§3322 Cost Contracts

Summary

It bans contracts that pay a percentage of total costs. For cost-plus-fixed-fee contracts, the contractor’s fee is capped based on the work and the contract’s estimated cost (not counting the fee): 15% for experimental, development, or research work; 6% for architectural or engineering services on a public work or utility (including the contractor’s cost for those services); and 10% for other work. The agency head sets the estimated cost when the contract is made. Contractors must tell the agency before they award under the main contract either a cost-plus-fixed-fee subcontract or any fixed-price subcontract or purchase order larger than the greater of the simplified acquisition threshold or 5% of the prime contract’s estimated cost, unless the contractor has a purchasing system approved by the contracting officer. For cost-reimbursement contracts to develop a major system, fixed-price options may use no more than one low-rate production lot unless a service acquisition executive or the Secretary of Defense waives that limit. Definitions: covered contract — a cost-reimbursement contract for developing a major system; low-rate initial production — defined in section 4231; major system — defined in section 3041.