52.216-7 Allowable Cost and Payment.

As prescribed in 16.307(a), insert the following clause:

Allowable Cost and Payment (Aug 2018)

(a) Invoicing.

(1) The Government will make payments to the Contractor when requested as work progresses, but

(except for small business concerns) not more often than once every 2 weeks, in amounts

determined to be allowable by the Contracting Officer in accordance with Federal Acquisition

Regulation (FAR) subpart 31.2 in effect on the date of this contract and the terms of this contract.

The Contractor may submit to an authorized representative of the Contracting Officer, in such form

and reasonable detail as the representative may require, an invoice or voucher supported by a

statement of the claimed allowable cost for performing this contract.

(2) Contract financing payments are not subject to the interest penalty provisions of the Prompt

Payment Act. Interim payments made prior to the final payment under the contract are contract

financing payments, except interim payments if this contract contains Alternate I to the clause at

52.232-25.

(3) The designated payment office will make interim payments for contract financing on the _________

[Contracting Officer insert day as prescribed by agency head; if not prescribed, insert "30th"] day

after the designated billing office receives a proper payment request. In the event that the

Government requires an audit or other review of a specific payment request to ensure compliance

with the terms and conditions of the contract, the designated payment office is not compelled to

make payment by the specified due date.

(b) Reimbursing costs.

(1) For the purpose of reimbursing allowable costs (except as provided in paragraph (b)(2) of this

clause, with respect to pension, deferred profit sharing, and employee stock ownership plan

contributions), the term "costs" includes only—

(i) Those recorded costs that, at the time of the request for reimbursement, the Contractor has paid

by cash, check, or other form of actual payment for items or services purchased directly for the

contract;

(ii) When the Contractor is not delinquent in paying costs of contract performance in the ordinary

course of business, costs incurred, but not necessarily paid, for-

(A) Supplies and services purchased directly for the contract and associated financing payments to

subcontractors, provided payments determined due will be made–

(1) In accordance with the terms and conditions of a subcontract or invoice; and

(2) Ordinarily within 30 days of the submission of the Contractor’s payment request to the

Government;
(B) Materials issued from the Contractor’s inventory and placed in the production process for use on

the contract;

(C) Direct labor;

(D) Direct travel;

(E) Other direct in-house costs; and

(F) Properly allocable and allowable indirect costs, as shown in the records maintained by the

Contractor for purposes of obtaining reimbursement under Government contracts; and

(iii) The amount of financing payments that have been paid by cash, check, or other forms of

payment to subcontractors.

(2) Accrued costs of Contractor contributions under employee pension plans shall be excluded until

actually paid unless-

(i) The Contractor’s practice is to make contributions to the retirement fund quarterly or more

frequently; and

(ii) The contribution does not remain unpaid 30 days after the end of the applicable quarter or

shorter payment period (any contribution remaining unpaid shall be excluded from the Contractor’s

indirect costs for payment purposes).

(3) Notwithstanding the audit and adjustment of invoices or vouchers under paragraph (g) of this

clause, allowable indirect costs under this contract shall be obtained by applying indirect cost rates

established in accordance with paragraph (d) of this clause.

(4) Any statements in specifications or other documents incorporated in this contract by reference

designating performance of services or furnishing of materials at the Contractor’s expense or at no

cost to the Government shall be disregarded for purposes of cost-reimbursement under this clause.

(c) Small business concerns. A small business concern may receive more frequent payments than

every 2 weeks.

(d) Final indirect cost rates.

(1) Final annual indirect cost rates and the appropriate bases shall be established in accordance

with subpart 42.7 of the Federal Acquisition Regulation (FAR) in effect for the period covered by the

indirect cost rate proposal.

(2)

(i) The Contractor shall submit an adequate final indirect cost rate proposal to the Contracting

Officer (or cognizant Federal agency official) and auditor within the 6-month period following the

expiration of each of its fiscal years. Reasonable extensions, for exceptional circumstances only, may

be requested in writing by the Contractor and granted in writing by the Contracting Officer. The

Contractor shall support its proposal with adequate supporting data.

(ii) The proposed rates shall be based on the Contractor’s actual cost experience for that period. The

appropriate Government representative and the Contractor shall establish the final indirect cost
rates as promptly as practical after receipt of the Contractor’s proposal.

(iii) An adequate indirect cost rate proposal shall include the following data unless otherwise

specified by the cognizant Federal agency official:

(A) Summary of all claimed indirect expense rates, including pool, base, and calculated indirect rate.

(B) General and Administrative expenses (final indirect cost pool). Schedule of claimed expenses by

element of cost as identified in accounting records (Chart of Accounts).

(C) Overhead expenses (final indirect cost pool). Schedule of claimed expenses by element of cost as

identified in accounting records (Chart of Accounts) for each final indirect cost pool.

(D) Occupancy expenses (intermediate indirect cost pool). Schedule of claimed expenses by element

of cost as identified in accounting records (Chart of Accounts) and expense reallocation to final

indirect cost pools.

