FAR 36.215—Special procedure for cost-reimbursement contracts for construction.
Plain-English Summary
FAR 36.215 is a narrow but important gatekeeping rule for construction contracting. It addresses when a contracting officer may use a cost-reimbursement contract for construction and ties that decision to the broader requirements in FAR subpart 16.3 (cost-reimbursement contracts) and FAR part 15 (contracting by negotiation), including the fee limitation referenced at FAR 15.404-4(c)(4)(i). In practice, this section does not create a general preference for cost-reimbursement construction; instead, it limits such use to situations where the contract type is otherwise justified under the cost-reimbursement rules and negotiated-procurement procedures. The section matters because construction is ordinarily well suited to fixed-price contracting, so a cost-reimbursement approach should be used only when the acquisition circumstances support it and the contracting officer can document compliance with the applicable acquisition and fee rules. For contractors, this means cost-reimbursement construction opportunities are exceptional and will usually come with tighter cost controls, more government oversight, and fee constraints. For contracting officers, it means the contract type decision must be deliberate, supportable, and aligned with the rest of the FAR framework.
Key Rules
Cost-reimbursement is limited
A contracting officer may use a cost-reimbursement contract for construction only in limited circumstances. The section does not authorize cost-reimbursement as a routine construction contract type; it is permitted only when the broader FAR requirements support it.
Must satisfy subpart 16.3
The decision must be consistent with FAR subpart 16.3, which governs cost-reimbursement contracts. That means the contracting officer must ensure the contract type is appropriate for the work and that the conditions for using a cost-reimbursement arrangement are met.
Must satisfy part 15
The acquisition must also be consistent with FAR part 15, which covers negotiated procurements. This ties the contract type decision to the normal negotiation, evaluation, and documentation requirements used when awarding by negotiation.
Fee limitation applies
The reference to FAR 15.404-4(c)(4)(i) means the fee limitation for cost-reimbursement contracts must be considered. The contracting officer cannot ignore the applicable fee cap or related pricing constraints when structuring the contract.
Construction-specific caution
Because the rule applies to construction, it functions as a special restriction on a contract type that is often less suitable for construction than fixed-price methods. The contracting officer should be prepared to justify why a cost-reimbursement approach is necessary for the particular project.
Responsibilities
Contracting Officer
Determine whether a cost-reimbursement contract for construction is justified under FAR subpart 16.3 and part 15, and ensure the fee limitation in FAR 15.404-4(c)(4)(i) is applied. The contracting officer should document the rationale for using this contract type and confirm the acquisition strategy supports it.
Agency
Support acquisition planning and oversight so that construction requirements are structured using an appropriate contract type. The agency should ensure internal review and approval processes, if any, are followed before a cost-reimbursement construction contract is used.
Contractor
Understand that cost-reimbursement construction is exceptional and be prepared to comply with cost allowability, documentation, and fee limitations associated with this contract type. The contractor should price and manage the work with the expectation of closer government scrutiny and reimbursement-based administration.
Practical Implications
This section is a warning flag: cost-reimbursement construction should not be the default choice, so the contracting officer needs a strong acquisition rationale before using it.
A common pitfall is treating the rule as permission rather than a restriction; the real test is whether subpart 16.3 and part 15 both support the decision.
Fee limitations can materially affect the economics of the deal, so both sides should check the applicable fee rule early in planning and negotiation.
Because cost-reimbursement contracts require more oversight, contractors should expect more detailed cost tracking, invoicing review, and government monitoring than under fixed-price construction.
If the contract type decision is weakly documented, the award may be vulnerable to protest, audit findings, or internal review concerns.
Official Regulatory Text
Contracting officers may use a cost-reimbursement contract to acquire construction only when its use is consistent with subpart 16.3 and part 15 (see 15.404-4 (c)(4)(i) for fee limitation on cost-reimbursement contracts).