DCAA FAR 31.205 Cost Principals Guidebook

From time to time given the nature of our business, we receive inquiries about whether a specific cost is allowable (billable/recoverable) under a federal contract. While it makes sense for contractors to familiarize themselves with the Federal Acquisition Regulations Part 31.205, it sometimes is just easier to ask around to find an answer.  It appears that the Defense Contract Audit Agency (DCAA) has taken notice, and has recently published a Guidebook that is designed to better explain "allowability" of costs in a well organized, 75 chapter document with each chapter dedicated to a specific cost type and with a narrative as to whether or not it is generally considered to be allowable. While this does not completely eliminate questions since there remain several gray areas that could be subject to interpretation, this format sure beats sifting through the FAR in an attempt to get your questions answered.

As we have learned, DCAA will even challenge allowable costs if they find something that looks amiss. For example, a contractor recently told us that during the course of their DCAA ICE audit, their bank service charge account came under scrutiny due to what appeared to be unusually high fees. The auditors suspected that unallowable interest and finance charges were being "buried" in the bank service charge general ledger account. As it turned out, the contractor had incurred such higher than normal fees due to numerous international wire transfers while paying subcontractors in far-flung places around the globe, so no blatant unallowable entries were uncovered. If you wish to learn more about Interest and Other Financial Costs in Chapter 35 of the Guidebook, you'll have to wait a while as it is currently under construction as of this writing.

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