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If a prime contractor has a cost plus award fee contract and some of their employees comitted fraud (submitted false documents) which resulted in losses to the prime, is that loss reimbursable by the government?

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So you are saying that some of the prime's own employees committed wrongful acts and, as a result, the prime suffered a financial loss? How is that loss a cost to the government? A cost-plus-award-fee contract is one in which the government will reimburse actual, allowable costs. You need to incur a cost, not record a loss, in order to get reimbursed.

And even if the "loss" was somehow a cost (debit to an expense account) it would be unallowable per 31.205-15(B). So you wouldn't get reimbursed in any possible case.

However, the company may have legal recourse against the employees.

Hope this helps.

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