[Federal Register Volume 69, Number 117 (Friday, June 18, 2004)]
[Rules and Regulations]
[Pages 34241-34242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13625]





48 CFR Part 31

[FAC 2001-24; FAR Case 2002-006; Item VIII]
RIN 9000-AJ65

Federal Acquisition Regulation; Application of Cost Principles 
and Procedures and Accounting for Unallowable Costs

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.


SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to revise FAR 31.204, 
Application of principles and procedures, to improve clarity and 

DATES: Effective Date: July 19, 2004.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755 
for information pertaining to status or publication schedules. For 
clarification of content, contact Mr. Edward Loeb, Policy Advisor, at 
(202) 501-0650. Please cite FAC 2001-24, FAR case 2002-006.


A. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at (68 FR 28108) on May 22, 2003, with request for comments. 
The rule proposed to amend FAR 31.204, Application of principles and 
procedures, and FAR 31.201-6, Accounting for unallowable costs. Nine 
respondents submitted comments; however, no comments related to FAR 
31.204. Therefore, the Councils concluded that the proposed rule should 
be converted to a final rule without changes.

[[Page 34242]]

    The proposed FAR rule also included proposed revisions to FAR 
31.201-6, Accounting for unallowable costs. Due to significant changes 
made as a result of public comments received, the Councils have decided 
that the proposed revisions to FAR 31.201-6 will be published as a 
second proposed rule in a Federal Register notice under new FAR case 
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Public Comments

    There were no public comments received on section 31.204.

C. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded 
to small entities use simplified acquisition procedures or are awarded 
on a competitive, fixed-price basis, and do not require application of 
the cost principles and procedures discussed in this rule. For FY 2003, 
only 2.4 % of all contract actions were cost contracts awarded to small 

D. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501, et seq.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: June 10, 2004.
Ralph J. De Stefano,
Acting Director, Acquisition Policy Division.

Therefore, DoD, GSA, and NASA amend 48 CFR part 31 as set forth below:


1. The authority citation for 48 CFR part 31 is revised to read as 

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

2. Amend section 31.204 in the first sentence of paragraph (a) by 
removing ``shall be allowed'' and adding ``are allowable'' in its 
place; by revising paragraph (b); and by redesignating paragraph (c) as 
paragraph (d) and adding a new paragraph (c) to read as follows:

31.204  Application of principles and procedures.

* * * * *
    (b)(1) For the following subcontract types, costs incurred as 
reimbursements or payments to a subcontractor are allowable to the 
extent the reimbursements or payments are for costs incurred by the 
subcontractor that are consistent with this part:
    (i) Cost-reimbursement.
    (ii) Fixed-price incentive.
    (iii) Price redeterminable (i.e., fixed-price contracts with 
prospective price redetermination and fixed-ceiling-price contracts 
with retroactive price redetermination).
    (2) The requirements of paragraph (b)(1) of this section apply to 
any tier above the first firm-fixed-price subcontract or fixed-price 
subcontract with economic price adjustment provisions.
    (c) Costs incurred as payments under firm-fixed-price subcontracts 
or fixed-price subcontracts with economic price adjustment provisions 
or modifications thereto, for which subcontract cost analysis was 
performed are allowable if the price was negotiated in accordance with 
* * * * *

[FR Doc. 04-13625 Filed 6-17-04; 8:45 am]