HR 5414 RH 
(1) COMMERCIAL
ITEM.—The term ‘‘commercial item’’ has the 
meaning provided the term by section 103 of this title. 
(2) COST
OR
PRICING
DATA.—The term ‘‘cost or pricing data’’ 
means all facts that, as of the date of agreement on the price of a con-
tract (or the price of a contract modification) or, if applicable con-
sistent with section 3506(a)(2) of this title, another date agreed upon 
between the parties, a prudent buyer or seller would reasonably expect 
to affect price negotiations significantly. The term does not include in-
formation that is judgmental, but does include factual information from 
which a judgment was derived. 
(3) SUBCONTRACT.—The term ‘‘subcontract’’ includes a transfer of 
commercial items between divisions, subsidiaries, or affiliates of a con-
tractor or a subcontractor. 
§ 3502. Required cost or pricing data and certification 
(a) WHEN REQUIRED.—The head of an executive agency shall require 
offerors, contractors, and subcontractors to make cost or pricing data avail-
able as follows: 
(1) OFFEROR FOR PRIME CONTRACT.—An offeror for a prime con-
tract under this part to be entered into using procedures other than 
sealed-bid procedures shall be required to submit cost or pricing data 
before the award of a contract if— 
(A) in the case of a prime contract entered into after October 
13, 1994, the price of the contract to the Federal Government is 
expected to exceed $500,000; and 
(B) in the case of a prime contract entered into on or before 
October 13, 1994, the price of the contract to the Federal Govern-
ment is expected to exceed $100,000. 
(2) CONTRACTOR.—The contractor for a prime contract under this 
part shall be required to submit cost or pricing data before the pricing 
of a change or modification to the contract if— 
(A) in the case of a change or modification made to a prime 
contract referred to in paragraph (1)(A), the price adjustment is 
expected to exceed $500,000; 
(B) in the case of a change or modification made to a prime 
contract that was entered into on or before October 13, 1994, and 
that has been modified pursuant to subsection (f), the price ad-
justment is expected to exceed $500,000; and 
(C) in the case of a change or modification not covered by sub-
paragraph (A) or (B), the price adjustment is expected to exceed 
$100,000. 
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(3) OFFEROR FOR SUBCONTRACT.—An offeror for a subcontract (at 
any tier) of a contract under this part shall be required to submit cost 
or pricing data before the award of the subcontract if the prime con-
tractor and each higher-tier subcontractor have been required to make 
available cost or pricing data under this chapter and— 
(A) in the case of a subcontract under a prime contract referred 
to in paragraph (1)(A), the price of the subcontract is expected 
to exceed $500,000; 
(B) in the case of a subcontract entered into under a prime con-
tract that was entered into on or before October 13, 1994, and 
that has been modified pursuant to subsection (f), the price of the 
subcontract is expected to exceed $500,000; and 
(C) in the case of a subcontract not covered by subparagraph 
(A) or (B), the price of the subcontract is expected to exceed 
$100,000. 
(4) SUBCONTRACTOR.—The subcontractor for a subcontract covered 
by paragraph (3) shall be required to submit cost or pricing data before 
the pricing of a change or modification to the subcontract if— 
(A) in the case of a change or modification to a subcontract re-
ferred to in paragraph (3)(A) or (B), the price adjustment is ex-
pected to exceed $500,000; and 
(B) in the case of a change or modification to a subcontract re-
ferred to in paragraph (3)(C), the price adjustment is expected to 
exceed $100,000. 
(b) CERTIFICATION.—A person required, as an offeror, contractor, or 
subcontractor, to submit cost or pricing data under subsection (a) (or re-
quired by the head of the procuring activity concerned to submit the data 
under section 3504 of this title) shall be required to certify that, to the best 
of the person’s knowledge and belief, the cost or pricing data submitted are 
accurate, complete, and current. 
(c) TO WHOM SUBMITTED.—Cost or pricing data required to be sub-
mitted under subsection (a) (or under section 3504 of this title), and a cer-
tification required to be submitted under subsection (b), shall be sub-
mitted— 
(1) in the case of a submission by a prime contractor (or an offeror 
for a prime contract), to the contracting officer for the contract (or a 
designated representative of the contracting officer); or 
(2) in the case of a submission by a subcontractor (or an offeror for 
a subcontract), to the prime contractor. 
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HR 5414 RH 
(d) APPLICATION OF CHAPTER.—Except as provided under section 3503 
of this title, this chapter applies to contracts entered into by the head of 
an executive agency on behalf of a foreign government. 
(e) SUBCONTRACTS NOT AFFECTED BY WAIVER.—A waiver of require-
ments for submission of certified cost or pricing data that is granted under 
section 3503(a)(3) of this title in the case of a contract or subcontract does 
not waive the requirement under subsection (a)(3) of this section for sub-
mission of cost or pricing data in the case of subcontracts under that con-
tract or subcontract unless the head of the procuring activity granting the 
waiver determines that the requirement under subsection (a)(3) of this sec-
tion should be waived in the case of those subcontracts and justifies in writ-
ing the reason for the determination. 
(f) MODIFICATIONS TO PRIOR CONTRACTS.—On the request of a con-
tractor that was required to submit cost or pricing data under subsection 
(a) in connection with a prime contract entered into on or before October 
13, 1994, the head of the executive agency that entered into the contract 
shall modify the contract to reflect paragraphs (2)(B) and (3)(B) of sub-
section (a). All those modifications shall be made without requiring consid-
eration. 
(g) ADJUSTMENT OF AMOUNTS.—Effective on October 1 of each year 
that is divisible by 5, each amount set forth in subsection (a) shall be ad-
justed to the amount that is equal to the fiscal year 1994 constant dollar 
value of the amount set forth. Any amount, as so adjusted, that is not even-
ly divisible by $50,000 shall be rounded to the nearest multiple of $50,000. 
In the case of an amount that is evenly divisible by $25,000 but not evenly 
divisible by $50,000, the amount shall be rounded to the next higher mul-
tiple of $50,000. 
§ 3503. Exceptions 
(a) IN GENERAL.—Submission of certified cost or pricing data shall not 
be required under section 3502 of this title in the case of a contract, a sub-
contract, or a modification of a contract or subcontract— 
(1) for which the price agreed on is based on— 
(A) adequate price competition; or 
(B) prices set by law or regulation; 
(2) for the acquisition of a commercial item; or 
(3) in an exceptional case when the head of the procuring activity, 
without delegation, determines that the requirements of this chapter 
may be waived and justifies in writing the reasons for the determina-
tion. 
