Does the Contractor has to use the labor rates that they used in their proposal or do they bill the government using their actual labor rates?
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FAR 16.301-1 Description.
Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.
Based on the above FAR reference, it depends on what is written in the contract. Unless there is a clause in Section H which limits labor rates to what is listed in Section B of the contract, the contractor bills at its actual rate.