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compliance with item (i), and (iii) the estimated facilities capital cost of money is specifically identified or proposed in cost proposals relating to the contract under which this cost is to be claimed. (See 3.808-7.)

a

(3) Cost of money for facilities capital need not be entered on the company's books of account. However, memorandum entry of the cost shall be made. All relevant schedules, cost data and other data necessary to fully support the entry shall be maintained in a manner to permit audit and verification.

(4) Cost of money which is calculated, allocated and documented in accordance with these regulations shall be deemed an "incurred cost" for reimbursement purposes pursuant to the payment provisions of applicable cost type contracts. (b) Cost of Money as an Element of the Cost of Capital

Assets Under Construction.

(1) Cost of money as an element of the cost of capital assets under construction is an imputed cost determined by applying a cost of money rate to the investment in tangible and intangible capital assets while they are being constructed, fabricated, or developed for a contractor"s own use. The source of the investment for capital assets being constructed, whether equity or borrowed capital, is not considered in this cost of money determination.

(2) Cost of money computed on representative investments prior to the contractor's first fiscal year subsequent to December 15, 1980 is not allowable. Cost of money may be capitalized on assets under construction beginning with the contractor's first fiscal year after December 15, 1980. However, amortization of such costs shall first be allowable for full CAS covered contracts on the same date that CAS 417 becomes applicable. For non-CAS covered contracts or modified CAS covered contracts, the cost of money will first be allowable for new awards made on or after the effective date of this cost principle change. Whether or not the contract is otherwise subject to the cost accounting standards, and except as specified in paragraph 3 (below), the cost of money for capital assets under construction, fabrication, or development is allowable only when:

(i) the cost of money is calculated,

contracts, and costed in accordance with 3.1301;

allocated to

(ii) the contractor maintains adequate records to demonstrate compliance with (1) above;

(iii) the cost of money for tangible capital assets is included in the capitalized cost which provides the basis for allowable depreciation costs, or in the case of intangible capital assets, the cost of money is included in the cost those assets for which amortization costs are allowable.

of

(3) Actual interest cost in lieu of the calculated imputed cost of money for capital assets under construction, fabrication, or development is unallowable.

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(4) The cost of money for capital assets under construction need not be entered on the contractor's books of account. However, the contractor shall (i) make a memorandum entry of the cost and (ii) maintain, in a manner that permits audit and verification, all relevant schedules, cost data, and other data necessary to support the entry.

for

(5) Cost of money that is allowable under subparagraph (b) of this cost principle shall be an "incurred cost" reimbursement purposes under applicable cost reimbursement contracts and for progress payment purposes under fixed-price

contracts.

15.205-51 Lobbying Costs.

Ta For the purpose of this section, lobbying is defined as any activity or communication which is intended or designed to directly influence or to engage in any campaign to encourage others to influence members of the Congress, their staffs, or the staffs of committees of the Congress to favor or oppose legislation, appropriations or other actions of the Congress, its members, or its committees, for the procurement of specific supplies or services by the Federal Government. Except as provided in (c) below, lobbying activity includes, but is not limited to, all forms of communications by the contractor, its employees, or its agents with the Congress, its members, and staffs or members and committees for the above-mentioned purpose.

(b) The costs of lobbying as defined herein, including the applicable portion of the salaries of the contractor's employees and the fees of individuals or firms engaged in lobbying, on behalf of the contractor (whether or not the individuals or firms are registered as lobbyists under any applicable law) are unallowable. In addition, the directly associated costs (see 15.201-6) of lobbying are unallowable.

(c) Legislative liaison activities, such as attendance at committee hearings, gathering information regarding pending legislation, analysis of the effect of pending legislation, and the like are not lobbying and are allowable. In addition, communications that would be considered lobbying in accordance with (a) above shall be allowable if they are performed after receipt of an invitation or request from a congressional or executive branch source.

15.205-52 Defense of Fraud Proceedings.

(a) Costs incurred in connection with defense of any (i) criminal or civil investigation, grand jury proceeding or prosecution, (ii) civil litigation, or (iii) suspension, debarment or other administrative proceedings, or any combination of the foregoing, brought by the Government against a contractor, its agent or employee, are unallowable when the charges, which are the subject of the investigation, proceedings, or prosecution, involve fraud on the part of the contractor, its agent or employee, as defined in (b) below, and result in conviction (including conviction entered on a

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plea of nolo contendere), judgment against the contractor, its agent or employees, or decision to debar or suspend, or are resolved by consent or compromise.

(b) Fraud, as used in this paragraph, includes (i) acts of fraud or corruption or attempts to defraud the Government or to corrupt its agents, (ii) acts which constitute a cause for debarment or suspension under NASA PR 1.605-2(a) and 1.6062(a) and (iii) acts which violate the False Claims Act, 31 U.S.C., sections 231-235, or the Anti-Kickback Act, 41 U.S.C., sections 51 and 54.

(c) Costs, as used in this paragraph, include, but are not limited to, administrative and clerical expenses; the costs of legal services, whether performed by in-house or private counsel; the costs of the services of accountants, consultants, or others retained by the contractor to assist it; the salaries and wages of employees, officers, and directors; and any of the foregoing costs incurred prior to the commencement of the formal judicial or administrative proceedings which bear a direct relationship to the proceedings.

(d) In circumstances where the charges of fraud are resolved by consent or compromise, the parties may agree as to the extent of allowability of such costs as a part of such resolution.

