[Code of Federal Regulations]

[Title 48, Volume 7]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR9904.405-40]



[Page 368-369]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

     CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL 

           PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET

 

PART 9904_COST ACCOUNTING STANDARDS--Table of Contents

 

Sec. 9904.405-40  Fundamental requirement.



    (a) Costs expressly unallowable or mutually agreed to be 

unallowable, including costs mutually agreed to be unallowable directly 

associated costs, shall be identified and excluded from any billing, 

claim, or proposal applicable to a Government contract.

    (b) Costs which specifically become designated as unallowable as a 

result of a written decision furnished by a contracting officer pursuant 

to contract disputes procedures shall be identified if included in or 

used in the computation of any billing, claim, or proposal applicable to 

a Government contract. This identification requirement applies also to 

any costs incurred for the same purpose under like circumstances as the 

costs specifically identified as unallowable under either this paragraph 

or paragraph (a) of this subsection.

    (c) Costs which, in a contracting officer's written decision 

furnished pursuant to contract disputes procedures, are designated as 

unallowable directly associated costs of unallowable costs covered by 

either paragraph (a) or (b) of this subsection shall be accorded the 

identification required by paragraph (b) of this subsection.

    (d) The costs of any work project not contractually authorized, 

whether or not related to performance of a proposed or existing 

contract, shall be accounted for, to the extent appropriate, in a manner 

which permits ready separation from the costs of authorized work 

projects.

    (e) All unallowable costs covered by paragraphs (a) through (d) of 

this subsection shall be subject to the same cost accounting principles 

governing cost allocability as allowable costs. In



[[Page 369]]



circumstances where these unallowable costs normally would be part of a 

regular indirect-cost allocation base or bases, they shall remain in 

such base or bases. Where a directly associated cost is part of a 

category of costs normally included in an indirect-cost pool that will 

be allocated over a base containing the unallowable cost with which it 

is associated, such a directly associated cost shall be retained in the 

indirect-cost pool and be allocated through the regular allocation 

process.

    (f) Where the total of the allocable and otherwise allowable costs 

exceeds a limitation-of-cost or ceiling-price provision in a contract, 

full direct and indirect cost allocation shall be made to the contract 

cost objective, in accordance with established cost accounting practices 

and Standards which regularly govern a given entity's allocations to 

Government contract cost objectives. In any determination of unallowable 

cost overrun, the amount thereof shall be identified in terms of the 

excess of allowable costs over the ceiling amount, rather than through 

specific identification of particular cost items or cost elements.