(b) MODIFICATIONS OF CONTRACTS AND SUBCONTRACTS FOR COMMER-
CIAL ITEMS.—In the case of a modification of a contract or subcontract for 
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a commercial item that is not covered by the exception to the submission 
of certified cost or pricing data in paragraph (1) or (2) of subsection (a), 
submission of certified cost or pricing data shall not be required under sec-
tion 3502 of this title if— 
(1) the contract or subcontract being modified is a contract or sub-
contract for which submission of certified cost or pricing data may not 
be required by reason of paragraph (1) or (2) of subsection (a); and 
(2) the modification would not change the contract or subcontract 
from a contract or subcontract for the acquisition of a commercial item 
to a contract or subcontract for the acquisition of an item other than 
a commercial item. 
§ 3504. Cost or pricing data on below-threshold contracts 
(a) AUTHORITY TO REQUIRE SUBMISSION.—Subject to subsection (b), 
when certified cost or pricing data are not required to be submitted by sec-
tion 3502 of this title for a contract, subcontract, or modification of a con-
tract or subcontract, the data may nevertheless be required to be submitted 
by the head of the procuring activity, but only if the head of the procuring 
activity determines that the data are necessary for the evaluation by the 
agency of the reasonableness of the price of the contract, subcontract, or 
modification of a contract or subcontract. In any case in which the head 
of the procuring activity requires the data to be submitted under this sec-
tion, the head of the procuring activity shall justify in writing the reason 
for the requirement. 
(b) EXCEPTION.—The head of the procuring activity may not require cer-
tified cost or pricing data to be submitted under this section for any con-
tract or subcontract, or modification of a contract or subcontract, covered 
by the exceptions in section 3503(a)(1) or (2) of this title. 
(c) DELEGATION OF AUTHORITY PROHIBITED.—The head of a procuring 
activity may not delegate the functions under this section. 
§ 3505. Submission of other information 
(a) AUTHORITY TO REQUIRE SUBMISSION.—When certified cost or pric-
ing data are not required to be submitted under this chapter for a contract, 
subcontract, or modification of a contract or subcontract, the contracting of-
ficer shall require submission of data other than certified cost or pricing 
data to the extent necessary to determine the reasonableness of the price 
of the contract, subcontract, or modification of the contract or subcontract. 
Except in the case of a contract or subcontract covered by the exceptions 
in section 3503(a)(1) of this title, the contracting officer shall require that 
the data submitted include, at a minimum, appropriate information on the 
prices at which the same item or similar items have previously been sold 
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that is adequate for evaluating the reasonableness of the price for the pro-
curement. 
(b) LIMITATIONS ON AUTHORITY.—The Federal Acquisition Regulation 
shall include the following provisions regarding the types of information that 
contracting officers may require under subsection (a): 
(1) REASONABLE LIMITATIONS.—Reasonable limitations on requests 
for sales data relating to commercial items. 
(2) LIMITATION ON SCOPE OF REQUEST.—A requirement that a con-
tracting officer limit, to the maximum extent practicable, the scope of 
any request for information relating to commercial items from an offer-
or to only that information that is in the form regularly maintained 
by the offeror in commercial operations. 
(3) INFORMATION NOT TO BE DISCLOSED.—A statement that any in-
formation received relating to commercial items that is exempt from 
disclosure under section 552(b) of title 5 shall not be disclosed by the 
Federal Government. 
§ 3506. Price reductions for defective cost or pricing data 
(a) PROVISION REQUIRING ADJUSTMENT.— 
(1) IN GENERAL.—A prime contract (or change or modification to 
a prime contract) under which a certificate under section 3502(b) of 
this title is required shall contain a provision that the price of the con-
tract to the Federal Government, including profit or fee, shall be ad-
justed to exclude any significant amount by which it may be deter-
mined by the head of the executive agency that the price was increased 
because the contractor (or any subcontractor required to make the cer-
tificate available) submitted defective cost or pricing data. 
(2) WHAT CONSTITUTES DEFECTIVE COST OR PRICING DATA.—For 
the purposes of this chapter, defective cost or pricing data are cost or 
pricing data that, as of the date of agreement on the price of the con-
tract (or another date agreed on between the parties), were inaccurate, 
incomplete, or noncurrent. If for purposes of the preceding sentence the 
parties agree on a date other than the date of agreement on the price 
of the contract, the date agreed on by the parties shall be as close to 
the date of agreement on the price of the contract as is practicable. 
(b) VALID DEFENSE.—In determining for purposes of a contract price 
adjustment under a contract provision required by subsection (a) whether, 
and to what extent, a contract price was increased because the contractor 
(or a subcontractor) submitted defective cost or pricing data, it is a defense 
that the Federal Government did not rely on the defective data submitted 
by the contractor or subcontractor. 
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(c) INVALID DEFENSES.—It is not a defense to an adjustment of the 
price of a contract under a contract provision required by subsection (a) 
that— 
(1) the price of the contract would not have been modified even if 
accurate, complete, and current cost or pricing data had been sub-
mitted by the contractor or subcontractor because the contractor or 
subcontractor— 
(A) was the sole source of the property or services procured; or 
(B) otherwise was in a superior bargaining position with respect 
to the property or services procured; 
(2) the contracting officer should have known that the cost or pricing 
data in issue were defective even though the contractor or subcon-
tractor took no affirmative action to bring the character of the data 
to the attention of the contracting officer; 
(3) the contract was based on an agreement between the contractor 
and the Federal Government about the total cost of the contract and 
there was no agreement about the cost of each item procured under 
the contract; or 
(4) the prime contractor or subcontractor did not submit a certifi-
cation of cost or pricing data relating to the contract as required by 
section 3502(b) of this title. 
(d) OFFSETS.— 
(1) WHEN ALLOWED.—A contractor shall be allowed to offset an 
amount against the amount of a contract price adjustment under a 
contract provision required by subsection (a) if— 
(A) the contractor certifies to the contracting officer (or to a 
designated representative of the contracting officer) that, to the 
best of the contractor’s knowledge and belief, the contractor is en-
titled to the offset; and 
(B) the contractor proves that the cost or pricing data were 
available before the date of agreement on the price of the contract 
(or price of the modification), or, if applicable, consistent with 
subsection (a)(2), another date agreed on by the parties, and that 
the data were not submitted as specified in section 3502(c) of this 
title before that date. 
(2) WHEN NOT ALLOWED.—A contractor shall not be allowed to off-
set an amount otherwise authorized to be offset under paragraph (1) 
if— 
(A) the certification under section 3502(b) of this title with re-
spect to the cost or pricing data involved was known to be false 
when signed; or 
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(B) the Federal Government proves that, had the cost or pricing 
data referred to in paragraph (1)(B) been submitted to the Fed-
eral Government before date of agreement on the price of the con-
tract (or price of the modification), or, if applicable, under sub-
section (a)(2), another date agreed on by the parties, the submis-
sion of the cost or pricing data would not have resulted in an in-
crease in that price in the amount to be offset. 
