PART 731—CONTRACT COST PRINCIPLES

AND PROCEDURES

Authority: Sec. 621, Pub. L. 87–195, 75 Stat. 445, (22 U.S.C. 2381) as amended; E.O. 12163, Sept.

29, 1979, 44 FR 56673; and 3 CFR 1979 Comp., p. 435.

Source: 49 FR 13250, Apr. 3, 1984, unless otherwise noted.

Subpart 731.1—Applicability

731.109 Advance agreements.

Subpart 731.2—Contracts With Commercial Organizations

731.205-6 Compensation for personal services.

731.205-43 Trade, business, technical and professional activity costs—USAID conference approval

requirements.

731.205-46 Travel costs.

731.205-70 Overseas recruitment incentive.

731.205-71 Salary supplements for Host Government employees.

Subpart 731.3—Contracts With Educational Institutions

731.370 Predetermined fixed rates for indirect costs.

731.371 Compensation for personal services.

731.372 Fringe benefits.

731.373 Overseas recruitment incentive.

731.374 Conference approval requirements.

Subpart 731.7—Contracts With Nonprofit Organizations

731.770 OMB Circular A–122, cost principles for nonprofit organizations; USAID implementation.

731.771 Bid and proposal costs.

731.772 Compensation for personal services.

731.773 Independent research and development costs.

731.774 Overseas recruitment incentive.

731.775 Conference approval requirements.

Parent topic: SUBCHAPTER E—GENERAL CONTRACTING REQUIREMENTS
Subpart 731.1—Applicability

731.109 Advance agreements.

Advance agreements on selected costs may be negotiated with USAID contractors by the Bureau for

Management, Office of Acquisition and Assistance, Cost Audit Support Division, Overhead and

Special Cost and Contract Close-Out Branch (M/OAA/CAS/OCC). Such advance understandings will

be applicable to all USAID contracts with that contractor.

Subpart 731.2—Contracts With Commercial Organizations

731.205-6 Compensation for personal services.

(a) General. When establishing the workweek for employees overseas the contractor will take local

and USAID Mission practice into account and will insure that the workweek is compatible with that

of those USAID Mission and Cooperating Country employees with whom the contractor will be

working.

(b) Salaries and wages. It is USAID policy that if an employee's base salary plus overseas

recruitment incentive, if any (see (48 CFR) AIDAR 731.205–70) exceeds the USAID Contractor

Salary Threshold (USAID CST), as stated in USAID's Automated Directives System (ADS) Chapter

302 USAID Direct Contracting (available at http://www.usaid.gov/policy/ads/300/302.pdf), it will be

allowable only if approved in writing by the contracting officer. The contracting officer shall only

provide such approval after internal Agency procedures for review/approval of salaries in excess of

the USAID CST in ADS 302 have been followed. USAID policies on compensation of third country

national or cooperating country national employees are set forth in (48 CFR) AIDAR 722.170.

(d)–(l) [Reserved]

(m) Fringe benefits. USAID's policies on certain fringe benefits related to overseas service, including

but not limited to leave, holidays, differentials and allowances, etc. are set forth in the appropriate

contract clauses in (48 CFR) AIDAR subpart 752.70.

731.205-43 Trade, business, technical and professional activity costs—USAID

conference approval requirements.

(a) Definitions. As used in this section—

Conference means a seminar, meeting, retreat, symposium, workshop, training activity or other such

event that is funded in whole or in part by USAID.

Net conference expense means the total conference expenses excluding: any fees or revenue

received by the Agency through the conference, costs to ensure the safety of attending

governmental officials, and salary of USAID employees and USAID personal services contractors.

Personal Services Contractor (PSC) means any individual who is awarded a personal services
contract in accordance with AIDAR appendix D or J of this chapter.

Temporary duty (TDY) travel means official travel at least fifty (50) miles from both the traveler's

home and duty station for a period exceeding twelve (12) hours.

USAID employee means a USAID direct-hire employee or a direct-hire Federal employee from

another U.S. government agency detailed to USAID.

(b) Prior approval. USAID policy requires contractors to obtain contracting officer approval of the

following, unless an exception in paragraph (c) of the clause at 752.231–72 applies:

(1) A conference funded in whole, or in part, by USAID when ten (10) or more USAID employees or

personal services contractors are required to travel on temporary duty status to attend the

conference; or

(2) A conference funded in whole, or in part, by USAID when the net conference expense funded by

USAID is expected to exceed $100,000, regardless of the number of USAID employees or USAID

personal services contractors who will participate in the conference.

(c) Allowability of cost. Costs associated with a conference that meets the criteria above, incurred

without USAID prior written approval, are unallowable.

