FAR 52.216-30—Time-and-Materials/Labor-Hour Proposal Requirements—Other Than Commercial Acquisition Without Adequate Price Competition.
Plain-English Summary
FAR 52.216-30 is a solicitation provision used when the Government contemplates awarding a time-and-materials (T&M) or labor-hour (LH) contract and the acquisition is other than a commercial acquisition without adequate price competition. Its purpose is to force offerors to disclose the fixed hourly rates they are proposing for each labor category and to make clear how those rates must be built up, including wages, overhead, general and administrative expenses, and profit. The provision also addresses rates for labor performed by subcontractors and by the offeror’s own divisions, subsidiaries, or affiliates under common control, which is important because interorganizational transfers can affect whether profit is included in the transferred rate. It further establishes a special rule for commercial services transferred between commonly controlled entities, allowing established catalog or market rates when the organization’s normal practice is to price such transfers at other than cost for commercial work. In practice, this provision helps the Government evaluate whether proposed labor rates are complete, reasonable, and consistent with the contractor’s internal pricing practices, while reducing the risk of hidden markups or inconsistent treatment of affiliated entities.
Key Rules
Applies to T&M and LH awards
The provision is used when the Government expects to award a time-and-materials or labor-hour contract from the solicitation. It is specifically prescribed for other-than-commercial acquisitions without adequate price competition, so offerors should expect detailed rate disclosure and scrutiny.
Separate fixed hourly rates required
Offerors must propose separate fixed hourly rates for each labor category. Those rates must include wages, overhead, general and administrative expenses, and profit, so the Government can evaluate the full labor pricing structure up front.
Rates must cover all performers
The offer must identify rates for labor performed by the offeror, each subcontractor, and each division, subsidiary, or affiliate under common control. This ensures the Government can compare pricing across all entities that may perform work under the contract.
No transferring-entity profit by default
For services transferred between commonly controlled divisions, subsidiaries, or affiliates, the fixed hourly rates generally may not include profit for the transferring organization. The provision does allow profit for the prime contractor, but not for the internal transferring entity unless an exception applies.
Commercial service exception
If the transferred labor meets the FAR definition of a commercial service, the rate may be the established catalog or market rate when the organization’s established practice is to price interorganizational transfers at other than cost for commercial work. This exception recognizes commercial pricing practices for affiliated transfers.
Established practice matters
The commercial-service exception is not automatic; the offeror must be able to show that pricing interorganizational transfers at other than cost is the organization’s established practice for commercial work. Without that showing, the default no-profit-for-transfer rule applies.
Responsibilities
Offeror
Must propose separate fixed hourly rates for each labor category and each performing entity, and ensure the rates include wages, overhead, G&A, and profit as required. The offeror must also account for internal transfers between commonly controlled entities and determine whether any commercial-service exception applies.
Subcontractor
Must provide its own labor rates or pricing information as needed so the offeror can include separate fixed hourly rates for subcontracted labor. Subcontractor pricing must be identifiable by labor category and consistent with the solicitation requirements.
Divisions, subsidiaries, and affiliates under common control
Must support disclosure of their labor rates when they will perform work under the proposed contract. If labor is transferred internally, these entities must provide pricing information showing whether the transfer is at cost or at an established catalog or market rate for commercial services.
Contracting Officer
Must use the provision when prescribed, review the proposed fixed hourly rates, and evaluate whether the offeror has properly separated rates by labor category and performing entity. The contracting officer must also assess whether any claimed commercial-service exception is supported by the offeror’s pricing practice and the nature of the service.
Agency
Must include the provision in the solicitation when the acquisition conditions in the prescription are met. The agency should ensure the solicitation clearly signals that T&M or LH pricing disclosures will be required and that internal transfer pricing may be examined.
Practical Implications
Offerors need a clean rate build-up for every labor category and every entity that may perform the work; missing one affiliate or subcontractor can make the proposal nonresponsive or create evaluation problems.
Internal transfers are a common pitfall. If labor moves between commonly controlled entities, the default rule is no profit for the transferring organization, so contractors should not assume they can simply roll up commercial markups into the hourly rate.
The commercial-service exception is narrow and documentation-driven. Contractors should be prepared to prove that the service is commercial and that the organization’s established practice is to price interorganizational transfers at other than cost.
Contracting officers should look for consistency between proposed rates, accounting practices, and any affiliate/subsidiary relationships disclosed in the proposal. Inconsistencies can signal unsupported profit, incomplete pricing, or misunderstanding of the provision.
Because the provision requires fixed hourly rates, contractors should ensure the rates are stable and fully loaded before submission; later attempts to explain missing overhead, G&A, or profit can undermine credibility and complicate negotiations.
Official Regulatory Text
As prescribed in 16.601 (f)(2) , insert the following provision: Time-and-Materials/Labor-Hour Proposal Requirements—Other Than Commercial Acquisition Without Adequate Price Competition (Nov 2021) (a) The Government contemplates award of a Time-and-Materials or Labor-Hour type of contract resulting from this solicitation. (b) The offeror must specify separate fixed hourly rates in its offer that include wages, overhead, general and administrative expenses, and profit for each category of labor to be performed by- (1) The offeror; (2) Each subcontractor; and (3) Each division, subsidiary, or affiliate of the offeror under a common control. (c) Unless exempt under paragraph (d) of this provision, the fixed hourly rates for services transferred between divisions, subsidiaries, or affiliates of the offeror under a common control- (1) Shall not include profit for the transferring organization; but (2) May include profit for the prime Contractor. (d) The fixed hourly rates for services that meet the definition of “commercial service” at Federal Acquisition Regulation 2.101 that are transferred between divisions, subsidiaries, or affiliates of the offeror under a common control may be the established catalog or market rate when it is the established practice of the transferring organization to price interorganizational transfers at other than cost for commercial work of the offeror or any division, subsidiary or affiliate of the offeror under a common control. (End of provision)