FAR Part 31 Deck 3 (Contract Cost Principles and Procedures)

Question 1

What types of interest and financial costs are unallowable?

Answer 1

Interest on borrowings, bond discounts, costs of financing and refinancing capital, legal and professional fees for prospectuses, and costs of issuing stock rights

However, interest assessed by State or local taxing authorities under specified conditions is allowable.

Question 2

What costs are allowable for maintaining labor relations?

Answer 2

Costs incurred for shop stewards, labor management committees, employee publications, and related activities

Costs related to persuading employees regarding their rights to organize are unallowable.

Question 3

Which costs related to lobbying and political activities are unallowable?

Answer 3

Costs associated with influencing elections, contributing to political parties, influencing legislation, and legislative liaison activities

Attempts to improperly influence government officials regarding contract matters are also unallowable.

Question 4

What activities are exempt from the lobbying costs unallowable rule?

Answer 4

Providing technical presentations in response to documented requests, lobbying to reduce contract costs, and activities authorized by statute

These exceptions only apply under specific conditions.

Question 5

What are the rules regarding losses on other contracts?

Answer 5

An excess of costs over income under any other contract is unallowable.

Question 6

What manufacturing and production engineering costs are allowable?

Answer 6

Costs for developing new materials, deploying pilot production lines, improving production functions, and manufacturing producibility analysis

Basic and applied research costs are not covered under this principle.

Question 7

What do material costs include?

Answer 7

Costs of raw materials, parts, subassemblies, components, manufacturing supplies, inbound transportation, and in-transit insurance.

Question 8

What adjustments must contractors make to material costs?

Answer 8

Adjust for income and other credits, including trade discounts, refunds, rebates, and credits for scrap

Reasonable adjustments for inventory discrepancies may also be included.

Question 9

What are considered unallowable organization costs?

Answer 9

Costs related to planning or executing corporate structure changes, resisting reorganization, and raising capital

This includes costs for attorneys and consultants.

Question 10

What types of business expenses are allowable under other business expenses?

Answer 10

Registry and transfer charges, costs of shareholder meetings, proxy solicitations, and preparing reports to shareholders.

Question 11

What costs related to plant protection are allowable?

Answer 11

Wages, uniforms, equipment for plant protection personnel, depreciation on capital assets, and compliance expenses.

Question 12

Which patent costs are allowable?

Answer 12

Costs for preparing invention disclosures, searching the art, and filing patent applications when title is conveyed to the Government.

Question 13

What are plant reconversion costs?

Answer 13

Costs incurred to restore contractor facilities to pre-contract condition, with exceptions for government property removal costs.

Question 14

What defines precontract costs?

Answer 14

Costs incurred before contract effective date that are necessary for compliance with proposed delivery schedules.

Question 15

What services fall under professional and consultant service costs?

Answer 15

Services rendered by professionals or skilled individuals who are not employees of the contractor

Examples include legal, economic, financial, or technical consulting.

Question 16

What circumstances make professional and consultant service costs unallowable?

Answer 16

Improperly obtaining protected data, influencing solicitations or evaluations, and violations of statutes or regulations.

Question 17

What factors are considered for the allowability of professional service costs?

Answer 17

Nature and scope of service, necessity for contracting, past acquisition patterns, impact of government contracts, and proportion of government work.

Question 18

What should the contracting officer consider regarding the nature and scope of the service?

Answer 18

The nature and scope of the service rendered in relation to the service required.

Question 19

What factor relates to the contractor’s capability in the specific area?

Answer 19

The necessity of contracting for the service.

Question 20

What past information is relevant for the contracting officer’s decision?

Answer 20

The past pattern of acquiring such services and their costs.

Question 21

What is the impact of Government contracts on?

Answer 21

The contractor’s business.

Question 22

How does the proportion of Government work affect the contractor?

Answer 22

It may influence the contractor in favor of incurring costs.

Question 23

What is one possible alternative to contracting for services?

Answer 23

Employment can perform the service more economically.

Question 24

What qualifications must be considered for the individual or concern rendering the service?

