§3322 Cost Contracts

Summary

Contracts must not pay a contractor by adding a percentage on top of the costs. If a contract pays a fixed fee on top of costs, that fee has a cap. For experimental, development, or research work the fee cannot be more than 15% of the contract’s estimated cost (excluding the fee). For architectural or engineering work on a public project or utility the fee cannot be more than 6%. For all other cost-plus-fixed-fee contracts the fee cannot be more than 10%. The agency head sets the estimated cost when the contract is made. The contractor must tell the agency before putting under the main contract either a cost-plus-fixed-fee subcontract or any fixed-price subcontract or purchase order that is higher than the greater of the simplified acquisition threshold or 5% of the main contract’s estimated cost, unless the contractor has a purchasing system already approved by the contracting officer. For cost-reimbursement contracts that develop a major system, fixed-price options may not be used to buy more than one low-rate production lot unless the service acquisition executive, or the Secretary of Defense for joint programs, waives that limit because it is in the Department of Defense’s best interest. That waiver power cannot be given to anyone below the level of a service acquisition executive. Definitions: covered contract = cost-reimbursement contract for developing a major system; low-rate initial production and major system = as defined elsewhere in law.