Changes Affecting FAR Part 31 Cost Principles

This section recaps changes affecting FAR Par 31 Cost Principles. These recaps will remain here for about a year after their effective dates.

Use of Stat Sampling to Identify Unallowable Costs

FAR 31.201-6, Accounting for Unallowable Costs, was revised effective October 31, 2005 to specifically allow contractors to use statistical sampling as a method of identifying and segregating unallowable costs.  

Where statistical sampling is used, FAR requires that the sample be unbiased, that it represent the universe, that large dollar and high risk transactions be separately reviewed and that the process permits audit verification.

FAR also recommends that the sampling process be the subject of an advance agreement with the administrative contracting officer.

Compensation

The Office of Management and Budget (OMB) just announced the maximum compensation that will be allowable on government contracts during fiscal years 2006 and later. The amount is $546,689, a significant increase over the 2005 cap of $473,318.

Depreciation

The Depreciation Cost Principle, FAR 31.205-11 was amended by Federal Acquisition Circular (FAC) 2005-10 on June 28, 2006. It affects situations where contractors re-acquire the title to assets that it sold and leased-back. Effective July 28, 2006, allowable depreciation will be based on the net book value of the asset as of the date the contractor originally became a lessee in the arrangement. To see the entire change and to read public comments, click here.

Relocation

FAR 31.205-35, Relocation Costs, was recently revised to add three additional types of relocation costs that may be reimbursed on a lump-sum basis in lieu of actual costs.

These three additional items are i) costs of finding a new home; ii) costs of traveling to the new location; and iii) costs of temporary lodging.