§ 3507. Interest and penalties for certain overpayments 
(a) IN GENERAL.—If the Federal Government makes an overpayment to 
a contractor under a contract with an executive agency subject to this chap-
ter and the overpayment was due to the submission by the contractor of 
defective cost or pricing data, the contractor shall be liable to the Federal 
Government— 
(1) for interest on the amount of the overpayment, to be computed— 
(A) for the period beginning on the date the overpayment was 
made to the contractor and ending on the date the contractor re-
pays the amount of the overpayment to the Federal Government; 
and 
(B) at the current rate prescribed by the Secretary of the 
Treasury under section 6621 of the Internal Revenue Code of 
1986 (26 U.S.C. 6621); and 
(2) if the submission of the defective data was a knowing submission, 
for an additional amount equal to the amount of the overpayment. 
(b) LIABILITY NOT AFFECTED
BY REFUSAL TO SUBMIT CERTIFI-
CATION.—Any liability under this section of a contractor that submits cost 
or pricing data but refuses to submit the certification required by section 
3502(b) of this title with respect to the cost or pricing data is not affected 
by the refusal to submit the certification. 
§ 3508. Right to examine contractor records 
For the purpose of evaluating the accuracy, completeness, and currency 
of cost or pricing data required to be submitted by this chapter, an execu-
tive agency shall have the authority provided by section 4706(b)(2) of this 
title. 
CHAPTER 37—AWARDING OF CONTRACTS 
Sec. 
3701.
Basis of award and rejection. 
3702.
Sealed bids. 
3703.
Competitive proposals. 
3704.
Post-award debriefings. 
3705.
Pre-award debriefings. 
3706.
Encouragement of alternative dispute resolution. 
3707.
Antitrust violations. 
3708.
Protests. 
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HR 5414 RH 
§ 3701. Basis of award and rejection 
(a) AWARD.—An executive agency shall evaluate sealed bids and competi-
tive proposals, and award a contract, based solely on the factors specified 
in the solicitation. 
(b) REJECTION.—All sealed bids or competitive proposals received in re-
sponse to a solicitation may be rejected if the agency head determines that 
rejection is in the public interest. 
§ 3702. Sealed bids 
(a) OPENING OF BIDS.—Sealed bids shall be opened publicly at the time 
and place stated in the solicitation. 
(b) CRITERIA FOR AWARDING CONTRACT.—The executive agency shall 
evaluate the bids in accordance with section 3701(a) of this title without 
discussions with the bidders and, except as provided in section 3701(b) of 
this title, shall award a contract with reasonable promptness to the respon-
sible source whose bid conforms to the solicitation and is most advantageous 
to the Federal Government, considering only price and the other price-re-
lated factors included in the solicitation. 
(c) NOTICE OF AWARD.—The award of a contract shall be made by trans-
mitting, in writing or by electronic means, notice of the award to the suc-
cessful bidder. Within 3 days after the date of contract award, the executive 
agency shall notify, in writing or by electronic means, each bidder not 
awarded the contract that the contract has been awarded. 
§ 3703. Competitive proposals 
(a) EVALUATION AND AWARD.—An executive agency shall evaluate com-
petitive proposals in accordance with section 3701(a) of this title and may 
award a contract— 
(1) after discussions with the offerors, provided that written or oral 
discussions have been conducted with all responsible offerors who sub-
mit proposals within the competitive range; or 
(2) based on the proposals received and without discussions with the 
offerors (other than discussions conducted for the purpose of minor 
clarification), if, as required by section 3305(b)(2)(B)(i) of this title, 
the solicitation included a statement that proposals are intended to be 
evaluated, and award made, without discussions unless discussions are 
determined to be necessary. 
(b) LIMIT ON NUMBER OF PROPOSALS.—If the contracting officer deter-
mines that the number of offerors that would otherwise be included in the 
competitive range under subsection (a)(1) exceeds the number at which an 
efficient competition can be conducted, the contracting officer may limit the 
number of proposals in the competitive range, in accordance with the cri-
teria specified in the solicitation, to the greatest number that will permit 
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an efficient competition among the offerors rated most highly in accordance 
with those criteria. 
(c) CRITERIA FOR AWARDING CONTRACT.—Except as otherwise provided 
in section 3701(b) of this title, the executive agency shall award a contract 
with reasonable promptness to the responsible source whose proposal is most 
advantageous to the Federal Government, considering only cost or price and 
the other factors included in the solicitation. 
(d) NOTICE OF AWARD.—The executive agency shall award the contract 
by transmitting, in writing or by electronic means, notice of the award to 
that source and, within 3 days after the date of contract award, shall notify, 
in writing or by electronic means, all other offerors of the rejection of their 
proposals. 
§ 3704. Post-award debriefings 
(a) REQUEST FOR DEBRIEFING.—When a contract is awarded by the 
head of an executive agency on the basis of competitive proposals, an unsuc-
cessful offeror, on written request received by the agency within 3 days after 
the date on which the unsuccessful offeror receives the notification of the 
contract award, shall be debriefed and furnished the basis for the selection 
decision and contract award. 
(b) WHEN DEBRIEFING TO BE CONDUCTED.—The executive agency shall 
debrief the offeror within, to the maximum extent practicable, 5 days after 
receipt of the request by the executive agency. 
(c) INFORMATION TO BE PROVIDED.—The debriefing shall include, at a 
minimum— 
(1) the executive agency’s evaluation of the significant weak or defi-
cient factors in the offeror’s offer; 
(2) the overall evaluated cost and technical rating of the offer of the 
contractor awarded the contract and the overall evaluated cost and 
technical rating of the offer of the debriefed offeror; 
(3) the overall ranking of all offers; 
(4) a summary of the rationale for the award; 
(5) in the case of a proposal that includes a commercial item that 
is an end item under the contract, the make and model of the item 
being provided in accordance with the offer of the contractor awarded 
the contract; and 
(6) reasonable responses to relevant questions posed by the debriefed 
offeror as to whether source selection procedures set forth in the solici-
tation, applicable regulations, and other applicable authorities were fol-
lowed by the executive agency. 
(d) INFORMATION NOT TO BE INCLUDED.—The debriefing may not in-
clude point-by-point comparisons of the debriefed offeror’s offer with other 
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offers and may not disclose any information that is exempt from disclosure 
under section 552(b) of title 5. 
