§3750 — Title 10 Armed Forces | U.S. Code

Summary

Stops contractors from billing the government for many legal and investigation expenses when those expenses come from certain wrongdoings. Costs means the money a contractor pays for a proceeding, including admin work, lawyers, accountants, and pay for employees’ time. Penalty does not mean restitution, reimbursement, or compensatory damages. Proceeding also includes an investigation. If a criminal, civil, or administrative case is started by the United States, a State, or by an employee who files a complaint under section 4701, the contractor usually cannot charge those costs to a covered contract when the case is about breaking a law or regulation and it ends in one of these results: a criminal conviction, a finding of liability for fraud or similar misconduct, a monetary penalty or order to fix problems, a final decision to debar, suspend, cancel, or end the contract for default, or a settlement that could have led to any of those outcomes. Exceptions: the United States may let costs be paid if a settlement agreement says so, and a military or agency head may allow costs for State cases if the costs came from a specific contract term or written agency instruction. If costs are allowed and not barred above, up to 80 percent of otherwise allowable costs may be reimbursed, under rules that consider case complexity and fee practices. Costs are also barred if they involve the same misconduct as another barred case.

Title 10, §3750

Armed Forces — Source: USLM XML via OLRC

(a)In this section:

(1)The term “costs”, with respect to a proceeding—

(A)means all costs incurred by a contractor or subcontractor, or personal services contractor, whether before or after the commencement of any such proceeding; and

(B)includes—

(i)administrative and clerical expenses;

(ii)the cost of legal services, including legal services performed by an employee of the contractor or subcontractor, or personal services contractor;

(iii)the cost of the services of accountants and consultants retained by the contractor or subcontractor, or personal services contractor; and

(iv)the pay of directors, officers, and employees of the contractor or subcontractor, or personal services contractor for time devoted by such directors, officers, and employees to such proceeding.

(2)The term “penalty” does not include restitution, reimbursement, or compensatory damages.

(3)The term “proceeding” includes an investigation.

(b)Except as otherwise provided in this section, costs incurred by a contractor or subcontractor, or personal services contractor in connection with any criminal, civil, or administrative proceeding commenced by the United States, by a State, or by a contractor or subcontractor, or personal services contractor employee submitting a complaint under section 4701 of this title are not allowable as reimbursable costs under a covered contract, subcontract, or personal services contract if the proceeding—

(1)relates to a violation of, or failure to comply with, a Federal or State statute or regulation or to any other activity described in section 4701(a)(1) of this title; and

(2)results in a disposition described in subsection (c).

(c)A disposition referred to in subsection (b)(2) is any of the following:

(1)In the case of a criminal proceeding, a conviction (including a conviction pursuant to a plea of nolo contendere) by reason of the violation or failure referred to in subsection (b).

(2)In the case of a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of contractor or subcontractor, or personal services contractor liability on the basis of the violation or failure referred to in subsection (b).

(3)In the case of any civil or administrative proceeding, the imposition of a monetary penalty or an order to take corrective action under section 4701 of this title by reason of the violation or failure referred to in subsection (b).

(4)A final decision—

(A)to debar or suspend the contractor or subcontractor, or personal services contractor;

(B)to rescind or void the contract, subcontract, or personal services contract; or

(C)to terminate the contract, subcontract, or personal services contract for default;

(5)A disposition of the proceeding by consent or compromise if such action could have resulted in a disposition described in paragraphs (1), (2), (3), or (4).

(d)In the case of a proceeding referred to in subsection (b) that is commenced by the United States and is resolved by consent or compromise pursuant to an agreement entered into by a contractor or subcontractor, or personal services contractor and the United States, the costs incurred by the contractor or subcontractor, or personal services contractor in connection with such proceeding that are otherwise not allowable as reimbursable costs under such subsection may be allowed to the extent specifically provided in such agreement.

