§3905 Cost Contracts

Summary

Bans contracts that pay a percentage of the contractor’s costs. For contracts that pay a fixed fee on top of costs, the fee can’t be more than 10% of the contract’s estimated cost (not counting the fee). For experimental, developmental, or research work the cap is 15%. For architectural or engineering work on public works or utility projects the cap is 6% and may include the contractor’s costs. The agency head sets the estimated cost when the contract starts. Contractors must tell the agency ahead of time about any cost-plus-fixed-fee subcontracts and about any fixed-price subcontract or purchase order that is larger than the simplified acquisition threshold or more than 5% of the prime contract’s estimated cost. The agency can inspect plans and audit the books and records of prime contractors and subcontractors on cost or cost-plus-fixed-fee contracts.