In

(a) The widely varying conditions of climate, terrain, etc., applicable to individual Government construction projects make it impracticable to determine accurately the actual costs of depreciation of construction plant and equipment used on individual contracts. addition, in certain cases it may be extremely difficult to determine or allocate accurately the cost of overhaul or repairs applicable in an individual contract since the period of incidence of such cost may not correspond with the period of benefit derived therefrom. Therefore, uniform rates covering depreciation, and where appropriate, overhaul and repair costs shall be used to provide equitable average compensation to contractors for the use of construction plant and equipment under Government contracts. Two separate rate schedules are available for this purpose. The rate schedule contained in DOD Instruction 4105.2, referred to in paragraph (b) of this section, is generally appropriate to the types of construction projects awarded under cost-reimbursement type contracts; whereas, the rate schedule referred to in paragraph (c) of this section, published by the Associated General Contractors of America, Inc., is generally appropriate to the types of construction projects awarded under fixed-price type contracts. Accordingly, unless the contract specifically provides to the contrary, usage costs for construction plant and equipment under cost-reimbursement type contracts and fixed-price type contracts shall be determined as provided in paragraphs (b) and (c) of this section, respectively.

(b) Allowable costs for construction plant and equipment in sound workable condition owned or controlled and furnished by a contractor or subcontractor

with the approval of the contracting officer for use under cost-reimbursement type contracts shall be based on the provisions of DOD Instruction 4105.2 in effect as of the date of the contract with respect to (1) uniform rental rates in lieu of depreciation, overhead and profit, and (2) the cost incident to major, minor and running repairs, complete and thorough overhaul, and, loss or destruction of equipment.

(c) Evaluation of costs for the use of construction plant and equipment, in sound and workable condition, which are owned or controlled by a contractor or subcontractor and are furnished for the proper and economical performance of a fixed-price type contract shall be based upon the "Contractors' Equipment Ownership Expense Schedule" published by the Associated General Contractors of America, Inc. in effect as of the date of the contract. This represents a percentage of acquisition cost per working month or fraction thereof for the period of time the equipment is required for the job. If the equipment has already exceeded the assigned service life indicated by the percentage used for depreciation, one year shall be added to the actual age of the equipment and the depreciation percentage shall be revised accordingly. The allowance for equipment ownership expense, computed as provided herein shall be considered to include all costs of depreciation, major repairs and overhaul, and overhead applicable to the equipment. Accordingly, there shall be eliminated from all direct and indirect charges under the contract all costs applicable to items of equipment which are included in the allowance for ownership expense. In considering total costs under any contract, no allowance for overhead shall be applied to the allowance for equipment ownership expense. Since costs incident to maintenance and minor and running repairs are not reflected in the ownership Schedule, separate allowance shall be made therefor. In periods of suspension of work for the convenience of the Government under an appropriate contract clause, the allowance for equipment ownership expense shall not exceed 50 percent of the amount computed as herein indicated. Notwithstanding any sale and leaseback, or the acquisition of contruction plant and equipment by individuals, firms, corporations, or trusts, other than the contractor, and the leasing or rental of such construction plant or equipment to the

contractor, the amount to be considered as a cost covering the use of such equipment shall not exceed the allowance for ownership expenses computed as indicated herein. Under certain circumstances, because of the long duration, special nature, or location of the work, it may be more economical to charge the net cost of items of construction plant and equipment directly against a contract in lieu of use of the ownership Schedule. In such cases, where the contract, record of negotiations, or attendant circumstances indicate that particular items of construction plant and equipment were purchased for use solely under a specific contract, the cost of such items, less their proper resale or salvage value, may be charged to the contract as a direct charge, together with costs of repairs, overhaul, and maintenance incident thereto.

§ 15.402-2 Construction plant

equipment rented from others.

and

Costs incurred in connection with rental of construction plant and equipment from others (not under sale and leaseback arrangements) are allowable. Under cost-reimbursement type contracts, rental arrangements are subject to approval by the contracting officer. Costs, such as maintenance and minor or running repairs incident to the operation of such rented equipment, that are not included in the rental rate are allowable. Costs incident to major repair and overhaul are not allowable.

§ 15.402-3 Home office expenses.

