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(a) The total cost, including standard costs properly adjusted for applicable variances of a contract, is the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred, plus any allocable cost of money pursuant to 31.205–10, less any allocable credits.
This guidance includes the current listing of FAR 31 and DFARS 231 cost principles (Figure A-1-1) that meet the definition of expressly unallowable costs. In addition, figure A-1-1, reflects the impact of recent court cases and current FAR and DFARS language.
Unallowable organization costs are costs incurred related to the organization or reorganization of the corporate structure of a business, including mergers and acquisitions (FAR 31.205-27). Additionally, organizational cost includes cost related to partnerships.
Unallowable costs are prohibited from any billing, proposal or claim. Also, penalties can be assessed for passing such costs onto the government. Costs can be made unallowable by regulation (Federal Acquisition Regulation (FAR) Subpart 31.2), by statute or by contracting officer decision.
Common DCAA Unallowable Costs. Unallowable costs are expenses that cannot be billed to the government under the terms of FAR. Identifying and excluding these from your invoices is essential to ensure compliance and avoid audit issues.
Accounting for unallowable costs. (a) Costs that are expressly unallowable or mutually agreed to be unallowable, including mutually agreed to be unallowable directly associated costs, shall be identified and excluded from any billing, claim, or proposal applicable to a Government contract.
•The cost principle must explicitly state disallowance (i.e., “ osts incident to major repair and overhaul of rental equipment are unallowable.”). •DCAA auditor guidance removed 19 presumptions related to expressly unallowable costs that were based on cost principles that did not expressly prohibit the costs. See