FAR 31—Contract Cost Principles and Procedures

Scope of part.

FAR 31.000 explains the scope of FAR Part 31, which is the government’s core set of cost principles and related procedures. It tells readers that Part 31 applies in two main situations: first, when the government is pricing contracts, subcontracts, or contract modifications and performs cost analysis under FAR 15.404-1(c); and second, when a contract clause requires the determination, negotiation, or allowance of costs. In practice, this means Part 31 is the reference point for deciding whether a cost is allowable, allocable, and reasonable in cost-based pricing or in post-award cost determinations. The section matters because it establishes when the cost principles govern, helping contracting officers, contractors, and auditors know when to apply FAR Part 31 rather than relying only on market pricing or other pricing methods. It also signals that these rules are not limited to prime contracts; they can reach subcontracts and modifications whenever cost analysis is part of the pricing process. For contractors, this section is a warning that proposed, billed, and negotiated costs may be scrutinized under Part 31 whenever the contract structure or clause makes cost principles relevant.

Definitions.

FAR 31.001 is the definitions section for FAR Part 31, which governs contract cost principles and procedures. It establishes the meaning of key accounting, cost, and pension terms used throughout the part, including accrued benefit cost method, accumulating costs, actual cash value, actual costs, actuarial accrued liability, actuarial assumption, actuarial cost method, actuarial gain and loss, actuarial valuation, allocate, compensated personal absence, compensation for personal services, cost input, cost objective, deferred compensation, defined-benefit pension plan, defined-contribution pension plan, directly associated cost, estimating costs, expressly unallowable cost, final cost objective, fiscal year, funded pension cost, and home office. These definitions matter because they control how contractors accumulate, assign, estimate, and claim costs, especially for indirect costs, pension costs, compensation, and unallowable costs. In practice, the section is the foundation for applying the allowability, allocability, and reasonableness rules in the rest of Part 31. It also helps distinguish actual versus estimated costs, direct versus indirect relationships, and different pension accounting concepts that can materially affect contract pricing and reimbursement. For contractors, the definitions drive accounting system design, cost submissions, and compliance risk; for contracting officers and auditors, they provide the vocabulary needed to evaluate cost proposals and incurred cost claims consistently.

Subpart 31.1

Availability of accounting guide.

FAR 31.002 is a very short informational provision that points contractors to a specific accounting reference: Defense Contract Audit Agency (DCAA) Pamphlet No. 7641.90, Information for Contractors. It covers only the availability of that guide and the fact that contractors may request it when they need help developing or improving their accounting systems and procedures. The section exists to steer contractors toward practical, government-recognized guidance on accounting system expectations, especially in cost-reimbursement and other situations where accounting adequacy matters. In practice, it signals that contractors are responsible for maintaining sound accounting systems, but they do not have to start from scratch; they can use DCAA’s pamphlet as a reference point. It also makes clear that the pamphlet is available online through DCAA, so access is intended to be straightforward and current. This section does not itself impose detailed accounting standards, approval procedures, or audit requirements; instead, it serves as a resource notice within the FAR framework.

Subpart 31.2

Subpart 31.3

Subpart 31.6

Subpart 31.7