H. R. 1107—112 
(17) Conventions. 
(c) ADDITIONAL REQUIREMENTS.— 
(1) WHEN QUESTIONED COSTS MAY BE RESOLVED.—The Federal 
Acquisition Regulation shall require that a contracting officer 
not resolve any questioned costs until the contracting officer 
has obtained— 
(A) adequate documentation of those costs; and 
(B) the opinion of the contract auditor on the allowability 
of those costs. 
(2) PRESENCE OF CONTRACT AUDITOR.—The Federal Acquisi-
tion Regulation shall provide that, to the maximum extent 
practicable, a contract auditor be present at any negotiation 
or meeting with the contractor regarding a determination of 
the allowability of indirect costs of the contractor. 
(3) SETTLEMENT TO REFLECT AMOUNT OF INDIVIDUAL QUES-
TIONED
COSTS.—The Federal Acquisition Regulation shall 
require that all categories of costs designated in the report 
of a contract auditor as questioned with respect to a proposal 
for settlement be resolved in a manner so that the amount 
of the individual questioned costs that are paid will be reflected 
in the settlement. 
§ 4306. Applicability of regulations to subcontractors 
The regulations referred to in sections 4304 and 4305(a) and 
(b) of this title shall require prime contractors of a covered contract, 
to the maximum extent practicable, to apply the provisions of 
those regulations to all subcontractors of the covered contract. 
§ 4307. Contractor certification 
(a) CONTENT AND FORM.—A proposal for settlement of indirect 
costs applicable to a covered contract shall include a certification 
by an official of the contractor that, to the best of the certifying 
official’s knowledge and belief, all indirect costs included in the 
proposal are allowable. The certification shall be in a form pre-
scribed in the Federal Acquisition Regulation. 
(b) WAIVER.—An executive agency may, in an exceptional case, 
waive the requirement for certification under subsection (a) in the 
case of a contract if the agency— 
(1) determines that it would be in the interest of the Federal 
Government to waive the certification; and 
(2) states in writing the reasons for the determination and 
makes the determination available to the public. 
§ 4308. Penalties for submission of cost known to be unallow-
able 
The submission to an executive agency of a proposal for settle-
ment of costs for any period after those costs have been accrued 
that includes a cost that is expressly specified by statute or regula-
tion as being unallowable, with the knowledge that the cost is 
unallowable, is subject to section 287 of title 18 and section 3729 
of title 31. 
§ 4309. Burden of proof on contractor 
In a proceeding before a board of contract appeals, the United 
States Court of Federal Claims, or any other Federal court in 
which the reasonableness of indirect costs for which a contractor 
seeks reimbursement from the Federal Government is in issue,
H. R. 1107—113 
the burden of proof is on the contractor to establish that those 
costs are reasonable. 
§ 4310. Proceeding costs not allowable 
(a) DEFINITIONS.—In this section: 
(1) COSTS.—The term ‘‘costs’’, with respect to a proceeding, 
means all costs incurred by a contractor, whether before or 
after the commencement of the proceeding, including— 
(A) administrative and clerical expenses; 
(B) the cost of legal services, including legal services 
performed by an employee of the contractor; 
(C) the cost of the services of accountants and consultants 
retained by the contractor; and 
(D) the pay of directors, officers, and employees of the 
contractor for time devoted by those directors, officers, and 
employees to the proceeding. 
(2) PENALTY.—The term ‘‘penalty’’ does not include restitu-
tion, reimbursement, or compensatory damages. 
(3) PROCEEDING.—The term ‘‘proceeding’’ includes an inves-
tigation. 
(b) IN GENERAL.—Except as otherwise provided in this section, 
costs incurred by a contractor in connection with a criminal, civil, 
or administrative proceeding commenced by the Federal Govern-
ment or a State are not allowable as reimbursable costs under 
a covered contract if the proceeding— 
(1) relates to a violation of, or failure to comply with, a 
Federal or State statute or regulation; and 
(2) results in a disposition described in subsection (c). 
(c) COVERED DISPOSITIONS.—A disposition referred to in sub-
section (b)(2) is any of the following: 
(1) In a criminal proceeding, a conviction (including a convic-
tion pursuant to a plea of nolo contendere) by reason of the 
violation or failure referred to in subsection (b). 