The extent to which a contractor utilizes his home office or central office organization for the performance of general, administrative and management functions applicable to individual Government construction contracts is dependent upon the geographical location of the job site in relation to the contractor's home office, the magnitude and duration of the project and other similar factors. Under the types of construction projects awarded on a costreimbursement type contract basis, most general, administrative, management and other indirect cost functions are usually performed at the job site rather than at the contractor's home or central office. Other minor or incidental services otherwise provided are considered to be compensated for in the fixed fee. Accordingly, expenses incurred in the contractor's central or home office, in

cluding compensation and traveling expenses of officers and central office employees, are not allowable under costreimbursement type contracts except to the extent authorized by the contract or approved by the contracting officer. Under fixed-price type construction contracts which are performed at least in part through the use of the contractor's central office organization, the costs incurred by the contractor's central office are acceptable to the extent that they are allocable and reasonable in relation to the contract, and provided they do not exceed any limitations of cost stated in the contract or an advance understanding.

§ 15.402-4 Job site expenses.

Costs incurred at the job site incident to the performance of the work, such as the cost of superintendence, time-keeping and clerical work, engineering, utility costs, supplies, material handling, restoration and cleanup, etc., are allowable as a direct charge.

§ 15.402-5 Temporary use of land, structures and facilities.

(a) Rental and any other costs, less any applicable credits, incurred in acquiring the temporary use of land, structures and facilities are allowable.

(b) Costs, less any applicable credits, incurred in the construction of fabrication of structures and facilities of a temporary nature are allowable.

Subpart E-Contracts for Industrial Facilities [Added]

SOURCE: 15.501 to 15.505 appear at 26 F.R. 9642, Oct. 12, 1961.

§ 15.501 Applicable cost principles.

Except as otherwise provided in this subpart, the allowability of cost will be determined in accordance with Subpart B, C, or D of this part, as appropriate. § 15.502 Factors affecting allowability of costs.

A contractor's established accounting system and procedures are normally directed to the equitable allocation of costs to the types of products which he produces or services which he renders in the course of his normal operating activities. The acquisition of, or work on, facilities for the Government normally does not involve the manufacturing processes, plant departmental operations, cost patterns of work, administrative and managerial control, or

clerical effort usual to production of the contractor's normal products or services. These operating and administrative differences affect the equitable allocation of indirect costs to facility contracts and make it desirable that advance understandings, as provided in § 15.107, be agreed to between the contractor and the contracting officer as to such indirect cost items to be applied to the facilities acquisition. A contractor's normal accounting practice for allocating indirect costs to the acquisition of his own facilities may range from charging all such costs to this acquisition to not charging any such costs thereto. Where necessary to produce an equitable result, the contractor's usual method of allocating indirect cost will be varied and appropriate adjustment will be made to the pools of indirect cost and the bases of their distribution.

§ 15.503 Allocation of indirect manufacturing and plant operational costs. (a) Facilities contract operations may involve:

(1) The purchase of facilities, or services in connection therewith, on a completed basis from outside source;

(2) The purchase of completed facilities from outside sources, installation to be accomplished by the contractor's own employees;

(3) Rehabilitation of existing facilities by the contractor's own employees;

or

(4) Construction or manufacture of facilities by the contractor from purchased components.

Guidelines for the allocation of indirect costs in these particular circumstances are set forth in paragraphs (b), (c), and (d) of this section.

(b) The purchase of facilities, or services in connection therewith, from outside sources on a completed basis does not involve the contractor's direct labor or indirect plant maintenance personnel. Accordingly, indirect manufacturing and plant overhead costs, which are primarily incurred or generated by reason of direct labor or maintenance labor operations, are not allocable to the acquisition of such facilities.

(c) Contracts providing for the installation of new facilities or the rehabilitation of existing facilities may involve the use of the contractor's plant maintenance labor, as distinguished from direct labor engaged in the production of the company's normal prod

ucts. In such instances, only those types of indirect manufacturing and plant operating costs that are related to or incurred by reason of the expenditure of the classes of labor utilized for the performance of the facilities work may be allocated to the facilities work. Thus, a facilities contract which involves the use of plant maintenance labor only would not be subject to an allocation of such cost items as direct productive labor supervision, depreciation and maintenance expense applicable to productive machinery and equipment, or raw material and finished goods storage costs.

(d) Where a facilities contract calls for the construction, production, or rehabilitation of equipment or other items which are involved in the regular course of the contractor's business by the use of the contractor's direct labor and manufacturing processes, the indirect costs normally allocated to all such work may be allocated to the facilities contract.

