CHAPTER 4Cost Allowability
Knowing what costs can be claimed is essential in preparing price proposals and indirect cost rate proposals, as well as understanding how profit is affected by unallowable costs. In addition, knowing what costs are allowable will aid in avoiding penalties for claiming expressly unallowable costs as well as government allegations of defective pricing, criminal or civil false claims, or fraud.
ORIGIN OF GOVERNMENT CONTRACT COST PRINCIPLES
The first U.S. government purchases were on a firm-fixed-price basis for such items as horses, guns, and cannons. Over the years, the rules and regulations on the allowability of costs under government contracts have evolved from simple directives first developed during World War ...
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