(2) In a civil or administrative proceeding involving an allega-
tion of fraud or similar misconduct, a determination of con-
tractor liability on the basis of the violation or failure referred 
to in subsection (b). 
(3) In any civil or administrative proceeding, the imposition 
of a monetary penalty by reason of the violation or failure 
referred to in subsection (b). 
(4) A final decision to do any of the following, by reason 
of the violation or failure referred to in subsection (b): 
(A) Debar or suspend the contractor. 
(B) Rescind or void the contract. 
(C) Terminate the contract for default. 
(5) A disposition of the proceeding by consent or compromise 
if the disposition could have resulted in a disposition described 
in paragraph (1), (2), (3), or (4). 
(d) COSTS ALLOWED BY SETTLEMENT AGREEMENT IN PROCEEDING 
COMMENCED BY FEDERAL GOVERNMENT.—In the case of a proceeding 
referred to in subsection (b) that is commenced by the Federal 
Government and is resolved by consent or compromise pursuant 
to an agreement entered into by a contractor and the Federal 
Government, the costs incurred by the contractor in connection 
with the proceeding that are otherwise not allowable as reimburs-
able costs under subsection (b) may be allowed to the extent specifi-
cally provided in that agreement.
H. R. 1107—114 
(e) COSTS SPECIFICALLY AUTHORIZED BY EXECUTIVE AGENCY IN 
PROCEEDING COMMENCED BY STATE.—In the case of a proceeding 
referred to in subsection (b) that is commenced by a State, the 
executive agency that awarded the covered contract involved in 
the proceeding may allow the costs incurred by the contractor 
in connection with the proceeding as reimbursable costs if the 
executive agency determines, in accordance with the Federal 
Acquisition Regulation, that the costs were incurred as a result 
of— 
(1) a specific term or condition of the contract; or 
(2) specific written instructions of the executive agency. 
(f) OTHER ALLOWABLE COSTS.— 
(1) IN GENERAL.—Except as provided in paragraph (3), costs 
incurred by a contractor in connection with a criminal, civil, 
or administrative proceeding commenced by the Federal 
Government or a State in connection with a covered contract 
may be allowed as reimbursable costs under the contract if 
the costs are not disallowable under subsection (b), but only 
to the extent provided in paragraph (2). 
(2) AMOUNT OF ALLOWABLE COSTS.— 
(A) MAXIMUM
AMOUNT
ALLOWED.—The amount of the 
costs allowable under paragraph (1) in any case may not 
exceed the amount equal to 80 percent of the amount 
of the costs incurred, to the extent that the costs are 
determined to be otherwise allowable and allocable under 
the Federal Acquisition Regulation. 
(B) CONTENT OF REGULATIONS.—Regulations issued for 
the purpose of subparagraph (A) shall provide for appro-
priate consideration of the complexity of procurement litiga-
tion, generally accepted principles governing the award 
of legal fees in civil actions involving the Federal Govern-
ment as a party, and other factors as may be appropriate. 
(3) WHEN
OTHERWISE
ALLOWABLE
COSTS
ARE
NOT
ALLOW-
ABLE.—In the case of a proceeding referred to in paragraph 
(1), contractor costs otherwise allowable as reimbursable costs 
under this subsection are not allowable if— 
(A) the proceeding involves the same contractor mis-
conduct alleged as the basis of another criminal, civil, 
or administrative proceeding; and 
(B) the costs of the other proceeding are not allowable 
under subsection (b). 
CHAPTER 45—CONTRACT FINANCING 
Sec. 
4501.
Authority of executive agency. 
4502.
Payment. 
4503.
Security for advance payments. 
4504.
Conditions for progress payments. 
4505.
Payments for commercial items. 
4506.
Action in case of fraud. 
§ 4501. Authority of executive agency 
An executive agency may— 
(1) make advance, partial, progress or other payments under 
contracts for property or services made by the agency; and 
(2) insert in solicitations for procurement of property or serv-
ices a provision limiting to small business concerns advance 
or progress payments.