Answer 24

The qualifications and the customary fee charged.

Question 25

What must be adequate in the contractual agreement for the service?

Answer 25

Description of the service, estimate of time required, rate of compensation, termination provisions.

Question 26

What must retainer fees be supported by?

Answer 26

Evidence that the services are necessary and customary.

Question 27

What justifies the amount of retainer fees?

Answer 27

The level of past services performed.

Question 28

What must be documented regarding actual services performed?

Answer 28

Documentation in accordance with specified paragraphs.

Question 29

What types of recruitment costs are allowable?

Answer 29

* Costs of help-wanted advertising * Costs of operating an employment office * Costs of operating an aptitude and educational testing program * Travel costs of employees engaged in recruiting * Travel costs of applicants for interviews * Costs for employment agencies

Question 30

What makes help-wanted advertising costs unallowable?

Answer 30

If it does not describe specific positions or includes irrelevant material.

Question 31

What are relocation costs defined as?

Answer 31

Costs incident to the permanent change of assigned work location.

Question 32

What types of relocation costs are allowable?

Answer 32

* Travel costs of the employee and family * Costs of finding a new home * Closing costs of the former residence * Continuing costs of ownership of the former residence * Other necessary and reasonable relocation expenses * Costs of acquiring a home in the new location * Mortgage interest differential payments * Rental differential payments * Costs of canceling an unexpired lease * Payments for increased income or taxes * Payments for spouse employment assistance.

Question 33

What conditions must relocation costs meet to be allowable?

Answer 33

* The move must benefit the employer * Reimbursement must follow an established policy * Costs must not be otherwise unallowable * Amounts reimbursed shall not exceed actual expenses.

Question 34

What types of costs are unallowable under relocation costs?

Answer 34

* Loss on the sale of a home * Costs incident to acquiring a home * Continuing mortgage principal payments * Costs incident to furnishing equity or nonequity loans.

Question 35

What is the requirement for relocation costs if an employee resigns within 12 months?

Answer 35

The contractor shall refund or credit the relocation costs to the Government.

Question 36

What type of rental costs are applicable under this section?

Answer 36

Costs of renting or leasing real or personal property under operating leases.

Question 37

What factors determine the allowability of rental costs?

Answer 37

* Rental costs of comparable property * Market conditions * Type, life expectancy, condition, and value of the property * Alternatives available * Other provisions of the agreement.

Question 38

What are royalties on patents considered?

Answer 38

Allowable unless certain conditions invalidate them.

Question 39

What should be considered in determining the reasonableness of royalty payments?

Answer 39

Whether the royalties were arrived at through less-than-arm's-length bargaining.

Question 40

What is included in the definition of selling costs?

Answer 40

All efforts to market the contractor's products or services.

Question 41

What are the allowable categories of selling activity?

Answer 41

* Advertising * Corporate image enhancement * Bid and proposal costs * Market planning * Direct selling.

Question 42

What is required for seller's compensation to be allowable?

Answer 42

It must be paid to bona fide employees or established commercial agencies.

Question 43

What are the allowable costs for direct selling efforts?

Answer 43

Costs of direct selling efforts are allowable.

Question 44

What types of compensation are allowable for sellers or agents?

Answer 44

Compensation is allowable only when paid to bona fide employees or established commercial agencies maintained by the contractor.

Question 45

What do service and warranty costs include?

Answer 45

Service and warranty costs include installation, training, correcting defects, replacing defective parts, and making refunds for inadequate performance.

Question 46

What are the criteria for special tooling and special test equipment costs to be allowable?

Answer 46

Costs are allowable if the items are used for Government contracts, except for certain pre-existing items and those specifically excluded by the contract.

Question 47

What types of taxes are allowable under 31.205-41?

Answer 47

Allowable taxes include federal, state, and local taxes required to be paid or accrued in accordance with generally accepted accounting principles.

Question 48

Which taxes are not allowable as per 31.205-41?

Answer 48

Federal income and excess profits taxes, taxes related to financing, and taxes for which exemptions are available are not allowable.

