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  • Question

    Are bonuses an allowable cost under ODCs; if not, are they allowable somewhere else?


    Answer

    FAR 31.205-6(f)  states:
     
     
    (f) Bonuses and incentive compensation.
     
      (1) Bonuses, and incentive compensation are allowable provided the—
     
      (i) Awards are paid or accrued under an agreement entered into in good faith between the contractor and the employees before the services are rendered or pursuant to an established plan or policy followed by the contractor so consistently as to imply, in effect, an agreement to make such payment; and
     
      (ii) Basis for the award is supported.
     
      (2) When the bonus and incentive compensation payments are deferred, the costs are subject to the requirements of paragraphs (f)(1) and (k) of this subsection.
     
     
    In addition to complying with this requirement, the bonuses must be allowable, reasonable and allocable to be reimburseable. Based upon your stated facts, it appears that these bonuses were an established practice/policy of the contractor and in accordance with a stated plan.
     
    Based upon the above, I would say the bonuses meet the FAR requirements and can be reimbursed, PROVIDED the contracting officer determines the bonus amounts and their frequency are reasonable.


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