(E) Claimed allocation bases, by element of cost, used to distribute indirect costs.

(F) Facilities capital cost of money factors computation.

(G) Reconciliation of books of account (i.e., General Ledger) and claimed direct costs by major cost

element.

(H) Schedule of direct costs by contract and subcontract and indirect expense applied at claimed

rates, as well as a subsidiary schedule of Government participation percentages in each of the

allocation base amounts.

(I) Schedule of cumulative direct and indirect costs claimed and billed by contract and subcontract.

(J) Subcontract information. Listing of subcontracts awarded to companies for which the contractor

is the prime or upper-tier contractor (include prime and subcontract numbers; subcontract value and

award type; amount claimed during the fiscal year; and the subcontractor name, address, and point

of contact information).

(K) Summary of each time-and-materials and labor-hour contract information, including labor

categories, labor rates, hours, and amounts; direct materials; other direct costs; and, indirect

expense applied at claimed rates.

(L) Reconciliation of total payroll per IRS form 941 to total labor costs distribution.

(M) Listing of decisions/agreements/approvals and description of accounting/organizational changes.

(N) Certificate of final indirect costs (see 52.242-4, Certification of Final Indirect Costs).

(O) Contract closing information for contracts physically completed in this fiscal year (include

contract number, period of performance, contract ceiling amounts, contract fee computations, level

of effort, and indicate if the contract is ready to close).

(iv) The following supplemental information is not required to determine if a proposal is adequate,

but may be required during the audit process:

(A) Comparative analysis of indirect expense pools detailed by account to prior fiscal year and

budgetary data.
(B) General organizational information and limitation on allowability of compensation for certain

contractor personnel. See 31.205-6(p). Additional salary reference information is available at

https://www.whitehouse.gov/wp-content/uploads/2017/11/ContractorCompensationCapContractsAwa

rdedBeforeJune24.pdf and

https://www.whitehouse.gov/wp-content/uploads/2017/11/ContractorCompensationCapContractsAwa

rdedafterJune24.pdf.

(C) Identification of prime contracts under which the contractor performs as a subcontractor.

(D) Description of accounting system (excludes contractors required to submit a CAS Disclosure

Statement or contractors where the description of the accounting system has not changed from the

previous year’s submission).

(E) Procedures for identifying and excluding unallowable costs from the costs claimed and billed

(excludes contractors where the procedures have not changed from the previous year’s submission).

(F) Certified financial statements and other financial data (e.g., trial balance, compilation, review,

etc.).

(G) Management letter from outside CPAs concerning any internal control weaknesses.

(H) Actions that have been and/or will be implemented to correct the weaknesses described in the

management letter from subparagraph (G) of this section.

(I) List of all internal audit reports issued since the last disclosure of internal audit reports to the

Government.

(J) Annual internal audit plan of scheduled audits to be performed in the fiscal year when the final

indirect cost rate submission is made.

(K) Federal and State income tax returns.

(L) Securities and Exchange Commission 10-K annual report.

(M) Minutes from board of directors meetings.

(N) Listing of delay claims and termination claims submitted which contain costs relating to the

subject fiscal year.

(O) Contract briefings, which generally include a synopsis of all pertinent contract provisions, such

as: contract type, contract amount, product or service(s) to be provided, contract performance

period, rate ceilings, advance approval requirements, pre-contract cost allowability limitations, and

billing limitations.

(v) The Contractor shall update the billings on all contracts to reflect the final settled rates and

update the schedule of cumulative direct and indirect costs claimed and billed, as required in

paragraph (d)(2)(iii)(I) of this section, within 60 days after settlement of final indirect cost rates.

(3) The Contractor and the appropriate Government representative shall execute a written

understanding setting forth the final indirect cost rates. The understanding shall specify (i) the

agreed-upon final annual indirect cost rates, (ii) the bases to which the rates apply, (iii) the periods

for which the rates apply, (iv) any specific indirect cost items treated as direct costs in the

settlement, and (v) the affected contract and/or subcontract, identifying any with advance
agreements or special terms and the applicable rates. The understanding shall not change any

monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this

contract. The understanding is incorporated into this contract upon execution.

(4) Failure by the parties to agree on a final annual indirect cost rate shall be a dispute within the

meaning of the Disputes clause.

(5) Within 120 days (or longer period if approved in writing by the Contracting Officer) after

settlement of the final annual indirect cost rates for all years of a physically complete contract, the

Contractor shall submit a completion invoice or voucher to reflect the settled amounts and rates.

The completion invoice or voucher shall include settled subcontract amounts and rates. The prime

contractor is responsible for settling subcontractor amounts and rates included in the completion

invoice or voucher and providing status of subcontractor audits to the contracting officer upon

request.

(6)

(i) If the Contractor fails to submit a completion invoice or voucher within the time specified in

paragraph (d)(5) of this clause, the Contracting Officer may-

(A) Determine the amounts due to the Contractor under the contract; and

(B) Record this determination in a unilateral modification to the contract.

(ii) This determination constitutes the final decision of the Contracting Officer in accordance with

the Disputes clause.

