipment, from

the contractor’s accounting records. When such costs cannot be so determined, the contracting
agency may specify the use of a particular schedule of predetermined rates or any part thereof to

determine ownership and operating costs of construction equipment (see subdivisions (d)(2)(i)(B)

and (C) of this section). However, costs otherwise unallowable under this part shall not become

allowable through the use of any schedule (see 31.109(c)). For example, schedules need to be

adjusted for Government contract costing purposes if they are based on replacement cost, include

unallowable interest costs, or use improper cost of money rates or computations. Contracting

officers should review the computations and factors included within the specified schedule and

ensure that unallowable or unacceptably computed factors are not allowed in cost submissions.

(B) Predetermined schedules of construction equipment use rates (e.g., the Construction Equipment

Ownership and Operating Expense Schedule, published by the U.S. Army Corps of Engineers,

industry sponsored construction equipment cost guides, or commercially published schedules of

construction equipment use cost) provide average ownership and operating rates for construction

equipment. The allowance for operating costs may include costs for such items as fuel, filters, oil,

and grease; servicing, repairs, and maintenance; and tire wear and repair. Costs of labor,

mobilization, demobilization, overhead, and profit are generally not reflected in schedules, and

separate consideration may be necessary.

(C) When a schedule of predetermined use rates for construction equipment is used to determine

direct costs, all costs of equipment that are included in the cost allowances provided by the schedule

shall be identified and eliminated from the contractor’s other direct and indirect costs charged to

the contract. If the contractor’s accounting system provides for site or home office overhead

allocations, all costs which are included in the equipment allowances may need to be included in any

cost input base before computing the contractor’s overhead rate. In periods of suspension of work

pursuant to a contract clause, the allowance for equipment ownership shall not exceed an amount

for standby cost as determined by the schedule or contract provision.

(ii) Reasonable costs of renting construction equipment are allowable (but see paragraph (C) of this

subsection).

(A) Costs, such as maintenance and minor or running repairs incident to operating such rented

equipment, that are not included in the rental rate are allowable.

(B) Costs incident to major repair and overhaul of rental equipment are unallowable.

(C) The allowability of charges for construction equipment rented from any division, subsidiary, or

organization under common control, will be determined in accordance with 31.205-36(b)(3).

(3) Costs incurred at the job site incident to performing the work, such as the cost of

superintendence, timekeeping and clerical work, engineering, utility costs, supplies, material

handling, restoration and cleanup, etc., are allowable as direct or indirect costs, provided the

accounting practice used is in accordance with the contractor’s established and consistently

followed cost accounting practices for all work.

(4) Rental and any other costs, less any applicable credits incurred in acquiring the temporary use of

land, structures, and facilities are allowable. Costs, less any applicable credits, incurred in

constructing or fabricating structures and facilities of a temporary nature are allowable.

Parent topic: Subpart 31.1 - Applicability