(e) INCLUSION OF STATEMENT IN SOLICITATION.—Each solicitation for 
competitive proposals shall include a statement that information described 
in subsection (c) may be disclosed in post-award debriefings. 
(f) AFTER SUCCESSFUL PROTEST.—If, within one year after the date of 
the contract award and as a result of a successful procurement protest, the 
executive agency seeks to fulfill the requirement under the protested con-
tract either on the basis of a new solicitation of offers or on the basis of 
new best and final offers requested for that contract, the head of the execu-
tive agency shall make available to all offerors— 
(1) the information provided in debriefings under this section regard-
ing the offer of the contractor awarded the contract; and 
(2) the same information that would have been provided to the origi-
nal offerors. 
(g) SUMMARY TO BE INCLUDED IN FILE.—The contracting officer shall 
include a summary of the debriefing in the contract file. 
§ 3705. Pre-award debriefings 
(a) REQUEST FOR DEBRIEFING.—When the contracting officer excludes 
an offeror submitting a competitive proposal from the competitive range (or 
otherwise excludes that offeror from further consideration prior to the final 
source selection decision), the excluded offeror may request in writing, with-
in 3 days after the date on which the excluded offeror receives notice of its 
exclusion, a debriefing prior to award. 
(b) WHEN DEBRIEFING TO BE CONDUCTED.—The contracting officer 
shall make every effort to debrief the unsuccessful offeror as soon as prac-
ticable but may refuse the request for a debriefing if it is not in the best 
interests of the Federal Government to conduct a debriefing at that time. 
(c) PRECONDITION FOR POST-AWARD DEBRIEFING.—The contracting of-
ficer is required to debrief an excluded offeror in accordance with section 
3704 of this title only if that offeror requested and was refused a pre-award 
debriefing under subsections (a) and (b). 
(d) INFORMATION TO BE PROVIDED.—The debriefing conducted under 
this section shall include— 
(1) the executive agency’s evaluation of the significant elements in 
the offeror’s offer; 
(2) a summary of the rationale for the offeror’s exclusion; and 
(3) reasonable responses to relevant questions posed by the debriefed 
offeror as to whether source selection procedures set forth in the solici-
tation, applicable regulations, and other applicable authorities were fol-
lowed by the executive agency. 
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(e) INFORMATION NOT TO BE DISCLOSED.—The debriefing conducted 
pursuant to this section may not disclose the number or identity of other 
offerors and shall not disclose information about the content, ranking, or 
evaluation of other offerors’ proposals. 
(f) SUMMARY TO BE INCLUDED IN FILE.—The contracting officer shall 
include a summary of the debriefing in the contract file. 
§ 3706. Encouragement of alternative dispute resolution 
The Federal Acquisition Regulation shall include a provision encouraging 
the use of alternative dispute resolution techniques to provide informal, ex-
peditious, and inexpensive procedures for an offeror to consider using before 
filing a protest, prior to the award of a contract, of the exclusion of the 
offeror from the competitive range (or otherwise from further consideration) 
for that contract. 
§ 3707. Antitrust violations 
If the agency head considers that a bid or proposal evidences a violation 
of the antitrust laws, the agency head shall refer the bid or proposal to the 
Attorney General for appropriate action. 
§ 3708. Protests 
(a) PROTEST FILE.— 
(1) ESTABLISHMENT AND ACCESS.—If, in the case of a solicitation 
for a contract issued by, or an award or proposed award of a contract 
by, the head of an executive agency, a protest is filed pursuant to the 
procedures in subchapter V of chapter 35 of title 31, and an actual 
or prospective offeror requests, a file of the protest shall be established 
by the procuring activity and reasonable access shall be provided to ac-
tual or prospective offerors. 
(2) REDACTED INFORMATION.—Information exempt from disclosure 
under section 552 of title 5 may be redacted in a file established pursu-
ant to paragraph (1) unless an applicable protective order provides oth-
erwise. 
(b) AGENCY ACTIONS ON PROTESTS.—If, in connection with a protest, 
the head of an executive agency determines that a solicitation, proposed 
award, or award does not comply with the requirements of law or regula-
tion, the head of the executive agency may— 
(1) take any action set out in subparagraphs (A) to (F) of subsection 
(b)(1) of section 3554 of title 31; and 
(2) pay costs described in paragraph (1) of section 3554(c) of title 
31 within the limits referred to in paragraph (2) of section 3554(c). 
CHAPTER 39—SPECIFIC TYPES OF CONTRACTS 
Sec. 
3901.
Contracts awarded using procedures other than sealed-bid procedures. 
3902.
Severable services contracts for periods crossing fiscal years. 
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3903.
Multiyear contracts. 
3904.
Contract authority for severable services contracts and multiyear contracts. 
3905.
Cost contracts. 
§ 3901. Contracts awarded using procedures other than 
sealed-bid procedures 
(a) AUTHORIZED TYPES.—Except as provided in section 3905 of this 
title, contracts awarded after using procedures other than sealed-bid proce-
dures may be of any type which in the opinion of the agency head will pro-
mote the best interests of the Federal Government. 
(b) REQUIRED WARRANTY.— 
(1) CONTENT.—Every contract awarded after using procedures other 
than sealed-bid procedures shall contain a suitable warranty, as deter-
mined by the agency head, by the contractor that no person or selling 
agency has been employed or retained to solicit or secure the contract 
on an agreement or understanding for a commission, percentage, bro-
kerage, or contingent fee, except for bona fide employees or bona fide 
established commercial or selling agencies the contractor maintains to 
secure business. 
(2) REMEDY FOR BREACH OR VIOLATION.—For the breach or viola-
tion of the warranty, the Federal Government may annul the contract 
without liability or deduct from the contract price or consideration the 
full amount of the commission, percentage, brokerage, or contingent 
fee. 
(3) NONAPPLICATION.—Paragraph (1) does not apply to a contract 
for an amount that is not greater than the simplified acquisition 
threshold or to a contract for the acquisition of commercial items. 
§ 3902. Severable services contracts for periods crossing fis-
cal years 
(a) AUTHORITY TO ENTER INTO CONTRACT.—The head of an executive 
agency may enter into a contract for the procurement of severable services 
for a period that begins in one fiscal year and ends in the next fiscal year 
if (without regard to any option to extend the period of the contract) the 
contract period does not exceed one year. 
(b) OBLIGATION OF AMOUNTS.—Amounts made available for a fiscal year 
may be obligated for the total amount of a contract entered into under the 
authority of this section. 
§ 3903. Multiyear contracts 
(a) DEFINITION.—In this section, a multiyear contract is a contract for 
the purchase of property or services for more than one, but not more than 
5, program years. 
