Overview
This section stipulates that cost-reimbursement contracts for construction projects are permitted only when they comply with the general regulations for cost-reimbursement (Subpart 16.3) and negotiated contracting (Part 15). It specifically mandates adherence to statutory fee limitations for these contract types.
Key Rules
- Regulatory Consistency: Use of cost-reimbursement for construction must align with FAR Subpart 16.3 (which defines when such contracts are appropriate) and FAR Part 15 (Contracting by Negotiation).
- Fee Limitations: Contracting officers must strictly follow the fee caps defined in FAR 15.404-4(c)(4)(i). For cost-plus-fixed-fee (CPFF) contracts that are not for experimental/R&D or A-E services, the fee is generally limited to 10% of the contract's estimated cost (excluding fee).
- Restricted Application: Cost-reimbursement is an exception to the standard practice in construction, which typically favors Firm-Fixed-Price (FFP) arrangements.
Practical Implications
- Risk Management: This procedure is typically reserved for complex construction projects where the scope of work cannot be defined with enough certainty to allow for a fixed-price bid without the contractor including a massive contingency.
- Increased Oversight: Using this procedure requires the government to have adequate resources to monitor contractor costs and ensure that the statutory fee limits are calculated correctly during the negotiation phase.