Source: https://www.govinfo.gov/content/pkg/USCODE-2009-title41/html/USCODE-2009-title41-chap4-subchapIV-sec256.htm
Timestamp: 2020-01-19 13:37:34
Document Index: 195550602

Matched Legal Cases: ['§256', '§306', '§8', '§2151', '§808', '§804', '§306', '§10', '§808', '§808']

Sec. 256 - Allowable costs
§256. Allowable costs
(a) Indirect cost that violates FAR 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 such costs have been accrued and if that proposal includes the submission of a cost which is unallowable because the cost violates a cost principle in the Federal Acquisition Regulation (referred to in section 421(c)(1) of this title) or an executive agency supplement to the Federal Acquisition Regulation, the cost shall be disallowed.
(b) Penalty for violation of cost principle
(1) If the executive agency determines that a cost submitted by a contractor in its proposal for settlement is expressly unallowable under a cost principle referred to in subsection (a) of this section that defines the allowability of specific selected costs, the executive agency shall assess a penalty against the contractor in an amount equal to—
(2) 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 such contractor before the submission of such proposal, the executive agency shall assess a penalty against the contractor in an amount equal to two 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 provide for a penalty under subsection (b) of this section to be waived in the case of a contractor's proposal for settlement of indirect costs when—
(d) Applicability of contract disputes procedure to disallowance of cost and assessment of penalty
An action of an executive agency under subsection (a) or (b) of this section—
(1) shall be considered a final decision for the purposes of section 605 of this title; and
(2) is appealable in the manner provided in section 606 of this title.
(e) Specific costs not allowable
(A) Costs of entertainment, including amusement, diversion, and social activities, and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities).
(C) Costs incurred in defense of any civil or criminal fraud proceeding or similar proceeding (including filing of any false certification) brought by the United States where the contractor is found liable or had pleaded nolo contendere to a charge of fraud or similar proceeding (including filing of a false certification).
(N) Costs of severance pay paid by the contractor to a foreign national employed by the contractor under a service contract performed in a foreign country if the termination of the employment of the foreign national is the result of the closing of, or the curtailment of activities at, a United States facility in that country at the request of the government of that country.
(O) Costs incurred by a contractor in connection with any criminal, civil, or administrative proceeding commenced by the United States or a State, to the extent provided in subsection (k) of this section.
(P) Costs of compensation of senior executives of contractors for a fiscal year, regardless of the contract funding source, to the extent that such compensation exceeds the benchmark compensation amount determined applicable for the fiscal year by the Administrator for Federal Procurement Policy under section 435 of this title.
(2)(A) Pursuant to the Federal Acquisition Regulation and subject to the availability of appropriations, an executive agency, in awarding a covered contract, may waive the application of the provisions of paragraphs (1)(M) and (1)(N) to that contract if the executive agency determines that—
(i) the application of such provisions to the contract would adversely affect the continuation of a program, project, or activity that provides significant support services for employees of the executive agency posted outside the United States;
(B) An executive agency shall include in the solicitation for a covered contract a statement indicating—
(ii) whether the executive agency will consider granting such a waiver, and, if the executive agency will consider granting a waiver, the criteria to be used in granting the waiver.
(C) An executive agency shall make the final determination regarding whether to grant a waiver under subparagraph (A) with respect to a covered contract before award of the contract.
(3) The provisions of the Federal Acquisition Regulation implementing this section may establish appropriate definitions, exclusions, limitations, and qualifications. Any submission by a contractor of costs which are incurred by the contractor and which are claimed to be allowable under Department of Energy management and operating contracts shall be considered a “proposal for settlement of indirect costs incurred by the contractor for any period after such costs have been accrued”, as used in this section.
(f) Required regulations
(2) The Federal Acquisition Regulation shall require that a contracting officer not resolve any questioned costs until the contracting officer has obtained—
(3) The Federal Acquisition 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.
