FAR 31.601—Purpose.
Plain-English Summary
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.
Key Rules
Purpose is cost allowability
This section states that the subpart exists to provide principles for determining whether costs are allowable. Its function is to orient the reader to the governing framework, not to prescribe individual cost items.
Applies to government entities
The subpart specifically covers contracts and subcontracts with State, local, and federally recognized Indian tribal governments. Those entities are the focus of the cost-allowability rules addressed in the subpart.
Includes subcontracts
The scope is not limited to prime contracts; it also extends to subcontracts. That means downstream agreements tied to covered work may also need to follow the same cost-principle analysis.
Principles guide decisions
The section emphasizes principles for determining allowability, which means users must apply the broader cost-principle framework to specific facts. It is a guide for analysis rather than a standalone list of mandatory cost items.
Responsibilities
Contracting Officer
Use the subpart’s cost principles when evaluating proposed, billed, or claimed costs under covered contracts and subcontracts. Ensure the contract administration approach reflects the applicable allowability framework.
Contractor
Apply the subpart’s principles when preparing cost proposals, billing, and subcontract arrangements under covered agreements. Support claimed costs with documentation showing they are allowable under the governing principles.
Subcontractor
Follow the same cost-allowability principles when performing under a covered subcontract. Maintain records and cost support consistent with the applicable Federal framework.
State, Local, or Tribal Government Recipient/Entity
Use the subpart as the governing reference for determining whether costs charged to the Federal agreement are allowable. Flow the applicable requirements down to subcontracts as needed.
Practical Implications
This section matters because it tells users where to look first when deciding if a cost can be charged to a covered agreement: the cost-principles subpart, not general intuition or local practice.
A common pitfall is treating this section as if it contains the actual allowability rules; it does not. It only states the purpose and scope of the subpart, so users must read the related cost-principle provisions for the real tests.
Contractors and subcontractors should expect documentation and accounting systems to support allowability determinations, since the subpart is about deciding which costs qualify under Federal standards.
Contracting officers should use this section to confirm that the agreement falls within the subpart’s scope before applying the detailed cost rules.
Because subcontracts are included, prime contractors should ensure subcontract terms and oversight align with the same allowability framework to avoid unallowable costs flowing up to the prime contract.
Official Regulatory Text
This subpart provides the principles for determining allowable cost of contracts and subcontracts with State, local, and federally recognized Indian tribal governments.