Overview
FAR 31.104 establishes the regulatory framework for managing costs in contracts with higher education institutions for research, development, and training. It mandates the application of specific cost principles (Subpart 31.3) to ensure consistency in how educational institutions account for and recover expenses.
Key Rules
- Applicability: Applies to all contracts and modifications for R&D, training, and other work performed by educational institutions as defined by 2 CFR part 200 and 20 U.S.C. 1001.
- Mandatory Incorporation: Contracting officers must incorporate FAR Subpart 31.3 by reference in all cost-reimbursement contracts and subcontracts with these institutions.
- Primary Functions of Subpart 31.3:
- Determining allowable reimbursable costs.
- Serving as the legal basis for negotiating indirect cost rates (Facilities and Administrative costs).
- Governing the settlement of costs for terminated cost-reimbursement contracts.
- Fixed-Price Guidance: For fixed-price contracts, these cost principles serve as a non-mandatory guide for evaluating price reasonableness and negotiating termination settlements.
Practical Implications
- Educational institutions must align their accounting practices with FAR 31.3 and the OMB Uniform Guidance to ensure full recovery of direct and indirect costs during audits and rate negotiations.
- Prime contractors must ensure that FAR 31.3 cost principles are flowed down in any cost-reimbursement subcontracts issued to universities or colleges.