During an audit for payment, which costs are allowable on a CR contract?

During an audit for payment, which costs are allowable on a CR contract?

• A. Are reasonable
• B. Are allocable
• C. Are not unallowable
• D. All of the above

Answer: (D)

Allowable costs on a cost-reimbursable contract must meet three criteria. First, they must be reasonable, meaning a prudent person would incur the expense under the circumstances and at a value that reflects normal market conditions. Second, they must be allocable to the contract, either as direct costs or by a proper indirect-cost allocation basis, so the expense clearly benefits the contract work. Third, they must not be unallowable, meaning the cost isn’t one that regulations, the contract, or law disallow (such as penalties, certain fines, or other prohibited categories). If a cost satisfies all three of these conditions, it is allowable for payment during an audit. Since each of the criteria is required, the correct interpretation is that allowable costs are those that are reasonable, allocable, and not unallowable.

Allowable costs on a cost-reimbursable contract must meet three criteria. First, they must be reasonable, meaning a prudent person would incur the expense under the circumstances and at a value that reflects normal market conditions. Second, they must be allocable to the contract, either as direct costs or by a proper indirect-cost allocation basis, so the expense clearly benefits the contract work. Third, they must not be unallowable, meaning the cost isn’t one that regulations, the contract, or law disallow (such as penalties, certain fines, or other prohibited categories).

If a cost satisfies all three of these conditions, it is allowable for payment during an audit. Since each of the criteria is required, the correct interpretation is that allowable costs are those that are reasonable, allocable, and not unallowable.