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CONTRACT COST PRINCIPLES AND PROCEDURES

plant and equipment under cost reimbursement type contracts and fixed price type contracts shall be determined as provided in subparagraphs (b) and (c), 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 the subject of an advance understanding as set forth in 15-107 with respect to (i) depreciation, overhead and profit, and (ii) the costs 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 or the proper and economical performance of a fixed-price type contract shall be based upon the “Contractors' Equipment Ownership Expense Schedule" Sixth Edition, 1966, published by the Associated General Contractors of America, Inc. 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% of the amount computed as herein indicated. Notwithstanding any sale and leaseback, or the acquisition of construction plant and equipment by individuals, firms, corporations, or trusts, other than the contractor, and the leasing or rental of such construction plant and 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.

15-402.1

ARMED SERVICES PROCUREMENT REGULATION

CONTRACT COST PRINCIPLES AND PROCEDURES

15–402.2 Construction Plant and Equipment Rented From Others. 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 rentat rate are allowable. Costs incident to major repair and overhaul are not allowable.

15–402.3 Home Office Expense. 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 cost-reimbursement 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, including compensation and traveling expenses of officers and central office employees, are not allowable under cost-reimbursement 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 or fabrication of structures and facilities of a temporary nature are allowable.

15-402.5

ARMED SERVICES PROCUREMENT REGULATION

CONTRACT COST PRINCIPLES AND PROCEDURES

Part 5-Contracts for Industrial Facilities

15-501 Applicable Cost Principles. Except as otherwise provided in this Part, the allowability of cost will be determined in accordance with Part 2, 3, or 4 of this Section XV, 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 af. fect 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 Cost. (a) Facilities contract operations may involve: (i) the purchase of facilities, or services in connection therewith, on a

completed basis from outside source; (ii) the purchase of completed facilities from outside sources, installation

to be accomplished by the contractor's own employees; (iii) rehabilitation of existing facilities by the contractor's own em

ployees; or (iv) 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 (b) through (d) below.

(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 products. 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 in

15-503

ARMED SERVICES PROCUREMENT REGULATION

A list of current CFR volumes, a list of superseded CFR volumes, and a list of CFR titles, subtitles, chapters, subchapters and parts are included in the CFR Index to the Code of Federal Regulations which is published separately and revised annually.

Table of CFR Titles and Chapters
Alphabetical List of Agencies Appearing in the CFR
Redesignation Table
List of CFR Sections Affected

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