(e) Billing rates. Until final annual indirect cost rates are established for any period, the Government

shall reimburse the Contractor at billing rates established by the Contracting Officer or by an

authorized representative (the cognizant auditor), subject to adjustment when the final rates are

established. These billing rates-

(1) Shall be the anticipated final rates; and

(2) May be prospectively or retroactively revised by mutual agreement, at either party’s request, to

prevent substantial overpayment or underpayment.

(f) Quick-closeout procedures. Quick-closeout procedures are applicable when the conditions in FAR

42.708(a) are satisfied.

(g) Audit. At any time or times before final payment, the Contracting Officer may have the

Contractor’s invoices or vouchers and statements of cost audited. Any payment may be-

(1) Reduced by amounts found by the Contracting Officer not to constitute allowable costs; or

(2) Adjusted for prior overpayments or underpayments.

(h) Final payment.

(1) Upon approval of a completion invoice or voucher submitted by the Contractor in accordance

with paragraph (d)(5) of this clause, and upon the Contractor’s compliance with all terms of this

contract, the Government shall promptly pay any balance of allowable costs and that part of the fee
(if any) not previously paid.

(2) The Contractor shall pay to the Government any refunds, rebates, credits, or other amounts

(including interest, if any) accruing to or received by the Contractor or any assignee under this

contract, to the extent that those amounts are properly allocable to costs for which the Contractor

has been reimbursed by the Government. Reasonable expenses incurred by the Contractor for

securing refunds, rebates, credits, or other amounts shall be allowable costs if approved by the

Contracting Officer. Before final payment under this contract, the Contractor and each assignee

whose assignment is in effect at the time of final payment shall execute and deliver-

(i) An assignment to the Government, in form and substance satisfactory to the Contracting Officer,

of refunds, rebates, credits, or other amounts (including interest, if any) properly allocable to costs

for which the Contractor has been reimbursed by the Government under this contract; and

(ii) A release discharging the Government, its officers, agents, and employees from all liabilities,

obligations, and claims arising out of or under this contract, except-

(A) Specified claims stated in exact amounts, or in estimated amounts when the exact amounts are

not known;

(B) Claims (including reasonable incidental expenses) based upon liabilities of the Contractor to

third parties arising out of the performance of this contract; provided, that the claims are not known

to the Contractor on the date of the execution of the release, and that the Contractor gives notice of

the claims in writing to the Contracting Officer within 6 years following the release date or notice of

final payment date, whichever is earlier; and

(C) Claims for reimbursement of costs, including reasonable incidental expenses, incurred by the

Contractor under the patent clauses of this contract, excluding, however, any expenses arising from

the Contractor’s indemnification of the Government against patent liability.

(End of clause)

Alternate I (Feb 1997). As prescribed in 16.307 (a)(2), substitute the following paragraph (b)(1)(iii)

for paragraph (b)(1)(iii) of the basic clause:

(iii) The amount of progress and other payments to the Contractor’s subcontractors that either have

been paid, or that the Contractor is required to pay pursuant to the clause of this contract entitled

"Prompt Payment for Construction Contracts." Payments shall be made by cash, check, or other form

of payment to the Contractor’s subcontractors under similar cost standards.

Alternate II (Aug 2012). As prescribed in 16.307 (a)(3), substitute the following paragraph (a)(1) for

paragraph (a)(1) of the basic clause:

(a)(1) The Government will make payments to the Contractor when requested as work progresses,

but not more often than once every two weeks, in amounts determined to be allowable by the

Contracting Officer in accordance with subpart 31.3 in effect on the date of this contract and the

terms of this contract. The Contractor may submit to an authorized representative of the Contracting

Officer, in such form and reasonable detail as the representative may require, an invoice or voucher

supported by a statement of the claimed allowable cost for performing this contract.

Alternate III (Aug 2012). As prescribed in 16.307 (a)(4), substitute the following paragraph (a)(1) for

paragraph (a)(1) of the basic clause:
(a)(1) The Government will make payments to the Contractor when requested as work progresses,

but not more often than once every two weeks, in amounts determined to be allowable by the

Contracting Officer in accordance with subpart 31.6 in effect on the date of this contract and the

terms of this contract. The Contractor may submit to an authorized representative of the Contracting

Officer, in such form and reasonable detail as the representative may require, an invoice or voucher

supported by a statement of the claimed allowable cost for performing this contract.

Alternate IV (Aug 2012). As prescribed in 16.307 (a)(5), substitute the following paragraph (a)(1) for

paragraph (a)(1) of the basic clause:

(a)(1) The Government will make payments to the Contractor when requested as work progresses,

but not more often than once every two weeks, in amounts determined to be allowable by the

Contracting Officer in accordance with subpart 31.7 in effect on the date of this contract and the

terms of this contract. The Contractor may submit to an authorized representative of the Contracting

Officer, in such form and reasonable detail as the representative may require, an invoice or voucher

supported by a statement of the claimed allowable cost for performing this contract.

Parent topic: 52.216 [Reserved]