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What do FAR Part 31.205 and Cost Principles have to do with Construction or A&E Firms?

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INQUIRY: I am in Construction. My contracts are typically fixed price.  Why am I being asked to breakdown my price into things like indirect and direct costs and why am I asked how I determine my indirect rates and why am I asked about my accounting system and how I handle unallowable costs?

 

RESPONSE: Good question. The short answer is that the FAR specifically states that Subpart 31.2 (which includes 31.205) shall be used if cost analysis is performed for contracts and contract modifications that are negotiated on the basis of costs (this includes construction).  Going a bit deeper…



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