(e)In the case of a proceeding referred to in subsection (b) that is commenced by a State, the head of the agency or Secretary of the military department concerned that awarded the covered contract, subcontract, or personal services contract involved in the proceeding may allow the costs incurred by the contractor or subcontractor, or personal services contractor in connection with such proceeding as reimbursable costs if the agency head or Secretary determines, in accordance with the Federal Acquisition Regulation, that the costs were incurred as a result of (1) a specific term or condition of the contract, subcontract, or personal services contract, or (2) specific written instructions of the agency or military department.

(f)(1)Except as provided in paragraph (3), costs incurred by a contractor or subcontractor, or personal services contractor in connection with a criminal, civil, or administrative proceeding commenced by the United States or a State in connection with a covered contract, subcontract, or personal services contract may be allowed as reimbursable costs under the contract, subcontract, or personal services contract if such costs are not disallowable under subsection (b), but only to the extent provided in paragraph (2).

(2)(A)The amount of the costs allowable under paragraph (1) in any case may not exceed the amount equal to 80 percent of the amount of the costs incurred, to the extent that such costs are determined to be otherwise allowable and allocable under the Federal Acquisition Regulation.

(B)Regulations issued for the purpose of subparagraph (A) shall provide for appropriate consideration of—

(i)the complexity of procurement litigation;

(ii)generally accepted principles governing the award of legal fees in civil actions involving the United States as a party; and

(iii)such other factors as may be appropriate.

(3)In the case of a proceeding referred to in paragraph (1), contractor or subcontractor, or personal services contractor costs otherwise allowable as reimbursable costs under this subsection are not allowable if—

(A)such proceeding involves the same contractor or subcontractor, or personal services contractor misconduct alleged as the basis of another criminal, civil, or administrative proceeding; and

(B)the costs of such other proceeding are not allowable under subsection (b).

Notes & Related Subsidiaries

Editorial Notes

Codification The text of subsec. (k) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, § 1832(i), was based on Pub. L. 100–700, § 8(b), Nov. 19, 1988, 102 Stat. 4636; Pub. L. 101–189, div. A, title VIII, § 853(a)(1)(A), (b)(3), Nov. 29, 1989, 103 Stat. 1518; Pub. L. 103–355, title II, § 2101(a)(11), Oct. 13, 1994, 108 Stat. 3308; Pub. L. 112–239, div. A, title VIII, § 827(g), Jan. 2, 2013, 126 Stat. 1836; Pub. L. 114–261, § 1(b)(1), Dec. 14, 2016, 130 Stat. 1362.

Prior Provisions

Prior sections 3750 to 3756 were renumbered sections 7280 to 7286 of this title, respectively.