§ 15.504 General and administrative costs (including home office allocations).

General and administrative costs consist of items of cost attributable to the overall management, supervision and conduct of the business. General and administrative costs in connection with the acquisition of or work on industrial facilities shall be allowed only when and to the extent specifically provided for in the contract. In allocating general and administrative costs, consideration should be given to (a) all work to which such costs are common, including acquisition of or work on facilities by the contractor for his own account, and (b) any difference in the amount of administrative effort expended by the contractor on his various activities, such as between production and fixed asset improvement programs or between the acquisition of facilities by purchase and by construction or manufacture. However, in no event will prices charged pursuant to § 15.505 be increased by the allocation of additional general and administrative costs.

§ 15.505 Contractor's commercial prod

ucts.

If facilities which constitute the contractor's usual commercial products (or only minor modifications thereof) are acquired by the Government under the contract, the Government shall not pay any amount in excess of the contractor's

This subpart provides guidance for the use of Subparts B, C, and D of this part, (a) in the evaluation of costs in pricing of negotiated fixed-price type contracts and subcontracts where such evaluation is required to establish prices for such contracts, (b) in the negotiation of termination settlements, and (c) in the negotiation of any adjustment in price required by the contract, such as issuance of change orders, a suspension of work for the convenience of the Government under an appropriate contract clause, and equitable adjustments under the Government-furnished property clause.

Order for paid advertisements (Standard Forms 1143 and 1143a). [Revised]

Subpart F-Forms for Coordinated Procurement [Revised]

Military Interdepartmental Pur

chase Request

Acceptance of MIPR (DD Form
448-2).

Requisitions for Coal, Coke, or
Briquettes (DD Form 416).

Subpart G-Contract Termination Forms 16.702-1 Settlement Proposal-Inventory Basis (DD Form 540). [Revised] 16.702-2 Settlement Proposal-Total Cost Basis (DD Form 541). [Revised]

[Amended]

16.203

Request for Proposals and Proposal, Schedule, Amendment to Request for Proposals, Acceptance of Proposal (DD Form 746, 746-1, 746s, 746-2.

16.703

16.704

Notice of Audit Status Date (DD Form 547s).

16.706

[Amended]

16.203-2

Conditions for use.

[Amended]

Subpart H-Miscellaneous Forms

posals. [Added]

16.206

Cost and Price Analysis Forms (DD Forms 633, 633-1, 633-2,

16.801

16.803-1

16.206-2 DD Form 633 (Cost and Price

ed]

Analysis) [Revised]

16.803-2

16.206-3 DD Forms 633-1, 633-2, 633-3, and

16.805

16.806

633-4. [Revised]

Construction contracts.

Supply contracts. [Revised]
Bond forms. [Revised]

Royalty report (Foreign and Domestic) (DD Form 783). [Revised]

Individual procurement actions report (DD Form 350). [Revoked]

(d) Any other special terms for the invitation for bids or additional contract provisions which are prescribed by this subchapter or Departmental procedures;

NOTE. The Federal, State, and local taxes clause at § 11.401-1 of this chapter shall be used as a part of Standard Form 32, when that standard form is used in any advertised procurement or in any of the other circumstances set forth in § 11.401-1. When a Standard Form is used in a negotiated fixedprice type contract in excess of $10,000 where the contracting officer is not satisfied that the contract price, by virtue of competition or otherwise, excludes contingencies for State and local taxes, the Federal, State, and local taxes clause at § 11.401-2 shall be made a part of the contract, and the clause at § 11.401-1 shall be deleted from Standard Form 32.

[Paragraph (d) amended, 26 F.R. 9643, Oct. 12, 1961]

(ix) The procedures set forth in §4.604 of this chapter will be followed when required by Subpart F, Part 4, of this chapter, Humane Slaughter of Livestock.

[Subdivision (ix) added, 26 F.R. 2616, Mar. 28, 1961]

(x) where the contract is for Military Assistance Program items, the "United States Products (Military Assistance Program)" certificate and clause (see §§ 6.703-3 and 6.703-4 of this chapter) shall be inserted in the Schedule, and Paragraph 10 of the General Provisions (Foreign Supplies) deleted.

[Subdivision (x) added, 28 F.R. 4892, May 16, 1963]

1 Appears as § 16.202-1.