Question 49

What are the rules regarding taxes on property used in connection with Government work?

Answer 49

Taxes should be allocated based on the use of property for Government or non-Government work.

Question 50

What costs arise from contract terminations?

Answer 50

Costs include those that would not have arisen had the contract not been terminated.

Question 51

What are the allowable costs for common items after contract termination?

Answer 51

Costs of common items are not allowable unless the contractor shows they could not be retained without a loss.

Question 52

What initial costs are allowable after contract termination?

Answer 52

Initial costs include starting load costs and preparatory costs, provided they are not also included in overhead.

Question 53

What is the loss of useful value in relation to special tooling?

Answer 53

Loss of useful value is allowable if the tooling is not usable for other work and the Government's interest is protected.

Question 54

What are allowable settlement expenses?

Answer 54

Allowable expenses include accounting, legal costs, and reasonable costs for storage and disposition of property.

Question 55

What types of costs related to trade and professional activities are allowable?

Answer 55

Allowable costs include memberships in organizations, subscriptions to periodicals, and costs related to meetings aimed at dissemination of information.

Question 56

What training and education costs are unallowable?

Answer 56

Overtime compensation, salaries for undergraduate classes during working hours, and costs exceeding two school years for graduate education are unallowable.

Question 57

What travel costs are allowable?

Answer 57

Costs for transportation, lodging, meals, and incidental expenses incurred by contractor personnel on official business are allowable.

Question 58

Fill in the blank: The cost of _______ is unallowable when incurred for training and education.

Answer 58

overtime compensation

Question 59

True or False: Federal income taxes are allowable costs under 31.205-41.

Answer 59

False

Question 60

What is the requirement for costs of attendance by individuals who are not employees of the contractor?

Answer 60

Costs are allowable if they are not reimbursed by the employing company and their attendance is essential.

Question 61

What are the maximum per diem rates based on?

Answer 61

Federal Travel Regulations, Joint Travel Regulation, Standardized Regulations ## Footnote These regulations are prescribed by the General Services Administration, Department of Defense, and Department of State respectively

Question 62

Under what conditions are actual costs in excess of maximum per diem rates allowable?

Answer 62

If specific conditions warrant approval, written justification is approved, and proper documentation is maintained ## Footnote These conditions include the need for higher amounts due to special circumstances

Question 63

What must be documented for allowable costs?

Answer 63

Date and place of expenses, purpose of the trip, name and title of the person on the trip ## Footnote This documentation is required to substantiate the expenses incurred

Question 64

Are airfare costs in excess of the lowest priced airfare allowable?

Answer 64

No, except under specific conditions such as circuitous routing or medical needs ## Footnote Justification and documentation of these conditions are required for them to be allowable

Question 65

What costs are included in 'Cost of travel by contractor-owned aircraft'?

Answer 65

Lease, charter, operation, maintenance, depreciation, insurance ## Footnote These costs are limited to allowable airfare unless specified otherwise in the contract

Question 66

What is required for travel by contractor-owned aircraft to be justified?

Answer 66

Complete documentation and justification must be provided ## Footnote This includes maintaining manifest/logs for all flights

Question 67

What costs are allowable for contractor-owned or leased automobiles?

Answer 67

Costs related to lease, operation, maintenance, depreciation, insurance when used for company business ## Footnote Personal use costs by employees are unallowable

Question 68

What are the defined costs related to legal proceedings?

Answer 68

Administrative expenses, legal services, costs of consultants and employees related to the proceeding ## Footnote These costs must have a direct relationship to the legal proceeding

Question 69

What constitutes fraud under the regulations?

Answer 69

Acts of fraud or corruption, causes for debarment or suspension, violations of the False Claims Act ## Footnote This includes attempts to defraud the government or corrupt its agents

Question 70

What costs are unallowable in connection with proceedings brought by government entities?

Answer 70

Costs resulting in a criminal conviction, finding of liability for fraud, or debarment ## Footnote This includes costs from civil proceedings that involve similar misconduct

Question 71

What is the maximum percentage of costs that can be allowed for legal proceedings?

