$9-15.205-41 Taxes.

(d) The cost of taxes on accumulated funding deficiencies of, or prohibited transactions involving, employee deferred compensation plans pursuant to Section 4971 or Section 4975 of the Internal Revenue Code of 1954, as amended, respectively, is unallowable.

$9-15.5000

Subpart 9-15.50 Cost Principles and procedures.

Scope of subpart.

(a) This subpart sets forth the general policy and principles for the determination of allowable costs which are applicable to the negotiation and administration of cost-type contracts. Contracting officers shall take action to make this subpart applicable to costtype subcontracts by: (1) directing compliance by the prime contractor if consistent with his currently existing contract; or (2) conditioning future contracting approval of subcontracting procedures or subcontracts upon such compliance.

In

(b) This subpart also provides guidance for the evaluation of costs in negotiated fixed-price contracts and subcontracts where costs incurred are a factor in determining the amount payable. determining the allowable costs of research and development performed by educational institutions under cost-type contracts and cost-type subcontracts the provisions of FPR Subpart 1-15.3 adapted from BoB Bulletin No. A-21 for common use by Federal agencies, will control. Research-type operating contracts will be governed by the provisions of $89-15.5005 and 9-50.704-13.

(c) The terms "reimbursement" and "reimbursable" are used interchangeably in this subpart in relation to "allowable costs" as a matter of editorial convenience. No "reimbursement" is actually involved in those situations where the cost-type contractor makes payments for "allowable costs" from Government funds advanced to him by the ERDA.

(d) Standard cost articles setting forth examples of allowable and unallowable costs are included in 9-50.704-13 through 9-50.704-16.

(a) "Cost-type contract" includes cost, cost sharing, and costplus-a-fixed-fee contracts.

(b) "Cost-type subcontract" is a cost-type arrangement in any

tier under a cost-type prime contract where all higher-tier arrangements are on a cost basis.

(c) "Operating contract" is a cost-type contract for the operation of a Government-owned facility, such as a production facility or a research and development facility.

(d) "Construction contract" is a contract for the construction, alteration, or repair of public buildings and public works.

(e) "Architect-engineer contract" is a contract for architectengineer services related to the construction, alteration, or repair of public buildings and public works.

(1) "Off-site architect-engineer contract" is a contract where the design work is performed in the contractor's central or branch office.

(2) "On-site architect-engineer contract" is a contract where relatively complete staffing is required for the design work at an office other than a central or branch office of the contractor, and where a minimum of support is required from the contractor's central or branch office staff. The office where the design work is performed may be at the construction site or any other location.

(f) "Supply contract" is a contract for supplies and services, other than operating, construction, architect-engineer, experimental, developmental, or research work and personal services.

(g) "Research and development contract" is a contract for basic research (directed toward the increase of knowledge in science), applied research (involving the determination and expansion of the potentialities of new scientific discoveries or improvement in technology, materials, processes, methods, devices, and techniques including attempts to "advance the state of the art") or development (the systematic use of scientific knowledge which is directed toward the production of, or improvements in, useful products to meet specific performance requirements, but exclusive of manufacturing and production engineering).

$9-15.5002 Responsibilities.

(a) The Controller is responsible for developing and revising the policy and procedures for the determination of allowable costs, and for seeing that they are properly coordinated with the General Counsel, the Director of Procurement, and with other Divisions and Offices having joint interests.

(b) Directors of Headquarters Divisions and Offices negotiating contracts, and Managers of Field Offices are responsible for following the policy, principles and standards set forth herein in establishing the compensation provisions of contracts and subcontracts and for submission of deviations for Headquarters consideration.

(c) The General Counsel is responsible for the preparation and interpretation of contracts.

$9-15.5003 Deviation.

Deviations from the policy and principles set forth in this subpart shall not be made unless such action is authorized by the Director of Procurement, after consultation with the Controller, General Counsel, and any other appropriate Headquarters office, on the basis of a written justification stating clearly the special circumstances involved. Where appropriate, any approved deviation shall be reflected in the compensation provisions of the contract.

The general policy of the ERDA in connection with cost-type contracts and with cost-type subcontracts is as follows:

(a) ERDA reimburses its contractors for allowable costs actually incurred in the peformance of their contracts in accordance with their terms. Such allowable costs are those provided for in the contract to the extent that they are necessary or incident and either directly attributable or equitably allocable to the work under the contract. This broad expression of the ERDA's reimbursement policy is further developed and elaborated upon throughout this subpart.

