PRIA, Government Policy, Made Personal

Summary

Most costs that contractors pay for legal cases or investigations about breaking a law or not following rules cannot be charged to the government. Defined terms: "Costs" means any expenses before or after a case, including admin work, lawyers, accountants, consultants, and pay for staff time. "Penalty" does not mean money paid back as restitution or compensatory damages. "Proceeding" also covers investigations. If the United States, a State, or a contractor employee starts a criminal, civil, or administrative case tied to a violation, the contractor usually cannot be reimbursed for those costs when the case ends badly. Bad outcomes include a criminal conviction, a civil finding of fraud or similar liability, a money penalty or required corrective action, debarment or suspension, canceling or ending the contract for default, or settling in a way that could have led to any of those results. Exceptions: if the U.S. settles and the settlement specifically lets the contractor recover costs, those costs can be paid. If a State starts the case, the agency head or military secretary can allow costs if they find the costs came from a contract term or written agency instructions. In other cases, some costs may be paid but only up to 80 percent of allowable costs under the Federal Acquisition Regulation, with rules that consider case complexity and legal fee norms. Costs tied to the same misconduct as another disallowed case remain unpaid.

Title 10, §3750

Armed Forces, Source: USLM XML via OLRC

(a)Definitions.—

In this section: (1) Costs.—

(2)Penalty.—

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

(3)Proceedings.—

The term “proceeding” includes an investigation.

(b)In General.—

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)Covered Dispositions.—

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;

by reason of the violation or failure referred to in subsection (b).

(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)Costs Allowed by Settlement Agreement in Proceeding Commenced by United States.—

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)Costs Specifically Authorized in Proceeding Commenced by State.—

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)Other Allowable Costs.—

(1)In general.—

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)Amount of Allowable Costs.—

(A)Maximum amount allowed.—

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)Content of regulations.—

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

(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)When otherwise allowable costs are not allowable.—

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