Question: What Is Allowable Cost?

What are allowable costs for federal contracts?

Allowable costs are defined in the FAR as costs that are reasonable and allocable to the contract, per the terms of the contract at issue, Cost Accounting Standards and the FAR.

(See FAR 31.201-2).

Although this is a broad definition, FAR Section 31 specifically addresses many types of costs a contractor may incur..

Are bonuses allowable costs?

Bonuses and incentive programs are allowable costs if certain criteria are met. These include: … The bonuses must be based on a written agreement, plan or policy implying an agreement.

Are proposal preparation costs allowable?

Proposal costs are defined as the costs of preparing bids, proposals, or applications for potential Awards, including the development of data necessary to support the UW’s bids or proposals. For most federal Awards, proposal costs, for both successful and unsuccessful bids, are not allowable as direct costs.

Which of the following types of taxes are allowable contractor costs?

(a) The following types of costs are allowable: (1) Federal, State, and local taxes (see part 29), except as otherwise provided in paragraph (b) of this section that are required to be and are paid or accrued in accordance with generally accepted accounting principles. Fines and penalties are not considered taxes.

Do government contractors get bonuses?

While federal regulations state that an award fee “shall not be earned if the contractor’s overall cost, schedule, and technical performance in the aggregate is below satisfactory,” federal agencies continue to award bonuses to contractors for unsatisfactory performance.

How do you determine when a cost is allowable?

(a) A cost is allowable only when the cost complies with all of the following requirements: (1) Reasonableness. (2) Allocability. (3) Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circumstances.

What are allocable costs?

Allocable: A cost is allocable to a project if goods or services involved are chargeable or assignable in accordance with the relative benefits received by the projects. … The costs are treated consistently in like circumstances; and. The costs conform to any limitations of the cost principles or the sponsored agreement.

What are material allowable costs?

Allowable costs are those expenses specified in a contract that can be billed to the customer. For example, a contract to develop a customized lathe allows for the reimbursement of direct materials, direct labor, and a specific overhead charge as allowable costs.

What are expressly unallowable costs?

The definition in FAR § 31.001 of an “expressly unallowable cost” refers to “a particular item or type of cost.” These two categories of costs confirm that an “expressly unallowable” cost includes more than an explicitly stated “item.” Costs unambiguously falling within a generic definition of a “type” of unallowable …

What are direct and indirect costs in grants?

Looking at it another way, indirect costs are those costs that are not classified as direct. Direct costs can be identified specifically with particular cost objectives such as a grant, contract, project, function or activity. … Materials, supplies and equipment purchased directly for use on a specific grant or contract.

Are bank fees allowable under far?

Administrative costs associated with short-term borrowings for working capital may be classified as “bank fees.” These administrative costs are allowable under FAR 31.205-27, Organization costs. … VISA or MasterCard), and the card-issuing bank for processing payment through the credit card network.

Are business meals allowable under far?

Social activities, including those designed to influence and build relationships, may be an integral part of normal business activities, but that does not make the costs allowable. The costs for other normal business activities such as business meals may be deductible expenses for tax purposes.