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(b) AUTHORITY TO ENTER INTO CONTRACT.—An executive agency may 
enter into a multiyear contract for the acquisition of property or services 
if— 
(1) amounts are available and obligated for the contract, for the full 
period of the contract or for the first fiscal year in which the contract 
is in effect, and for the estimated costs associated with a necessary ter-
mination of the contract; and 
(2) the executive agency determines that— 
(A) the need for the property or services is reasonably firm and 
continuing over the period of the contract; and 
(B) a multiyear contract will serve the best interests of the Fed-
eral Government by encouraging full and open competition or pro-
moting economy in administration, performance, and operation of 
the agency’s programs. 
(c) TERMINATION CLAUSE.—A multiyear contract entered into under the 
authority of this section shall include a clause that provides that the con-
tract shall be terminated if amounts are not made available for the continu-
ation of the contract in a fiscal year covered by the contract. Amounts avail-
able for paying termination costs shall remain available for that purpose 
until the costs associated with termination of the contract are paid. 
(d) CANCELLATION CEILING NOTICE.—Before a contract described in 
subsection (b) that contains a clause setting forth a cancellation ceiling in 
excess of $10,000,000 may be awarded, the executive agency shall give writ-
ten notification of the proposed contract and of the proposed cancellation 
ceiling for that contract to Congress. The contract may not be awarded until 
the end of the 30-day period beginning on the date of the notification. 
(e) CONTINGENCY
CLAUSE
FOR
APPROPRIATION
OF
AMOUNTS.—A 
multiyear contract may provide that performance under the contract after 
the first year of the contract is contingent on the appropriation of amounts 
and (if the contract does so provide) that a cancellation payment shall be 
made to the contractor if the amounts are not appropriated. 
(f) OTHER LAW NOT AFFECTED.—This section does not modify or affect 
any other provision of law that authorizes multiyear contracts. 
§ 3904. Contract authority for severable services contracts 
and multiyear contracts 
(a) COMPTROLLER GENERAL.—The Comptroller General may use avail-
able amounts to enter into contracts for the procurement of severable serv-
ices for a period that begins in one fiscal year and ends in the next fiscal 
year and to enter into multiyear contracts for the acquisition of property 
and nonaudit-related services to the same extent as executive agencies under 
sections 3902 and 3903 of this title. 
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(b) LIBRARY OF CONGRESS.—The Library of Congress may use available 
amounts to enter into contracts for the lease or procurement of severable 
services for a period that begins in one fiscal year and ends in the next fis-
cal year and to enter into multiyear contracts for the acquisition of property 
and services pursuant to sections 3902 and 3903 of this title. 
(c) CHIEF ADMINISTRATIVE OFFICER OF THE HOUSE OF REPRESENTA-
TIVES.—The Chief Administrative Officer of the House of Representatives 
may enter into— 
(1) contracts for the procurement of severable services for a period 
that begins in one fiscal year and ends in the next fiscal year to the 
same extent as the head of an executive agency under the authority of 
section 3902 of this title; and 
(2) multiyear contracts for the acquisitions of property and 
nonaudit-related services to the same extent as executive agencies 
under the authority of section 3903 of this title. 
(d) CONGRESSIONAL BUDGET OFFICE.—The Congressional Budget Office 
may use available amounts to enter into contracts for the procurement of 
severable services for a period that begins in one fiscal year and ends in 
the next fiscal year and may enter into multiyear contracts for the acquisi-
tion of property and services to the same extent as executive agencies under 
the authority of sections 3902 and 3903 of this title. 
(e) SECRETARY AND SERGEANT AT ARMS AND DOORKEEPER OF THE 
SENATE.—Subject to regulations prescribed by the Committee on Rules and 
Administration of the Senate, the Secretary and the Sergeant at Arms and 
Doorkeeper of the Senate may enter into— 
(1) contracts for the procurement of severable services for a period 
that begins in one fiscal year and ends in the next fiscal year to the 
same extent and under the same conditions as the head of an executive 
agency under the authority of section 3902 of this title; and 
(2) multiyear contracts for the acquisition of property and services 
to the same extent and under the same conditions as executive agencies 
under the authority of section 3903 of this title. 
(f) CAPITOL POLICE.—The United States Capitol Police may enter into— 
(1) contracts for the procurement of severable services for a period 
that begins in one fiscal year and ends in the next fiscal year to the 
same extent as the head of an executive agency under the authority of 
section 3902 of this title; and 
(2) multiyear contracts for the acquisitions of property and 
nonaudit-related services to the same extent as executive agencies 
under the authority of section 3903 of this title. 
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(g) ARCHITECT OF THE CAPITOL.—The Architect of the Capitol may 
enter into— 
(1) contracts for the procurement of severable services for a period 
that begins in one fiscal year and ends in the next fiscal year to the 
same extent as the head of an executive agency under the authority of 
section 3902 of this title; and 
(2) multiyear contracts for the acquisitions of property and 
nonaudit-related services to the same extent as executive agencies 
under the authority of section 3903 of this title. 
(h) SECRETARY OF THE SMITHSONIAN INSTITUTION.—The Secretary of 
the Smithsonian Institution may enter into— 
(1) contracts for the procurement of severable services for a period 
that begins in one fiscal year and ends in the next fiscal year under 
the authority of section 3902 of this title; and 
(2) multiyear contracts for the acquisition of property and services 
under the authority of section 3903 of this title. 
§ 3905. Cost contracts 
(a) COST-PLUS-A-PERCENTAGE-OF-COST CONTRACTS DISALLOWED.— 
The cost-plus-a-percentage-of-cost system of contracting shall not be used. 
(b) COST-PLUS-A-FIXED-FEE CONTRACTS.— 
(1) IN GENERAL.—Except as provided in paragraphs (2) and (3), the 
fee in a cost-plus-a-fixed-fee contract shall not exceed 10 percent of the 
estimated cost of the contract, not including the fee, as determined by 
the agency head at the time of entering into the contract. 
(2) EXPERIMENTAL, DEVELOPMENTAL, OR RESEARCH WORK.—The 
fee in a cost-plus-a-fixed-fee contract for experimental, developmental, 
or research work shall not exceed 15 percent of the estimated cost of 
the contract, not including the fee. 
(3) ARCHITECTURAL
OR
ENGINEERING
SERVICES.—The fee in a 
cost-plus-a-fixed-fee contract for architectural or engineering services 
relating to any public works or utility project may include the contrac-
tor’s costs and shall not exceed 6 percent of the estimated cost, not 
including the fee, as determined by the agency head at the time of en-
tering into the contract, of the project to which the fee applies. 
