FAR 31.6—Subpart 31.6

Purpose.

FAR 31.601 is the opening purpose statement for the cost-principles subpart that applies to contracts and subcontracts with State, local, and federally recognized Indian tribal governments. It tells readers that this subpart is about determining which costs are allowable under those agreements, and it frames the section as a set of principles rather than a detailed pricing rule. In practice, this means contracting officers, recipients, and contractors must look to the cost principles in the subpart when evaluating whether claimed costs can be paid, reimbursed, or included in contract pricing. The section is important because it establishes the scope of the cost-allowability framework for these non-Federal governmental entities and their subcontractors, helping ensure consistent treatment of costs across Federal awards and related subcontracts. It does not itself list specific allowable or unallowable costs, but it signals that the subpart governs the analysis used to make those determinations.

General.

FAR 31.602 is a short but important cross-reference provision that tells readers where to find the cost principles for contracts and subcontracts with State, local, and federally recognized Indian tribal governments. It points to the OMB Uniform Guidance at 2 CFR part 200, subpart E, and appendices V and VII, which govern how allowable costs are determined for those non-Federal entities. The section also clarifies the limited purpose of those principles: they are cost-determination rules, not rules for deciding whether the Federal Government, a State, or a local government should participate in financing a particular contract, or how much each should pay. In practice, this means contracting officers, grant/contract administrators, and contractors must use the Uniform Guidance cost principles when evaluating allowability, but they must look elsewhere for funding-share, matching, or participation decisions. The section helps prevent a common mistake: treating cost allowability rules as if they also establish funding policy or cost-sharing obligations.

Requirements.

FAR 31.603 explains how to determine allowable costs for contracts with State, local, and Indian tribal governments when the contract points to FAR Subpart 31.6, and it tells contracting officers to use the OMB Uniform Guidance at 2 CFR part 200, subpart E, plus appendices V and VII, as they exist on the contract date. It also makes clear that agencies generally should not add extra item-by-item cost restrictions beyond those already required, but it identifies specific categories of costs that are unallowable by statute or regulation. Those unallowable categories include entertainment, lobbying and legislative influence, certain fraud-defense costs, fines and penalties, social club memberships, alcoholic beverages, contributions and donations, promotional advertising, promotional items and memorabilia, airfare above standard commercial fare, certain golden parachute payments, certain commercial insurance for correcting the contractor’s own defects, specified severance pay for foreign nationals on overseas service contracts, and certain proceeding-related costs tied to government actions, whistleblower complaints, False Claims Act matters, and related Congressional investigations. In practice, this section is important because it tells contractors and contracting officers which cost principles control, prevents agencies from imposing unauthorized extra restrictions, and identifies cost items that must be excluded even when the broader allowability framework comes from the Uniform Guidance. It also links cost allowability to the outcome and nature of legal and investigative proceedings, which makes documentation and legal review especially important when such costs arise.