(e) Costs which may be unallowable under (a)-(d) above shall be differentiated and accounted for by the contractor so as to be separately identifiable. During the pendency of any proceeding or investigation covered by (a) above, the contracting officer should generally withhold payment of such costs. However, the contracting officer may in appropriate circumstances provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreement by the contractor to repay all unallowable costs, plus interest, if a conviction or judgment is rendered against it.

15.206 Notice of Intent to Disallow or Not Recognize Costs. Ta) Purpose. The clause entitled "Notice of Intent to Disallow or Not Recognize Costs" is a required clause for all cost-type contracts and fixed-price incentive contracts and contracts providing for price redetermination (see 7.203-30). A Notice of Intent to Disallow or Not Recognize Costs provides the basis under a contract for the contractor to appeal, prior to final settlement of costs of the contract, a determination of exception to costs either incurred or to be incurred. It thereby provides a vehicle for disputes to be settled in a more timely fashion.

(b) At any time during the performance of the contract, the cognizant contracting officer may issue a Notice of Intent to Disallow or Not Recognize Costs stating his intent to take exception to specific costs or portions thereof, under the contract. Usually, the decision to issue a Notice of Intent to

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Disallow or Not Recognize Costs results from activities performed through monitorship of contractors' cost or on advice of auditors or technical personnel. Also, the decision to issue a Notice of Intent to Disallow or Not Recognize Costs shall only be made after discussion between the contracting officer and the contractor. The notice should be specific as to the type of cost to which exception is taken, the amount of such exception, (if applicable), reasons for exception, applicable time period of the exception, and should reference the Notice of Intent to Disallow or Not Recognize Costs clause of the contract. When such notification involves elements of indirect costs, the NASA contracting officer shall insure that appropriate coordination is obtained from the cognizant administrative contracting officer prior to issuance of the notice. When the Notice of Intent to Disallow or Not Recognize Costs is issued, the originating contracting officer will distribute information copies to all administrative contracting officers cognizant of that corporation. The notice will allow the contractor sixty days in which to contest the exception in writing and provide justification why the proposed expenditure is justifiable and reasonable. The contracting officer will then consider the contractor's position and shall within sixty days either modify his original position or issue a decision in writing under the Disputes clause of the contract.

(c) As a minimum the Notice of Intent to Disallow or Not Recognize Costs should contain the following information:

(i) contractor identification;

(ii) contract(s) affected;

(iii) description of cost exception(s);

(iv) estimated dollar value by item;

(v) reason(s) for the exception;

(vi) applicable time period(s) involved;

(vii) potential impact on billing rates and FPRA's;

(viii) effective date of notice;

(ix) provision for acknowledgment of receipt;

(x) date when formal reply must be received; and
(xi) recipients of copies of notice.

NASA PROCUREMENT REGULATION

15.206

Subpart 3-Principles for Determining Cost Applicable to Grants, Contracts, and Other Agreements with Educational Institutions

15.301 Purpose and Scope.

15.301-1 Objectives. This Subpart provides principles for determining the costs applicable to research and development, training, and other sponsored work performed by colleges and universities under grants, contracts, and other agreements with the Federal Government. These agreements are referred to as sponsored agreements.

15.301-2 Policy Guides. The successful application of these cost accounting principles requires development of mutual understanding between representatives of universities and of NASA as to their scope, implementation, and interpretation. It is recognized that

(a) The arrangements for Federal agency and institutional participation in the financing of a research, training, or other project are properly subject to negotiation between the Government and the institution concerned, in accordance with such Government-wide criteria or legal requirements as may be applicable.

(b) Each institution, possessing its own unique combination of staff, facilities and experience, should be encouraged to conduct research and educational activities in a manner consonant with its own academic philosophies and institutional objectives.

(c) The dual role of students engaged in research and the resulting benefits to sponsored agreements are fundamental to the research effort and shall be recognized in the application of these principles.

(d) Each institution, in the fulfillment of its obligations, should employ sound management practices.

(e) The application of these cost accounting principles should require no significant changes in the generally accepted accounting practices of colleges and universities. However, the accounting practices of individual colleges and universities must support the accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charged to sponsored agreements.

(f) All agency personnel involved in negotiating indirect cost rates and auditing should assure that institutions are generally applying these cost accounting principles on a consistent basis. Where wide variations exist in the treatment of a given cost item among institutions, the reasonableness and equitableness of such treatments should be fully considered during the rate negotiations and audit.

15.301-3 Application. These principles shall be used in determining the allowable costs of work performed by colleges and universities under sponsored agreements. The principles shall also be used in determining the costs of work performed by such institutions under subgrants, costreimbursement sub-contracts; and other awards made to them under sponsored agreements. They also shall be used as a guide in the pricing of fixed-price contracts and subcontracts where costs are used in determining the appropriate price. The principles do not apply to:

(a) Arrangements under which Federal financing is in the form of loans, scholarships, fellowships, traineeships, or other fixed amounts based on such items as education allowance or published tuition rates and fees of the institution.

(b) Capitation awards.

(c) Other awards under which the institution is not required to account to the Government for actual costs incurred.

15.302 Definition of Terms.

15.302–1 Major functions of an institution refers to instruction (includes departmental research), organized research, other sponsored activities, and other institutional activities as defined below: (a) Instruction means the teaching and training activities of an institution. Except for research training as provided in (c) below, this term includes all teaching and training activities, whether they are offered for credits toward a degree or certificate or on a noncredit basis, and whether they are offered through regular academic departments or separate divisions, such as summer school division or an extension division.

(b) Departmental research means all research and development activities that are not organized research and, consequently, are not separately budgeted and accounted for. Departmental reNASA PROCUREMENT REGULATION

15.302-1