(c) NOTIFICATION.—All cost and cost-plus-a-fixed-fee contracts shall pro-
vide for advance notification by the contractor to the procuring agency of 
any subcontract on a cost-plus-a-fixed-fee basis and of any fixed-price sub-
contract or purchase order which exceeds in dollar amount either the sim-
plified acquisition threshold or 5 percent of the total estimated cost of the 
prime contract. 
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(d) RIGHT TO AUDIT.—A procuring agency, through any authorized rep-
resentative thereof, has the right to inspect the plans and to audit the books 
and records of a prime contractor or subcontractor engaged in the perform-
ance of a cost or cost-plus-a-fixed-fee contract. 
CHAPTER 41—TASK AND DELIVERY ORDER CONTRACTS 
Sec. 
4101.
Definitions. 
4102.
Authorities or responsibilities not affected. 
4103.
General authority. 
4104.
Guidance on use of task and delivery order contracts. 
4105.
Advisory and assistance services. 
4106.
Orders. 
§ 4101. Definitions 
In this chapter: 
(1) DELIVERY ORDER CONTRACT.—The term ‘‘delivery order con-
tract’’ means a contract for property that— 
(A) does not procure or specify a firm quantity of property 
(other than a minimum or maximum quantity); and 
(B) provides for the issuance of orders for the delivery of prop-
erty during the period of the contract. 
(2) TASK
ORDER
CONTRACT.—The term ‘‘task order contract’’ 
means a contract for services that— 
(A) does not procure or specify a firm quantity of services 
(other than a minimum or maximum quantity); and 
(B) provides for the issuance of orders for the performance of 
tasks during the period of the contract. 
§ 4102. Authorities or responsibilities not affected 
This chapter does not modify or supersede, and is not intended to impair 
or restrict, authorities or responsibilities under sections 1101 to 1104 of 
title 40. 
§ 4103. General authority 
(a) AUTHORITY TO AWARD.—Subject to the requirements of this section, 
section 4106 of this title, and other applicable law, the head of an executive 
agency may enter into a task or delivery order contract for procurement of 
services or property. 
(b) SOLICITATION.—The solicitation for a task or delivery order contract 
shall include— 
(1) the period of the contract, including the number of options to 
extend the contract and the period for which the contract may be ex-
tended under each option; 
(2) the maximum quantity or dollar value of the services or property 
to be procured under the contract; and 
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(3) a statement of work, specifications, or other description that rea-
sonably describes the general scope, nature, complexity, and purposes 
of the services or property to be procured under the contract. 
(c) APPLICABILITY OF RESTRICTION ON USE OF NONCOMPETITIVE PRO-
CEDURES.—The head of an executive agency may use procedures other than 
competitive procedures to enter into a task or delivery order contract under 
this section only if an exception in section 3303(a) of this title applies to 
the contract and the use of those procedures is approved in accordance with 
section 3303(d) of this title. 
(d) SINGLE AND MULTIPLE CONTRACT AWARDS.— 
(1) EXERCISE OF AUTHORITY.—The head of an executive agency 
may exercise the authority provided in this section— 
(A) to award a single task or delivery order contract; or 
(B) if the solicitation states that the head of the executive agen-
cy has the option to do so, to award separate task or delivery 
order contracts for the same or similar services or property to 2 
or more sources. 
(2) DETERMINATION NOT REQUIRED.—No determination under sec-
tion 3302 of this title is required for an award of multiple task or de-
livery order contracts under paragraph (1)(B). 
(3) REGULATIONS.—Regulations implementing this subsection shall 
establish— 
(A) a preference for awarding, to the maximum extent prac-
ticable, multiple task or delivery order contracts for the same or 
similar services or property under paragraph (1)(B); and 
(B) criteria for determining when award of multiple task or de-
livery order contracts would not be in the best interest of the Fed-
eral Government. 
(e) CONTRACT MODIFICATIONS.—A task or delivery order may not in-
crease the scope, period, or maximum value of the task or delivery order 
contract under which the order is issued. The scope, period, or maximum 
value of the contract may be increased only by modification of the contract. 
(f) INAPPLICABILITY TO CONTRACTS FOR ADVISORY AND ASSISTANCE 
SERVICES.—Except as otherwise specifically provided in section 4105 of this 
title, this section does not apply to a task or delivery order contract for the 
acquisition of advisory and assistance services (as defined in section 1105(g) 
of title 31). 
(g) RELATIONSHIP TO OTHER CONTRACTING AUTHORITY.—Nothing in 
this section may be construed to limit or expand any authority of the head 
of an executive agency or the Administrator of General Services to enter 
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into schedule, multiple award, or task or delivery order contracts under any 
other provision of law. 
§ 4104. Guidance on use of task and delivery order contracts 
(a) GUIDANCE IN FEDERAL ACQUISITION REGULATION.—The Federal 
Acquisition Regulation issued in accordance with sections 1121(b) and 
1303(a)(1) of this title shall provide guidance to agencies on the appropriate 
use of task and delivery order contracts in accordance with this chapter and 
sections 2304a to 2304d of title 10. 
(b) CONTENT OF REGULATIONS.—The regulations issued pursuant to 
subsection (a) at a minimum shall provide specific guidance on— 
(1) the appropriate use of Government-wide and other multiagency 
contracts entered into in accordance with this chapter and sections 
2304a to 2304d of title 10; and 
(2) steps that agencies should take in entering into and admin-
istering multiple award task and delivery order contracts to ensure 
compliance with the requirement in— 
(A) section 11312 of title 40 for capital planning and invest-
ment control in purchases of information technology products and 
services; 
(B) section 4106(c) of this title and section 2304c(b) of title 10 
to ensure that all contractors are afforded a fair opportunity to 
be considered for the award of task and delivery orders; and 
(C) section 4106(d) of this title and section 2304c(c) of title 10 
for a statement of work in each task or delivery order issued that 
clearly specifies all tasks to be performed or property to be deliv-
ered under the order. 
(c) FEDERAL SUPPLY SCHEDULES PROGRAM.—The Administrator for 
Federal Procurement Policy shall consult with the Administrator of General 
Services to assess the effectiveness of the multiple awards schedule program 
of the General Services Administration referred to in section 152(3) of this 
title that is administered as the Federal Supply Schedules program. The as-
sessment shall include examination of— 
(1) the administration of the program by the Administrator of Gen-
eral Services; and 
(2) the ordering and program practices followed by Federal customer 
agencies in using schedules established under the program. 
§ 4105. Advisory and assistance services 
(a) DEFINITION.—In this section, the term ‘‘advisory and assistance serv-
ices’’ has the same meaning given that term in section 1105(g) of title 31. 
