52.215-23 Limitations on Pass-Through

Charges.

As prescribed in 15.408(n)(2), use the following clause:

Limitations on Pass-Through Charges (Jun 2020)

(a) Definitions. As used in this clauseAdded value means that the Contractor performs subcontract management functions that the

Contracting Officer determines are a benefit to the Government (e.g., processing orders of parts or

services, maintaining inventory, reducing delivery lead times, managing multiple sources for

contract requirements, coordinating deliveries, performing quality assurance functions).

Excessive pass-through charge, with respect to a Contractor or subcontractor that adds no or

negligible value to a contract or subcontract, means a charge to the Government by the Contractor

or subcontractor that is for indirect costs or profit/fee on work performed by a subcontractor (other

than charges for the costs of managing subcontracts and any applicable indirect costs and

associated profit/fee based on such costs).

No or negligible value means the Contractor or subcontractor cannot demonstrate to the

Contracting Officer that its effort added value to the contract or subcontract in accomplishing the

work performed under the contract (including task or delivery orders).

Subcontract means any contract, as defined in Federal Acquisition Regulation (FAR)2.101, entered

into by a subcontractor to furnish supplies or services for performance of the contract or a

subcontract. It includes but is not limited to purchase orders, and changes and modifications to

purchase orders.

Subcontractor, as defined in FAR 44.101, means any supplier, distributor, vendor, or firm that

furnishes supplies or services to or for a prime Contractor or another subcontractor.

(b) General. The Government will not pay excessive pass-through charges. The Contracting Officer

shall determine if excessive pass-through charges exist.

(c) Reporting. Required reporting of performance of work by the Contractor or a subcontractor. The

Contractor shall notify the Contracting Officer in writing if-

(1) The Contractor changes the amount of subcontract effort after award such that it exceeds 70

percent of the total cost of work to be performed under the contract, task order, or delivery order.

The notification shall identify the revised cost of the subcontract effort and shall include verification

that the Contractor will provide added value; or

(2) Any subcontractor changes the amount of lower-tier subcontractor effort after award such that it

exceeds 70 percent of the total cost of the work to be performed under its subcontract. The

notification shall identify the revised cost of the subcontract effort and shall include verification that

the subcontractor will provide added value as related to the work to be performed by the lower-tier

subcontractor(s).

(d) Recovery of excessive pass-through charges. If the Contracting Officer determines that excessive
pass-through charges exist;

(1) For other than fixed-price contracts, the excessive pass-through charges are unallowable in

accordance with the provisions in FAR subpart 31.2; and

(2) For applicable DoD fixed-price contracts, as identified in 15.408(n)(2)(i)(B), the Government shall

be entitled to a price reduction for the amount of excessive pass-through charges included in the

contract price.

(e) Access to records.

(1) The Contracting Officer, or authorized representative, shall have the right to examine and audit

all the Contractor’s records (as defined at FAR 52.215-2(a)) necessary to determine whether the

Contractor proposed, billed, or claimed excessive pass-through charges.

(2) For those subcontracts to which paragraph (f) of this clause applies, the Contracting Officer, or

authorized representative, shall have the right to examine and audit all the subcontractor’s records

(as defined at FAR 52.215-2(a)) necessary to determine whether the subcontractor proposed, billed,

or claimed excessive pass-through charges.

(f) Subcontracts. The Contractor shall insert the substance of this clause, including this paragraph

(f), in all cost-reimbursement subcontracts under this contract that exceed the simplified acquisition

threshold, as defined in FAR 2.101 on the date of subcontract award, except if the contract is with

DoD, then insert in all cost-reimbursement subcontracts and fixed-price subcontracts, except those

identified in FAR 15.408(n)(2)(i)(B)(2), that exceed the threshold for obtaining cost or pricing data in

FAR 15.403-4 on the date of subcontract award.

(End of clause)

Alternate I (Oct 2009). As prescribed in 15.408 (n)(2)(iii), substitute the following paragraph (b) for

paragraph (b) of the basic clause:

(b) General. The Government will not pay excessive pass-through charges. The Contracting Officer

has determined that there will be no excessive pass-through charges, provided the Contractor

performs the disclosed value-added functions.

Parent topic: 52.215 [Reserved]