PART 231—CONTRACT COST PRINCIPLES AND PROCEDURES Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. Source: 56 FR 36408, July 31, 1991, unless otherwise noted. Subpart 231.1—Applicability 231.100 Scope of subpart. 231.100-70 Contract clause. Use the clause at 252.231-7000, Supplemental Cost Principles, in all solicitations and contracts which are subject to the principles and procedures described in FAR subpart 31.1, 31.2, 31.6, or 31.7. [59 FR 27672, May 27, 1994] Subpart 231.2—Contracts With Commercial Organizations 231.205 Selected costs. 231.205-1 Public relations and advertising costs. (e) See (f) Unallowable public relations and advertising costs also include monies paid to the Government associated with the leasing of Government equipment, including lease payments and reimbursement for support services, except for foreign military sales contracts as provided for at 225.7303-2. [74 FR 68382, Dec. 24, 2009] 231.205-6 Compensation for personal services. (f)(1) In accordance with Section 8122 of Pub. L. 104-61, and similar sections in subsequent Defense appropriations acts, costs for bonuses or other payments in excess of the normal salary paid by the contractor to an employee, that are part of restructuring costs associated with a business combination, are unallowable under DoD contracts funded by fiscal year 1996 or subsequent appropriations. This limitation does not apply to severance payments or early retirement incentive payments. (See 231.205-70(b) for the definitions of “business combination” and “restructuring costs.”) (m)(1) Fringe benefit costs that are contrary to law, employer-employee agreement, or an established policy of the contractor are unallowable. [57 FR 53600, Nov. 12, 1992, as amended at 58 FR 28469, May 13, 1993; 60 FR 2331, Jan. 9, 1995; 60 FR 61598, Nov. 30, 1995; 61 FR 7077, Feb. 26, 1996; 61 FR 36306, July 10, 1996; 61 FR 50454, Sept. 26, 1996; 61 FR 58490, Nov. 15, 1996; 61 FR 65479, Dec. 13, 1996; 62 FR 63036, Nov. 26, 1997; 63 FR 14641, Mar. 26, 1998; 78 FR 73453, Dec. 6, 2013] 231.205-18 Independent research and development and bid and proposal costs. (a) Definitions. Covered contract Covered segment Major contractor (c) Allowability. (ii) See 225.7303-2(c) for allowability provisions affecting foreign military sale contracts. (iii)(A) For IR&D costs major contractors incurred on covered contracts to be allowable— ( 1 https://defenseinnovationmarketplace.dtic.mil/industry-portal/; ( 2 (B) The amount of IR&D costs allowable under DoD contracts shall not exceed the lesser of— ( 1 ( 2 (C) Contractors that are not major contractors are encouraged to use the DTIC online input form and instructions at https://defenseinnovationmarketplace.dtic.mil/industry-portal/ (iv) Contractors are required to report incurred IR&D costs separately from indirect costs. (v) Contractors are required to report incurred B&P costs separately from other indirect costs. [88 FR 6599, Jan. 31, 2023] 231.205-19 Insurance and indemnification. (e) In addition to the cost limitations in FAR 31.205-19(e), self-insurance and purchased insurance costs are subject to the requirements of the clauses at 252.217-7012, Liability and Insurance, and 252.228-7001, Ground and Flight Risk. [75 FR 32645, June 8, 2010] 231.205-22 Lobbying and political activity costs. (a) Costs associated with preparing any material, report, list, or analysis on the actual or projected economic or employment impact in a particular State or congressional district of an acquisition program for which all research, development, testing, and evaluation has not been completed also are unallowable (10 U.S.C. 4652). [69 FR 63332, Nov. 1, 2004, as amended at 86 FR 59870, Oct. 29, 2021; 87 FR 76995, Dec. 16, 2022] 231.205-70 External restructuring costs. (a) Scope. (1) Prescribes policies and procedures for allowing contractor external restructuring costs when savings would result for DoD; and (2) Implements 10 U.S.C. 3761. (b) Definitions. (1) Business combination (2) External restructuring activities (3) Restructuring activities (4) Restructuring costs (5) Restructuring savings (c) Limitations on cost allowability. (1) Such costs are allowable in accordance with FAR part 31 and DFARS part 231; (2) An audit of projected restructuring costs and restructuring savings is performed; (3) The cognizant administrative contracting officer (ACO) reviews the audit report and the projected costs and projected savings, and negotiates an advance agreement in accordance with paragraph (d) of this subsection; and (4)(i) The official designated in paragraph (c)(4)(ii) of this subsection determines in writing that the audited projected savings, on a present value basis, for DoD resulting from the restructuring will exceed either— (A) The costs allowed by a factor of at least two to one; or (B) The costs allowed, and the business combination will result in the preservation of a critical capability that might otherwise be lost to DoD. (ii)(A) If the amount of restructuring costs is expected to exceed $25 million over a 5-year period, the designated official is the Under Secretary of Defense (Acquisition and Sustainment) or the Principal Deputy. This authority may not be delegated below the level of an Assistant Secretary of Defense. (B) For all other cases, the designated official is the Director of the