Overview
FAR 16.307 prescribes the specific contract clauses required for various types of cost-reimbursement contracts, ensuring that payment, fee, and cost-allowability terms are properly aligned with the contract's structure and the contractor's organizational type. It serves as the authoritative guide for Contracting Officers to select the correct legal language for cost-plus-fixed-fee, incentive-fee, cost-sharing, and no-fee arrangements.
Key Rules
- Allowable Cost and Payment (52.216-7): This mandatory clause for cost-reimbursement and Time-and-Materials (T&M) contracts defines how costs are reimbursed. It includes four specific Alternates (I-IV) based on whether the contractor is a construction firm, educational institution, state/local government, or non-profit organization.
- Fee-Specific Clauses: The regulation mandates distinct clauses for different fee structures: 52.216-8 for standard Fixed Fee, 52.216-9 for Fixed Fee in construction, and 52.216-10 for Incentive Fees.
- No-Fee and Cost-Sharing: Specific clauses (52.216-11 and 52.216-12) are required for contracts where no fee is paid or where the contractor shares the performance costs, with options to waive cost-withholding for R&D with non-profits or educational institutions.
- T&M and Labor-Hour Distinctions: While 52.216-7 applies to the "materials" portion of T&M contracts at actual cost, it is explicitly excluded from labor-hour contracts and the labor portion of T&M contracts.
- Predetermined Indirect Rates: The clause at 52.216-15 is required specifically for R&D contracts with educational institutions when indirect cost rates are established in advance rather than settled after the fact.
Practical Implications
- Organizational Tailoring: Contracting Officers must accurately verify a contractor’s legal status (e.g., non-profit vs. commercial) during the solicitation phase to ensure the correct Alternate version of the payment clause is used, as this dictates audit and cost-accounting standards.
- Billing Complexity: For T&M contracts, contractors must maintain distinct accounting practices to separate labor billing (governed by 52.232-7) from material reimbursement (governed by 52.216-7) to remain compliant with the clause prescriptions.