Amendments

2021—Subsec. (a). Pub. L. 116–283, § 1832(i)(1)(A), (B), redesignated par. (6) of section 2324(k) of this title as subsec. (a) of this section, inserted heading, substituted “In this section” for “In this subsection” in introductory provisions, and redesignated subpars. (B), (C), and (A) as pars. (1) to (3), respectively. Subsec. (a)(1). Pub. L. 116–283, § 1832(i)(1)(C), inserted heading and redesignated cls. (i) and (ii) and its subcls. (I) to (IV) as subpars. (A) and (B) and cls. (i) to (iv), respectively. Subsec. (a)(2), (3). Pub. L. 116–283, § 1832(i)(1)(D), (E), inserted heading. Subsec. (b). Pub. L. 116–283, § 1832(i)(2), (3), redesignated par. (1) of subsec. (k) of section 2324 of this title as subsec. (b) of this section, inserted heading, substituted “this section” for “this subsection” and “section 4701” for “section 2409”, redesignated inline subpars. (A) and (B) as pars. (1) and (2), respectively, and reformatted text, and substituted “in section 4701(a)(1)” for “in subparagraphs (A) through (C) of section 2409(a)(1)” in par. (1) and “subsection (c)” for “paragraph (2)”in par. (2). Subsec. (c). Pub. L. 116–283, § 1832(i)(2), (4)(A)–(D), redesignated par. (2) of section 2324(k) of this title as subsec. (c) of this section, inserted heading, substituted “subsection (b)(2)” for “paragraph (1)(B)” in introductory provisions, and “subsection (b)” for “paragraph (1)” wherever appearing, and redesignated subpars. (A) to (E) as pars. (1) to (5), respectively. Subsec. (c)(3). Pub. L. 116–283, § 1832(i)(4)(E), substituted “section 4701” for “section 2409”. Subsec. (c)(4). Pub. L. 116–283, § 1832(i)(4)(F), redesignated cls. (i) to (iii) as subpars. (A) to (C), respectively. Subsec. (c)(5). Pub. L. 116–283, § 1832(i)(4)(G), substituted “paragraphs (1), (2), (3), or (4)” for “subparagraph (A), (B), (C), or (D)”. Subsec. (d). Pub. L. 116–283, § 1832(i)(2), (5), redesignated par. (3) of section 2324(k) of this title as subsec. (d) of this section, inserted heading, and substituted “subsection (b)” for “paragraph (1)” and “such subsection” for “such paragraph”. Subsec. (e). Pub. L. 116–283, § 1832(i)(2), (6), redesignated par. (4) of section 2324(k) of this title as subsec. (e) of this section, inserted heading, and substituted “subsection (b)” for “paragraph (1)”, “(1)” for “(A)”, and “(2)” for “(B)”. Subsec. (f). Pub. L. 116–283, § 1832(i)(2), (7)(A), (B), redesignated par. (5) of section 2324(k) of this title as subsec. (f) of this section, inserted heading, and redesignated subpars. (A) to (C) as pars. (1) to (3), respectively, and realigned margins. Subsec. (f)(1). Pub. L. 116–283, § 1832(i)(7)(A), (C), inserted heading and substituted “paragraph (3)” for “subparagraph (C)”, “subsection (b)” for “paragraph (1)”, and “paragraph (2)” for “subparagraph (B)”. Subsec. (f)(2). Pub. L. 116–283, § 1832(i)(7)(D)(i), (ii), inserted heading and redesignated cls. (i) and (ii) as subpars. (A) and (B), respectively. Subsec. (f)(2)(A). Pub. L. 116–283, § 1832(i)(7)(D)(i), (iii), inserted heading and substituted “paragraph (1)” for “subparagraph (A)”. Subsec. (f)(2)(B). Pub. L. 116–283, § 1832(i)(7)(D)(iv), (E), inserted heading, substituted “subparagraph (A)” for “clause (i)”, inserted dash after “consideration of”, and reorganized remainder of existing text into designated cls. (i) to (iii). Subsec. (f)(3). Pub. L. 116–283, § 1832(i)(7)(F), as amended by Pub. L. 117–81, § 1701(b)(11), inserted heading, substituted “paragraph (1)” for “subparagraph (A)” and “under this subsection” for “under this paragraph”, inserted dash after “not allowable if”, redesignated inline cls. (i) and (ii) as subpars. (A) and (B), respectively, and reformatted text, and, in subpar. (B), substituted “subsection (b)” for “paragraph (1)”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2021 AmendmentAmendment by Pub. L. 117–81 applicable as if included in the enactment of title XVIII of Pub. L. 116–283 as enacted, see section 1701(a)(2) of Pub. L. 117–81, set out in a note preceding section 3001 of this title and

Effective Date

note below.

Effective Date

Section and amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as an

Effective Date

of 2021 Amendment note preceding section 3001 of this title.

Regulations

Pub. L. 100–700, § 8(d), Nov. 19, 1988, 102 Stat. 4638, provided that: “The

Regulations

necessary for the implementation of section 306(e) of the Federal Property and Administrative Services Act of 1949 [now 41 U.S.C. 4304] (as added by subsection (a)) and section 2324(k)(5) of title 10, United States Code [see 10 U.S.C. 3750(f)] (as added by subsection (b))— “(1) shall be prescribed not later than 120 days after the date of the enactment of this Act [Nov. 19, 1988]; and “(2) shall apply to contracts entered into more than 30 days after the date on which such

Regulations

are issued.”

§3750 Proceeding costs not allowable

Summary

Title 10, §3750

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Effective Date

Effective Date

Regulations

Regulations

Regulations

Citations & Metadata