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Costs incurred prior to funds being obligated....


LM_ABITWT

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I have a situation where an individual has worked before the funds were obligated to the contract. The contract is CPFF and is incrementally funded. The customer is sending us funds, but could those funds be applied for the work already accomplished? Overall, our contract has funding, but those funds are specific to other unrelated efforts. Contract has a broad scope so that's not an issue, but I'm unfamiliar with whether the funds could be applied to cover costs already incurred.

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Guest Vern Edwards

Generally, costs incurred before the effective date of a CPFF contract will be disallowed. However, if the contract is incrementally funded, and what you are talking about is work done before additional funds were provided, then the Limitation of Funds clause provides for retroactive allowance.

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LM, you said work started before funds were obligated on the contract. If the work started before the effective date of the contract, does the contract contain a pre-contract costs clause? If work started after contract award but before funds were obligated, does the contract contain an availability of funds clause?

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The Contract is funded by PWS task so while the contract was underway already, the task that this particular person was supporting was not funded yet (and still hasn't been). We do expect funds shortly, but what do I need from the CO in order for us to use those funds (that will be obligated in Feb) against costs incurred in Jan?

Yes, my contract contains 52.232-18.

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If the costs meet the criteria at FAR 31.205-32, then they would be allowable:

31.205-32 -- Precontract Costs.

Precontract costs means costs incurred before the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract award when such incurrence is necessary to comply with the proposed contract delivery schedule. These costs are allowable to the extent that they would have been allowable if incurred after the date of the contract (see 31.109).

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Don is correct in my estimation. However, note that, in order for the pre-contract costs to be allowable, they must have been incurred in order to comply with the proposed delivery schedule. In the scenario described, it's not at all clear the labor costs were incurred so as to meet a proposed delivery schedule.

Hope this helps.

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TO Vern's initial response re: LOF's clause aloowing for retroactive costs in this situation.

Vern forgive my ignorance but how does the LOF's clause allow for the retroactive costs to be allowed? I have a CPFF incrementally funded DO with the SAME situation as LM ABITWT.

Thanks!

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Guest Vern Edwards

My bad for not providing a citation. I was referring to 52.232-22(i):

(i) When and to the extent that the amount allotted by the Government to the contract is increased, any costs the Contractor incurs before the increase that are in excess of—

(1) The amount previously allotted by the Government or;

(2) If this is a cost-sharing contract, the amount previously allotted by the Government to the contract plus the Contractor’s corresponding share, shall be allowable to the same extent as if incurred afterward, unless the Contracting Officer issues a termination or other notice and directs that the increase is solely to cover termination or other specified expenses.

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