(d) Solicitation provision and contract clause. Contracting officers must insert the clause at

752.231–72 in all USAID-funded solicitations and contracts anticipated to include a requirement for

a USAID-funded conference.

731.205-46 Travel costs.

It is USAID policy to require prior written approval of international travel by the contracting officer,

or the contracting officer's representative (COR) if delegated in the Contracting Officer's

Representative Designation Letter. See (48 CFR) AIDAR 752.7032 for specific requirements and

procedures.

731.205-70 Overseas recruitment incentive.

Note:

The term employee as used in this section means an employee who is a U.S. citizen or a U.S.

resident alien.)

(a) If a contractor employee serving overseas under a contract does not qualify for the exemption for

overseas income provided under section 911 of the U.S. Internal Revenue Code (26 U.S.C. 911),

such employee is eligible to receive an overseas recruitment incentive (ORI), to the extent the ORI:

Is authorized by the contractor's normal policy and practice; is deemed necessary by the contractor

to recruit and retain qualified employees for overseas services; and does not exceed 10% of the base

salary of the employee from date of arrival at overseas post to begin assignment to date of departure

from post at the end of assignment. ORI is to be paid as a single payment at the end of the employee

tour of duty overseas. The contractor shall take all reasonable and prudent steps to ensure that ORI

is not paid to any employee who has received the IRS section 911 exemption.
(b) In the event that an employee subsequently receives a section 911 exclusion for any part of the

base salary upon which this supplement has been paid, such supplement or appropriate portion

thereof shall be reimbursed by the contractor to USAID with interest. The interest shall be

calculated at the average U.S. Treasury rate in effect for the period that the contractor or his

employee had the funds. Neither the contractor's nor the subcontractor's inability to collect refunds

from eligible employees shall be used as a basis to excuse subsequent refunds by the contractor to

USAID.

731.205-71 Salary supplements for Host Government employees.

(a) Definitions.

(1) A Host Government (HG) employee is a person paid by the HG, occupying an established

position, either temporary or permanent, part-time or full-time, within a HG institution.

(2) An HG institution is an organization in which the government owns at least a fifty percent share

or receives at least fifty percent of its financial support from the government.

(b) General. Salary supplement occurs when payments are made that augment an HG employee's

base salary or premiums, overtime, extra payments, incentive payment and allowances for which the

HG employee would qualify under HG rules or practices for the performance of his/hers regular

duties or work performed during his/hers regular office hours. Per diem, invitational travel,

honoraria and payment for work carried out outside of normal working hours are not considered to

be salary supplements subject to the provisions in USAID policy referenced in paragraph (c) of this

section.

(c) Salary supplements are eligible for USAID financing only when authorized in accordance with

USAID policy established in the cable State 119780 dated April 15, 1988 in ADS Chapter 302. If

salary supplements have been authorized in a particular case, the contracting officer shall provide

written approval to the contractor in order for such costs to be eligible. Any specific requirements or

limitations shall be specified in the approval.

(d) Contracting officers shall insert the Clause at 752.231–71 in all contracts in which there is a

possibility of the need of HG employees. It should also be inserted in all subsequent subcontracts.

Subpart 731.3—Contracts With Educational Institutions

731.370 Predetermined fixed rates for indirect costs.

Section 635(k) of the Foreign Assistance Act of 1961, as amended, authorizes USAID to use

predetermined fixed rates in determining the indirect costs applicable under contracts with

educational institutions.

731.371 Compensation for personal services.

(a) General. When establishing the workweek for employees overseas the contractor will take local

and USAID Mission practice into account and will ensure that the workweek is compatible with that
of those USAID Mission and Cooperating Country employees with whom the contractor will be

working.

(b) Salaries and wages.

(1) The policies set forth in (48 CFR) AIDAR 731.205–6(b) are also applicable to contracts with a

nonprofit organization.

(2) In considering consulting income as a factor when determining allowable salary for service under

a contract:

(i) For faculty members working under annual appointments, salary for service under the contract

may include the employee's on-campus salary plus “consulting income” (that is, income from

employment other than the employee's regular on-campus appointment, excluding business or other

activities not connected with the employee's profession) earned during the year preceding

employment under the contract.

(ii) For faculty members working under academic year appointments, salary for service under the

contract may include the employee's on-campus academic year salary plus “consulting income” as

defined above earned during the year proceeding employment under the contract, or salary for

service under the contract may be derived by annualizing the academic year salary (in which case

“consulting income” may not be included).

(3) USAID policies and compensation of third country national or cooperating country national

employees are set forth in (48 CFR) AIDAR 722.170.

