FAR 31.107—Contracts with State, local, and federally recognized Indian tribal governments.
Plain-English Summary
FAR 31.107 explains when the cost principles in FAR subpart 31.6 apply to contracts with State, local, and federally recognized Indian tribal governments, and when they do not. It states the purpose of those principles: to provide a uniform method for determining allowable costs, promote efficiency, and support better working relationships between non-Federal governments and Federal agencies. The section also identifies two specific categories of exceptions: publicly financed educational institutions governed by FAR subpart 31.3, and publicly owned hospitals and other medical care providers governed by requirements issued by the sponsoring government agencies. Finally, it reserves authority to the Office of Management and Budget to approve other exceptions in particular cases when adequate justification is shown. In practice, this section tells contracting personnel and recipients which cost rules to apply, which bodies of rules control in special cases, and when a deviation from the normal framework requires higher-level approval.
Key Rules
Subpart 31.6 applies generally
The cost principles in FAR subpart 31.6 are the default rules for contracts with State, local, and federally recognized Indian tribal governments. They are intended to create a uniform approach to cost determination across these types of agreements.
Uniform cost determination
The purpose of these principles is to standardize how costs are evaluated, which helps agencies and non-Federal governments apply consistent standards. This supports efficiency and reduces disputes over what costs are allowable.
Applies to covered programs
The rule applies to all programs involving contracts with State, local, and federally recognized Indian tribal governments unless a stated exception applies. Users should treat this as the baseline coverage rule for these contracts.
Educational institution exception
Publicly financed educational institutions are excluded from this section’s coverage when they are subject to FAR subpart 31.3. In those cases, the cost principles in subpart 31.3 control instead.
Public hospital exception
Publicly owned hospitals and other providers of medical care are also excluded when they are subject to requirements issued by the sponsoring government agencies. Those agency-specific requirements govern rather than FAR 31.6.
OMB-approved exceptions
The Office of Management and Budget may approve other exceptions in particular cases if adequate justification is presented. This means additional departures from the default rule are possible, but only through an approved exception process.
Responsibilities
Contracting Officer
Apply FAR subpart 31.6 as the default cost principle framework for contracts with State, local, and federally recognized Indian tribal governments, and verify whether a listed exception or an OMB-approved exception applies before using another cost standard.
Agency
Ensure its programs involving these government-to-government contracts follow the correct cost principles and, where applicable, issue or rely on the proper sponsoring-agency requirements for public hospitals and other medical care providers.
State, Local, and Federally Recognized Indian Tribal Governments
Use the applicable cost principles for contracts under this section and identify when their agreements fall within an exception, such as publicly financed educational institutions or other specially approved cases.
OMB
Review and approve other exceptions in particular cases when adequate justification is provided, thereby authorizing departures from the normal application of FAR subpart 31.6.
Practical Implications
This section is mainly a coverage rule: before analyzing allowability, you must first determine whether FAR subpart 31.6 applies or whether an exception controls.
A common pitfall is assuming all public entities follow the same cost rules; publicly financed educational institutions and public hospitals may be governed by different standards.
Contracting officers should document the basis for applying an exception, especially when relying on agency-specific medical care requirements or an OMB-approved deviation.
For contractors and non-Federal governments, the practical effect is that cost proposals and incurred-cost support must be aligned with the correct rule set from the start.
If the wrong cost principles are applied, the result can be questioned costs, delayed negotiations, or disputes over reimbursement and allowability.
Official Regulatory Text
(a) subpart 31.6 provides principles and standards for determining costs applicable to contracts with State, local, and federally recognized Indian tribal governments. They provide the basis for a uniform approach to the problem of determining costs and to promote efficiency and better relationships between State, local, and federally recognized Indian tribal governments, and Federal Government entities. They apply to all programs that involve contracts with State, local, and federally recognized Indian tribal governments, except contracts with- (1) Publicly financed educational institutions subject to subpart 31.3 ; or (2) Publicly owned hospitals and other providers of medical care subject to requirements promulgated by the sponsoring Government agencies. (b) The Office of Management and Budget will approve any other exceptions in particular cases when adequate justification is presented.