(b) AUTHORITY TO AWARD.— 
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(1) IN GENERAL.—Subject to the requirements of this section, sec-
tion 4106 of this title, and other applicable law, the head of an execu-
tive agency may enter into a task order contract for procurement of 
advisory and assistance services. 
(2) ONLY UNDER THIS SECTION.—The head of an executive agency 
may enter into a task order contract for advisory and assistance serv-
ices only under this section. 
(c) LIMITATION ON CONTRACT PERIOD.—The period of a task order con-
tract entered into under this section, including all periods of extensions of 
the contract under options, modifications, or otherwise, may not exceed 5 
years unless a longer period is specifically authorized in a law that is appli-
cable to the contract. 
(d) CONTENT OF NOTICE.—The notice required by section 1707 of this 
title and section 8(e) of the Small Business Act (15 U.S.C. 637(e)) shall 
reasonably and fairly describe the general scope, magnitude, and duration 
of the proposed task order contract in a manner that would reasonably en-
able a potential offeror to decide whether to request the solicitation and con-
sider submitting an offer. 
(e) REQUIRED CONTENT OF SOLICITATION AND CONTRACT.— 
(1) SOLICITATION.—The solicitation shall include the information 
(regarding services) described in section 4103(b) of this title. 
(2) CONTRACT.—A task order contract entered into under this sec-
tion shall contain the same information that is required by paragraph 
(1) to be included in the solicitation of offers for that contract. 
(f) MULTIPLE AWARDS.— 
(1) AUTHORITY TO MAKE MULTIPLE AWARDS.—On the basis of one 
solicitation, the head of an executive agency may award separate task 
order contracts under this section for the same or similar services to 
2 or more sources if the solicitation states that the head of the execu-
tive agency has the option to do so. 
(2) CONTENT OF SOLICITATION.—In the case of a task order con-
tract for advisory and assistance services to be entered into under this 
section, if the contract period is to exceed 3 years and the contract 
amount is estimated to exceed $10,000,000 (including all options), the 
solicitation shall— 
(A) provide for a multiple award authorized under paragraph 
(1); and 
(B) include a statement that the head of the executive agency 
may also elect to award only one task order contract if the head 
of the executive agency determines in writing that only one of the 
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offerors is capable of providing the services required at the level 
of quality required. 
(3) NONAPPLICATION.—Paragraph (2) does not apply in the case of 
a solicitation for which the head of the executive agency concerned de-
termines in writing that, because the services required under the con-
tract are unique or highly specialized, it is not practicable to award 
more than one contract. 
(g) CONTRACT MODIFICATIONS.— 
(1) INCREASE IN SCOPE, PERIOD, OR MAXIMUM VALUE OF CONTRACT 
ONLY BY MODIFICATION OF CONTRACT.—A task order may not in-
crease the scope, period, or maximum value of the task order contract 
under which the order is issued. The scope, period, or maximum value 
of the contract may be increased only by modification of the contract. 
(2) USE OF COMPETITIVE PROCEDURES.—Unless use of procedures 
other than competitive procedures is authorized by an exception in sec-
tion 3303(a) of this title and approved in accordance with section 
3303(d) of this title, competitive procedures shall be used for making 
such a modification. 
(3) NOTICE.—Notice regarding the modification shall be provided in 
accordance with section 1707 of this title and section 8(e) of the Small 
Business Act (15 U.S.C. 637(e)). 
(h) CONTRACT EXTENSIONS.— 
(1) WHEN
CONTRACT
MAY
BE
EXTENDED.—Notwithstanding the 
limitation on the contract period set forth in subsection (c) or in a so-
licitation or contract pursuant to subsection (f), a contract entered into 
by the head of an executive agency under this section may be extended 
on a sole-source basis for a period not exceeding 6 months if the head 
of the executive agency determines that— 
(A) the award of a follow-on contract has been delayed by cir-
cumstances that were not reasonably foreseeable at the time the 
initial contract was entered into; and 
(B) the extension is necessary to ensure continuity of the receipt 
of services pending the award of, and commencement of perform-
ance under, the follow-on contract. 
(2) LIMIT OF ONE EXTENSION.—A task order contract may be ex-
tended under paragraph (1) only once and only in accordance with the 
limitations and requirements of this subsection. 
(i) INAPPLICABILITY TO CERTAIN CONTRACTS.—This section does not 
apply to a contract for the acquisition of property or services that includes 
acquisition of advisory and assistance services if the head of the executive 
agency entering into the contract determines that, under the contract, advi-
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sory and assistance services are necessarily incident to, and not a significant 
component of, the contract. 
§ 4106. Orders 
(a) APPLICATION.—This section applies to task and delivery order con-
tracts entered into under sections 4103 and 4105 of this title. 
(b) ACTIONS NOT REQUIRED FOR ISSUANCE OF ORDERS.—The following 
actions are not required for issuance of a task or delivery order under a 
task or delivery order contract: 
(1) A separate notice for the order under section 1707 of this title 
or section 8(e) of the Small Business Act (15 U.S.C. 637(e)). 
(2) Except as provided in subsection (c), a competition (or a waiver 
of competition approved in accordance with section 3303(d) of this 
title) that is separate from that used for entering into the contract. 
(c) MULTIPLE AWARD CONTRACTS.—When multiple contracts are award-
ed under section 4103(d)(1)(B) or 4105(f) of this title, all contractors 
awarded the contracts shall be provided a fair opportunity to be considered, 
pursuant to procedures set forth in the contracts, for each task or delivery 
order in excess of $2,500 that is to be issued under any of the contracts, 
unless— 
(1) the executive agency’s need for the services or property ordered 
is of such unusual urgency that providing the opportunity to all of 
those contractors would result in unacceptable delays in fulfilling that 
need; 
(2) only one of those contractors is capable of providing the services 
or property required at the level of quality required because the services 
or property ordered are unique or highly specialized; 
(3) the task or delivery order should be issued on a sole-source basis 
in the interest of economy and efficiency because it is a logical follow- 
on to a task or delivery order already issued on a competitive basis; 
or 
(4) it is necessary to place the order with a particular contractor to 
satisfy a minimum guarantee. 
(d) STATEMENT OF WORK.—A task or delivery order shall include a 
statement of work that clearly specifies all tasks to be performed or prop-
erty to be delivered under the order. 
(e) PROTESTS.—A protest is not authorized in connection with the 
issuance or proposed issuance of a task or delivery order except for a pro-
test on the ground that the order increases the scope, period, or maximum 
value of the contract under which the order is issued. 