Answer 71

80 percent of otherwise allowable legal costs ## Footnote This percentage is applicable to costs incurred in connection with various proceedings

Question 72

What types of costs are explicitly unallowable?

Answer 72

Defense against government claims, costs of mergers, antitrust suits, patent litigation ## Footnote These costs are unallowable unless specified otherwise in the contract

Question 73

What must contractors do with costs that may be unallowable?

Answer 73

Segregate and account for them separately ## Footnote This is necessary to manage payments and ensure compliance with regulations

Question 74

What must contractors do with unallowable costs under 31.205-47?

Answer 74

Segregate and account for them separately ## Footnote Unallowable costs include those that cannot be charged to the government, and they must be tracked distinctly by the contractor.

Question 75

Under what condition may a contracting officer provide conditional payment for unallowable costs?

Answer 75

Upon provision of adequate security or assurance, and agreement to repay unallowable costs plus interest ## Footnote This is in the best interests of the Government.

Question 76

Define 'research and development' as per 31.205-48.

Answer 76

Technical effort sponsored by a grant or required in the performance of a contract ## Footnote It is related to costs incurred beyond contract price or grant amount.

Question 77

What is goodwill according to 31.205-49?

Answer 77

An unidentifiable intangible asset originating from the purchase method of accounting for a business combination ## Footnote It arises when the acquisition price exceeds the fair value of identifiable assets.

Question 78

Are costs of alcoholic beverages allowable?

Answer 78

No, they are unallowable ## Footnote This applies to all costs associated with alcoholic beverages.

Question 79

What is the basis for allowable depreciation of tangible capital assets under 31.205-52?

Answer 79

Capitalized asset values measured and assigned in accordance with 48 CFR 9904.404-50(d) ## Footnote These values must be allocable, reasonable, and not otherwise unallowable.

Question 80

What does 31.301 provide principles for?

Answer 80

Determining the cost of research and development, training, and other work performed by educational institutions ## Footnote It applies to contracts with the Government.

Question 81

What does the OMB Uniform Guidance at 2 CFR part 200 cover?

Answer 81

Principles for determining the costs applicable to research and development, training, and other work performed by educational institutions ## Footnote It defines institutions of higher education and their cost principles.

Question 82

Under 31.602, what are the principles for determining allowable costs for contracts with State, local, and Indian tribal governments?

Answer 82

Set forth in the OMB Uniform Guidance at 2 CFR part 200, subpart E and appendices V and VII ## Footnote These principles focus on cost determination rather than financing participation.

Question 83

What types of costs are unallowable under 31.603(b)?

Answer 83

* Costs of entertainment * Costs to influence legislative action * Costs incurred in fraud proceedings * Payments of fines and penalties * Membership costs in clubs * Costs of alcoholic beverages * Contributions or donations * Advertising costs * Promotional items * Excessive travel costs * Golden parachute payments * Commercial insurance for contractor's defects * Foreign national severance pay exceeding industry standards * Costs of severance pay for foreign nationals due to government requests * Costs related to certain criminal or civil proceedings * Costs incurred in Congressional investigations ## Footnote These costs are specifically outlined as unallowable under federal regulations.

Question 84

Define a nonprofit organization as per 31.701.

Answer 84

A business entity organized for charitable, scientific, or educational purposes, exempt from Federal income taxation under section 501 of the Internal Revenue Code ## Footnote No part of the net earnings benefits any private shareholder.

Question 85

What does the OMB Uniform Guidance at 2 CFR part 200, subpart E, provide for nonprofit organizations?

Answer 85

Principles for determining the costs applicable to work performed under contracts with the Government ## Footnote It also includes exceptions to these cost principles.

Question 86

What must contracts referring to subpart 31.7 have for determining allowable costs?

Answer 86

Allowability determined by the contracting officer in accordance with OMB Uniform Guidance in effect on the contract date ## Footnote No additional restrictions on individual items of cost are expected.