(4) 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 such a manner that the amount of the individual questioned costs that are paid will be reflected in the settlement.
(g) Applicability of regulations to subcontractors
The regulations referred to in subsections (e) and (f)(1) of this section shall require prime contractors of a covered contract, to the maximum extent practicable, to apply the provisions of such regulations to all subcontractors of the covered contract.
(h) Contractor certification required
(1) 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. Any such certification shall be in a form prescribed in the Federal Acquisition Regulation.
(2) An executive agency may, in an exceptional case, waive the requirement for certification under paragraph (1) in the case of any contract if the agency—
(i) Penalties for submission of cost known as not allowable
The submission to an executive agency of a proposal for settlement of costs for any period after such costs have been accrued that includes a cost that is expressly specified by statute or regulation as being unallowable, with the knowledge that such cost is unallowable, shall be subject to the provisions of section 287 of title 18 and section 3729 of title 31.
(j) Contractor to have burden of proof
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 United States is in issue, the burden of proof shall be upon the contractor to establish that those costs are reasonable.
(k) Proceeding costs not allowable
(1) Except as otherwise provided in this subsection, costs incurred by a contractor in connection with any criminal, civil, or administrative proceeding commenced by the United States or a State are not allowable as reimbursable costs under a covered contract if the proceeding (A) relates to a violation of, or failure to comply with, a Federal or State statute or regulation, and (B) results in a disposition described in paragraph (2).
(C) In the case of any civil or administrative proceeding, the imposition of a monetary penalty by reason of the violation or failure referred to in paragraph (1).
(i) to debar or suspend the contractor,
(ii) to rescind or void the contract, or
(iii) to terminate the contract for default,
(4) In the case of a proceeding referred to in paragraph (1) 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 such 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 (A) a specific term or condition of the contract, or (B) specific written instructions of the executive agency.
(l) “Covered contract” defined
(1) In this section, 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 such term does not include a fixed-price contract without cost incentives or any firm, fixed price contract for the purchase of commercial items.
(2) Effective on October 1 of each year that is divisible by five, the amount set forth in paragraph (1) shall be adjusted to the equivalent amount in constant fiscal year 1994 dollars. An amount, as so adjusted, that is not evenly 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 is not evenly divisible by $50,000, the amount shall be rounded to the next higher multiple of $50,000.
(m) Other definitions
(1) The term “compensation”, for a fiscal year, means the total amount of wages, salary, bonuses and deferred compensation for the fiscal year, whether paid, earned, or otherwise accruing, as recorded in an employer's cost accounting records for the fiscal year.
(2) The term “senior executives”, with respect to a contractor, means the five most highly compensated employees in management positions at each home office and each segment of the contractor.
(3) The term “fiscal year” means a fiscal year established by a contractor for accounting purposes.
(June 30, 1949, ch. 288, title III, §306, as added Pub. L. 100–700, §8(a)(1), Nov. 19, 1988, 102 Stat. 4634; amended Pub. L. 103–355, title II, §2151, Oct. 13, 1994, 108 Stat. 3309; Pub. L. 105–85, div. A, title VIII, §808(b), Nov. 18, 1997, 111 Stat. 1836; Pub. L. 105–261, div. A, title VIII, §804(b), Oct. 17, 1998, 112 Stat. 2083.)
A prior section 256, act June 30, 1949, ch. 288, title III, §306, 63 Stat. 396, related to waiver of liquidated damages, prior to repeal by act Sept. 5, 1950, ch. 849, §10(b), 64 Stat. 591, eff. July 1, 1949. See section 256a of this title.
1998—Subsec. (m)(2). Pub. L. 105–261 amended par. (2) generally. Prior to amendment, par. (2) read as follows: “The term ‘senior executive’, with respect to a contractor, means—
“(C) in the case of a contractor that has components which report directly to the contractor's headquarters, the five most highly compensated individuals in management positions at each such component.”