Defense Contract Management Agency. The Director may not delegate this authority. (d) Procedures and ACO responsibilities. (e) Information needed to obtain a determination. (2) The contractor's restructuring proposal. (3) The proposed advance agreement. (4) The audit report. (5) Any other pertinent information. (6) The cognizant ACO's recommendation for a determination. This recommendation must clearly indicate one of the following, consistent with paragraph (c)(4)(i) of this subsection: (i) The audited projected savings for DoD will exceed the costs allowed by a factor of at least two to one on a present value basis. (ii) The business combination will result in the preservation of a critical capability that might otherwise be lost to DoD, and the audited projected savings for DoD will exceed the costs allowed on a present value basis. (f) Contracting officer responsibilities. (i) The time a business combination is announced; and (ii) The time the contractor's forward pricing rates are adjusted to reflect the impact of restructuring. (2) The decision to use a repricing clause will depend upon the particular circumstances involved, including— (i) When the restructuring will take place; (ii) When restructuring savings will begin to be realized; (iii) The contract performance period; (iv) Whether the contracting parties are able to make a reasonable estimate of the impact of restructuring on the contract; and (v) The size of the potential dollar impact of restructuring on the contract. (3) If the contracting officer decides to use a repricing clause, the clause must provide for a downward-only price adjustment to ensure that DoD receives its appropriate share of restructuring net savings. [63 FR 7309, Feb. 13, 1998; 63 FR 12862, Mar. 16, 1998, as amended at 64 FR 18828, Apr. 16, 1999; 65 FR 39705, June 27, 2000; 68 FR 7440, Feb. 14, 2003; 69 FR 63332, Nov. 1, 2004; 70 FR 43075, July 26, 2005; 87 FR 76995, Dec. 16, 2022; 88 FR 73237, Oct. 25, 2023] 231.205-71 Costs related to counterfeit electronic parts and suspect counterfeit electronic parts. (a) Scope. (b) The costs of counterfeit electronic parts and suspect counterfeit electronic parts and the costs of rework or corrective action that may be required to remedy the use or inclusion of such parts are unallowable, unless— (1) The contractor has an operational system to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts that has been reviewed and approved by DoD pursuant to 244.303(b); (2) The counterfeit electronic parts or suspect counterfeit electronic parts are Government-furnished property as defined in FAR 45.101 or were obtained by the contractor in accordance with the clause at 252.246-7008, Sources of Electronic Parts; and (3) The contractor— (i) Becomes aware of the counterfeit electronic parts or suspect counterfeit electronic parts through inspection, testing, and authentication efforts of the contractor or its subcontractors; through a Government Industry Data Exchange Program (GIDEP) alert; or by other means; and (ii) Provides timely ( i.e., (A) The cognizant contracting officer(s); and (B) GIDEP (unless the contractor is a foreign corporation or partnership that does not have an office, place of business, or fiscal paying agent in the United States; or the counterfeit electronic part or suspect counterfeit electronic part is the subject of an on-going criminal investigation). [81 FR 59515, Aug. 30, 2016] Subpart 231.3—Contracts With Educational Institutions 231.303 Requirements. (1) Pursuant to section 841 of the National Defense Authorization Act for Fiscal Year 1994 (Pub. L. 103-160), no limitation may be placed on the reimbursement of otherwise allowable indirect costs incurred by an institution of higher education under a DoD contract awarded on or after November 30, 1993, unless that same limitation is applied uniformly to all other organizations performing similar work under DoD contracts. The 26 percent limitation imposed on administrative indirect costs by OMB Circular No. A-21 shall not be applied to DoD contracts awarded on or after November 30, 1993, to institutions of higher education because the same limitation is not applied to other organizations performing similar work. (2) The cognizant administrative contracting officer may waive the prohibition in 231.303(1) if the governing body of the institution of higher education requests the waiver to simplify the institution's overall management of DoD cost reimbursements under DoD contracts. (3) Under 10 U.S.C. 4652, the costs cited in 231.205-22(a) are unallowable. [59 FR 26144, May 19, 1994, as amended at 60 FR 2331, Jan. 9, 1995; 61 FR 36306, July 10, 1996; 62 FR 47155, Sept. 8, 1997; 63 FR 14641, Mar. 26, 1998; 87 FR 76995, Dec. 16, 2022] Subpart 231.6—Contracts With State, Local, and Federally Recognized Indian Tribal Governments 231.603 Requirements. Under 10 U.S.C. 4652, the costs cited in 231.205-22(a) are unallowable. [61 FR 36306, July 10, 1996, as amended at 62 FR 47155, Sept. 8, 1997; 63 FR 14641, Mar. 26, 1998; 87 FR 76995, Dec. 16, 2022] Subpart 231.7—Contracts With Nonprofit Organizations 231.703 Requirements. Under 10 U.S.C. 4652, the costs cited in 231.205-22(a) are unallowable. [61 FR 36306, July 10, 1996, as amended at 62 FR 47155, Sept. 8, 1997; 63 FR 14641, Mar. 26, 1998; 87 FR 76995, Dec. 16, 2022]