(b)(1) ERDA uses retrospective or after-the-fact determination, usually called the "actual cost basis," to establish the amount reimbursable to its contractors for their allowable costs. This general policy precludes the use of predetermined fixed-overhead percentage rates except for provisional payment under paragraph (d) of this section.

(2)

It is recognized, however, that the total volume of work with a particular contractor in some cases may be so small that computation of the actual indirect costs may not be justified. In such cases it may be administratively desirable to adopt some alternative, such as a predetermined amount for indirect costs. However, a

departure from the actual cost basis under a cost-type contract is considered administratively undesirable if the amounts involved are significant, and the use of either a predetermined amount for indirect costs, except under the circumstances noted above, or other alternatives (such as a fixed billing rate for labor and overhead per direct labor hour) shall be submitted to Headquarters for approval. Any firm amount established for indirect costs, whether small or significant, and any other alternative, shall be supported by a wellconsidered conclusion that the firm amount or other alternative will result in approximately the same compensation for the costs concerned as would likely result from determination on the actual cost basis. The negotiation of predetermined fixed amounts, fixed billing rates, etc., shall be made on the basis of actual cost experience and satisfactory cost projections, and in accordance with the principles and standards set forth in this subpart. Such amounts, rates, etc., wil1 cover allowances only for allowable costs.

(c) When firm compensation for any otherwise allowable cost is negotiated, the items of such cost covered by the fixed amount shall be set forth in the contract or appropriate appendices as unallowable with maximum clarity in order to distinguish between allowable costs subject to reimbursement and costs which are covered by the negotiated fixed amount, and hence excluded from allowable cost in the case of the particular contract.

(d) Provisional payments on account of indirect costs incurred under the contract shall be provided for only after review of the contractor's system of accounting,

including items treated as indirect costs and methods of distributing them or on the basis of previous audits or past experience with the particular contractor. Based on such a review, a provisional overhead rate or rates shall be established taking into consideration the prior year's experience adjusted to eliminate nonrecurring costs and to any new conditions which may be applicable to the future. Such rate or rates shall be applied to an appropriate base or bases for computation of the provisional payments. The elements of indirect cost and the base or bases used in computing provisional payments, shall not be construed as indicating the elements of expense to be distributed or the base or bases of distribution to be employed in the periodic determination of actual overhead. The actual overhead shall be determined not less often than annually and the provisional payments made shall be adjusted accordingly. Prior to final settlement of the entire contract the actual overhead so determined periodically shall be subject to appropriate subsequent adjustment including errors subsequently becoming known. The amount of any adjustment shall promptly be paid or credited by the ERDA to the contractor or by the contractor to the ERDA as the review has determined.

$9-15.5005-2 Compensation through fee.

(a) ERDA compensates operating, construction and on-site architect-engineer contractors through the fixed fee for general and administrative expenses incurred in the general management and administration of the contractor's business as a whole by the contractor's home, divisional or branch offices.

(b) In a particular case, the contractor may be compensated on the basis of allowable cost, rather than through the fixed fee for some or all of the expenses described in paragraph (a) of this section if the Director of Procurement, the Manager of the Field Office, or a representative having the authority to approve the contract, authorizes use of this alternative approach and determines that the negotiated fixed fee reflects proper downward adjustment from that which would otherwise have been established. In the case of no-fee contracts (including contracts providing for nominal or token fees), this category of expense may be either reimbursed on the basis of actual costs or compensated through a predetermined fixed amount.

(c) The above-stated policy does not preclude the payment of expenses merely because they are incurred or accounted for at or by the contractor's home, divisional or branch offices; where expenses of a type typically incurred at construction or operation sites in support of the contract work, are, by reason of a particular contractor's greater centralization, incurred at such offices, rather than at the operation site, such expenses may be reimbursed.

(d) In the case of on-site architect-engineer contracts, the contracting officer may approve performance of some of the work in the contractor's central or branch office location. The direct costs of such work and an equitable portion of such indirect costs at the central office or branch office location as are properly applicable and apportionable to such work are allowable. In such cases, the indirect costs attributable to the performance at a central office or branch office location of work related directly and solely to individual contracts shall be distinguished with care from general and administrative expenses incurred by the contractor's home or branch offices in the general management, supervision, and conduct of its business, since these general administrative expenses are usually compensated for through fee and, in any event, where allowable, are related to and apportionable over all work under the supervision of the office concerned.

(e) As to work performed by an operating contractor in its own facilities, see §9-15.5007-3.