(f) TASK AND DELIVERY ORDER OMBUDSMAN.— 
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(1) APPOINTMENT OR DESIGNATION AND RESPONSIBILITIES.—The 
head of each executive agency who awards multiple task or delivery 
order contracts under section 4103(d)(1)(B) or 4105(f) of this title 
shall appoint or designate a task and delivery order ombudsman who 
shall be responsible for reviewing complaints from the contractors on 
those contracts and ensuring that all of the contractors are afforded 
a fair opportunity to be considered for task or delivery orders when re-
quired under subsection (c). 
(2) WHO IS ELIGIBLE.—The task and delivery order ombudsman 
shall be a senior agency official who is independent of the contracting 
officer for the contracts and may be the executive agency’s advocate 
for competition. 
CHAPTER 43—ALLOWABLE COSTS 
Sec. 
4301.
Definitions. 
4302.
Adjustment of threshold amount of covered contract. 
4303.
Effect of submission of unallowable costs. 
4304.
Specific costs not allowable. 
4305.
Required regulations. 
4306.
Applicability of regulations to subcontractors. 
4307.
Contractor certification. 
4308.
Penalties for submission of cost known to be unallowable. 
4309.
Burden of proof on contractor. 
4310.
Proceeding costs not allowable. 
§ 4301. Definitions 
In this chapter: 
(1) COMPENSATION.—The term ‘‘compensation’’, for a fiscal year, 
means the total amount of wages, salary, bonuses, and deferred com-
pensation for the fiscal year, whether paid, earned, or otherwise accru-
ing, as recorded in an employer’s cost accounting records for the fiscal 
year. 
(2) COVERED CONTRACT.—The term ‘‘covered contract’’ means a 
contract for an amount in excess of $500,000 that is entered into by 
an executive agency, except that the term does not include a fixed-price 
contract without cost incentives or any firm fixed-price contract for the 
purchase of commercial items. 
(3) FISCAL YEAR.—The term ‘‘fiscal year’’ means a fiscal year estab-
lished by a contractor for accounting purposes. 
(4) SENIOR EXECUTIVE.—The term ‘‘senior executive’’, with respect 
to a contractor, means the 5 most highly compensated employees in 
management positions at each home office and each segment of the 
contractor. 
§ 4302. Adjustment of threshold amount of covered contract 
Effective on October 1 of each year that is divisible by 5, the amount 
set forth in section 4301(2) of this title shall be adjusted to the equivalent 
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amount in constant fiscal year 1994 dollars. An adjusted amount that is 
not evenly divisible by $50,000 shall be rounded to the nearest multiple of 
$50,000. If an amount is evenly divisible by $25,000 but is not evenly divis-
ible by $50,000, the amount shall be rounded to the next higher multiple 
of $50,000. 
§ 4303. Effect of submission of unallowable costs 
(a) INDIRECT COST THAT VIOLATES FEDERAL ACQUISITION REGULA-
TION COST PRINCIPLE.—An executive agency shall require that a covered 
contract provide that if the contractor submits to the executive agency a 
proposal for settlement of indirect costs incurred by the contractor for any 
period after those costs have been accrued and if that proposal includes the 
submission of a cost that is unallowable because the cost violates a cost 
principle in the Federal Acquisition Regulation or an executive agency sup-
plement to the Federal Acquisition Regulation, the cost shall be disallowed. 
(b) PENALTY FOR VIOLATION OF COST PRINCIPLE.— 
(1) UNALLOWABLE COST IN PROPOSAL.—If the executive agency de-
termines that a cost submitted by a contractor in its proposal for set-
tlement is expressly unallowable under a cost principle referred to in 
subsection (a) that defines the allowability of specific selected costs, the 
executive agency shall assess a penalty against the contractor in an 
amount equal to— 
(A) the amount of the disallowed cost allocated to covered con-
tracts for which a proposal for settlement of indirect costs has 
been submitted; plus 
(B) interest (to be computed based on provisions in the Federal 
Acquisition Regulation) to compensate the Federal Government 
for the use of the amount which a contractor has been paid in ex-
cess of the amount to which the contractor was entitled. 
(2) COST DETERMINED TO BE UNALLOWABLE BEFORE PROPOSAL 
SUBMITTED.—If the executive agency determines that a proposal for 
settlement of indirect costs submitted by a contractor includes a cost 
determined to be unallowable in the case of that contractor before the 
submission of that proposal, the executive agency shall assess a penalty 
against the contractor in an amount equal to 2 times the amount of 
the disallowed cost allocated to covered contracts for which a proposal 
for settlement of indirect costs has been submitted. 
(c) WAIVER OF PENALTY.—The Federal Acquisition Regulation shall pro-
vide for a penalty under subsection (b) to be waived in the case of a con-
tractor’s proposal for settlement of indirect costs when— 
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HR 5414 RH 
(1) the contractor withdraws the proposal before the formal initiation 
of an audit of the proposal by the Federal Government and resubmits 
a revised proposal; 
(2) the amount of unallowable costs subject to the penalty is insig-
nificant; or 
(3) the contractor demonstrates, to the contracting officer’s satisfac-
tion, that— 
(A) it has established appropriate policies and personnel train-
ing and an internal control and review system that provide assur-
ances that unallowable costs subject to penalties are precluded 
from being included in the contractor’s proposal for settlement of 
indirect costs; and 
(B) the unallowable costs subject to the penalty were inadvert-
ently incorporated into the proposal. 
(d) APPLICABILITY OF CONTRACT DISPUTES PROCEDURE.—An action of 
an executive agency under subsection (a) or (b)— 
(1) shall be considered a final decision for the purposes of section 
6903 of this title; and 
(2) is appealable in the manner provided in section 6904(a) of this 
title. 
§ 4304. Specific costs not allowable 
(a) SPECIFIC COSTS.—The following costs are not allowable under a cov-
ered contract: 
(1) Costs of entertainment, including amusement, diversion, and so-
cial activities, and any costs directly associated with those costs (such 
as tickets to shows or sports events, meals, lodging, rentals, transpor-
tation, and gratuities). 
(2) Costs incurred to influence (directly or indirectly) legislative ac-
tion on any matter pending before Congress, a State legislature, or a 
legislative body of a political subdivision of a State. 
(3) Costs incurred in defense of any civil or criminal fraud pro-
ceeding or similar proceeding (including filing of any false certification) 
brought by the Federal Government where the contractor is found lia-
ble or had pleaded nolo contendere to a charge of fraud or similar pro-
ceeding (including filing of a false certification). 
(4) Payments of fines and penalties resulting from violations of, or 
failure to comply with, Federal, State, local, or foreign laws and regula-
tions, except when incurred as a result of compliance with specific 
terms and conditions of the contract or specific written instructions 
from the contracting officer authorizing in advance those payments in 
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