731.372 Fringe benefits.

USAID's policies on certain fringe benefits related to overseas service, including but not limited to

leave, holidays, differentials and allowances, etc. are set forth in the appropriate contract clauses in

(48 CFR) AIDAR 752.70.

731.373 Overseas recruitment incentive.

USAID's policies regarding overseas recruitment incentives are set forth in (48 CFR) AIDAR

731.205–70. These policies are also applicable to contracts with an educational institution.

731.374 Conference approval requirements.

USAID's policies regarding conference approval requirements are set forth in (48 CFR) AIDAR

731.205–43. These policies are also applicable to contracts with educational institutions.

Subpart 731.7—Contracts With Nonprofit Organizations
731.770 OMB Circular A–122, cost principles for nonprofit organizations;

USAID implementation.

Link to an amendment published at 89 FR 4206, Jan. 23, 2024.

(a) Paragraph 6 of the transmittal letter for OMB Circular A–122 specifies that “Agencies shall

designate a liaison official to serve as the agency representative on matters relating to the

implementation of this Circular.” The Director, Bureau for Management, Office of Acquisition and

Assistance, has been so designated. The Bureau for Management, Office of Acquisition and

Assistance, Cost Audit Support Division, Overhead and Special Cost and Contract Close-Out Branch

(M/OAA/CAS/OCC) provides staff assistance to the Director concerning OMB Circular A–122.

M/OAA/CAS/OCC is also responsible for obtaining cognizance under the criteria in the transmittal

letter for OMB Circular A–122; for liaison with other cognizant agencies; for authorizing exclusion of

OMB Circular A–122 coverage for a particular nonprofit organization pursuant to paragraph 5 of the

OMB Circular A–122 transmittal letter; and for advice and assistance in applying OMB Circular

A–122 cost principles.

(b) Paragraph 4b of the OMB Circular A–122 transmittal letter contains a definition of prior approval

as follows:

Prior approval means securing the awarding agency's permission in advance to incur costs for those

items that are designated as requiring prior approval by OMB Circular A–122. Generally, this

permission will be in writing. Where an item of cost requiring prior approval is specified in the

budget of an award, approval of the budget constitute approval of that cost.

Consequently, an award containing a budget constitutes prior approval of the direct cost item in the

budget, unless otherwise annotated. Accordingly, award budgets should be appropriately annotated

substantially as follows:

Inclusion of any cost in the line item budget of this award does not obviate the requirement for prior

approval of cost items designated as requiring prior approval by OMB Circular A–122 ; or

In accordance with the requirements to OMB Circular No. A–122, approval is granted to incur costs

for (name specific item or items) which are included in the budget of this award.

731.771 Bid and proposal costs.

Link to an amendment published at 89 FR 4206, Jan. 23, 2024.

Pending the establishment of Government-wide principles in Attachment B of OMB Circular A–122,

USAID will treat bid and proposal costs as follows:

(a) Bid and proposal costs are the costs of preparing bids, proposals, and applications for potential

activities such as Government and non-Government grants, contracts and other agreements,

including the development of scientific, cost, and other data needed to support such bids, proposals,

and applications. Except as provided in (b) below, bid and proposal costs of the current accounting

period of both successful and unsuccessful bids and proposals normally should be treated as indirect

costs for allocation to all current activities, and no bid and proposal costs of past accounting periods

will be allocable to the current period. However, if the organization's established practice is to treat

bid and proposal costs by some other method, the results obtained may be accepted only if found to
be reasonable and equitable.

(b) Bid and proposal costs incurred by the organization to obtain unrestricted funds are to be treated

as fund raising and allocated an appropriate share of indirect costs under the conditions described

in paragraph B.3 of Attachment A to OMB Circular A–122.

731.772 Compensation for personal services.

The policies set for in (48 CFR) AIDAR 731.205–6 are also applicable to contracts with a nonprofit

organization.

731.773 Independent research and development costs.

Link to an amendment published at 89 FR 4206, Jan. 23, 2024.

Pending establishment of Government-wide principles in Attachment B of OMB Circular A–122,

USAID will apply the cost principles at (48 CFR) FAR 31.205–18 for independent research and

development costs.

731.774 Overseas recruitment incentive.

USAID's policies regarding overseas recruitment incentives are set forth in (48 CFR) AIDAR

731.205–70. These policies are also applicable to contracts with a nonprofit organization.

731.775 Conference approval requirements.

USAID's policies regarding conference approval requirements are set forth in (48 CFR) AIDAR

731.205–43. These policies are also applicable to contracts with nonprofit organizations.