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  • Question

    Is it legal for a contractor to incrementally bill the Government for an item purchased under a cost reimbursement type contract? Does incremental billing for an item violate any cost accounting standards?


    Answer

    If it is agreed to with the contracting officer, then a contractor can incrementally bill the Government for an item it has purchased under a cost reimbursement incrementally funded contract.  The contract would have a clause that would dictate what happens if the contract is not fully funded.  The cost must comply with 52.216-7, Allocable Cost and Payment and the contractor must comply with clause 52.232-22, which should be in the contract. 

    Incremental billing is not part of the cost accounting standards that I could find below in 48 CFR 9903.302-1.


    The Three Areas of Cost Accounting (48 CFR 9903.302-1)
    Measurement of Costinvolves the methods and techniques used in defining the components of cost, determining the basis of cost measurement, and establishing criteria for use of alternative cost measurement techniques. Examples of cost measurement are listed below:

    • The use of historical cost, market value, or present value;
    • The use of standard or actual cost; or
    • The designation of items of cost which must be included or axcluded from tangible assets or pension cost.

    Assignment of cost to cost accounting period refers to the method used in determining the amount of cost to be assigned to individual cost accounting periods. Examples are the requirements for use of accrual basis or cash basis accounting.
    Allocation of cost to cost objectives refers to the method of determining direct and indirect allocation of cost. Examples of allocation issues are listed below:

    • The accumulation of costs;
    • The determination of whether to charge costs direct or indirect; or
    • The determination of the composition of cost pools and their allocation bases.

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