1997—Subsec. (e)(1)(P). Pub. L. 105–85, §808(b)(1), added subpar. (P).
Subsec. (m). Pub. L. 105–85, §808(b)(2), added subsec. (m).
1994—Pub. L. 103–355 amended section generally, substituting present provisions for provisions outlining limitations on allowability of costs incurred by contractors in criminal, civil, or administrative proceedings relating to violations of Federal or State statutes or regulations, which resulted in dispositions against contractors based on such violations.
Amendment by Pub. L. 105–261 applicable with respect to costs of compensation of senior executives incurred after Jan. 1, 1999, under covered contracts entered into before, on, or after Oct. 17, 1998, see section 804(d) of Pub. L. 105–261, set out as a note under section 2324 of Title 10, Armed Forces.
Amendment by Pub. L. 105–85 effective on date that is 90 days after Nov. 18, 1997, and applicable with respect to costs of compensation incurred after Jan. 1, 1998, under covered contracts entered into before, on, or after Nov. 18, 1997, see section 808(e) of Pub. L. 105–85, set out as an Effective Date note under section 435 of this title.
Section effective with respect to contracts awarded after Nov. 19, 1988, see section 8(e) of Pub. L. 100–700, set out as an Effective and Termination Dates of 1988 Amendment note under section 2324 of Title 10, Armed Forces.
Section 2192 of Pub. L. 103–355 provided that:
“(a) Costs Not Allowable.—(1) The costs of gifts or recreation for employees of a contractor or members of their families that are provided by the contractor to improve employee morale or performance or for any other purpose are not allowable under a covered contract unless, within 120 days after the date of the enactment of this Act [Oct. 13, 1994], the Federal Acquisition Regulatory Council prescribes amendments to the Federal Acquisition Regulation specifying circumstances under which such costs are allowable under a covered contract.
“(2) Not later than 90 days after the date of the enactment of this Act, the Federal Acquisition Regulatory Council shall amend the cost principle in the Federal Acquisition Regulation that is set out in section 31.205–14 of title 48, Code of Federal Regulations, relating to unallowability of entertainment costs—
“(A) by inserting in the cost principle a statement that costs made specifically unallowable under that cost principle are not allowable under any other cost principle; and
“(B) by striking out ‘(but see 31.205–1 and 31.205–13)’.
“(1) The term ‘employee’ includes officers and directors of a contractor.
“(2) The term ‘covered contract’ has the meaning given such term in section 2324(l) of title 10, United States Code (as amended by section 2101(c)), and section 306(l) of the Federal Property and Administrative Services Act of 1949 (as added by section 2151) [41 U.S.C. 256(l)].
“(c) Effective Date.—Any amendments to the Federal Acquisition Regulation made pursuant to subsection (a) shall apply with respect to costs incurred after the date on which the amendments made by section 2101 apply (as provided in section 10001) [set out as an Effective Date of 1994 Amendment note under section 251 of this title]) or the date on which the amendments made by section 2151 apply (as provided in section 10001), whichever is later.”
Section 1. To promote economy and efficiency in Government contracting, certain costs that are not directly related to the contractors’ provision of goods and services to the Government shall be unallowable for payment, thereby directly reducing Government expenditures. This order is also consistent with the policy of the United States to remain impartial concerning any labor-management dispute involving Government contractors. This order does not restrict the manner in which recipients of Federal funds may expend those funds.
Sec. 2. It is the policy of the executive branch in procuring goods and services that, to ensure the economical and efficient administration of Government contracts, contracting departments and agencies, when they enter into, receive proposals for, or make disbursements pursuant to a contract as to which certain costs are treated as unallowable, shall treat as unallowable the costs of any activities undertaken to persuade employees—whether employees of the recipient of the Federal disbursements or of any other entity—to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees’ own choosing. Such unallowable costs shall be excluded from any billing, claim, proposal, or disbursement applicable to any such Federal Government contract.