For contractors new to cost-reimbursement contracts, FAR Part 31 can feel overwhelming. But understanding its fundamentals is essential for any firm seeking to compete for cost-plus opportunities.
FAR 31 Cost Principles
- What costs are billable to the government
- What expenses must be excluded
- How indirect cost pools must be structured
- How contractors must maintain internal accounting systems
- How documentation must support all billing and invoicing
Key Compliance Takeaways
- Allowable vs. Unallowable Costs: Entertainment, alcohol, fines, interest, and certain travel expenses cannot be billed. Misclassifying these can lead to disallowed costs and audit findings.
- Indirect Rate Structure Matters: DCAA expects clear separation and justification for G&A, overhead, and fringe rates.
- Documentation Is Critical: If it is not documented, it is not reimbursable.
At Woodard Walker, we help contractors understand the practical implications of FAR 31—and connect them with experts who can help them design accounting systems that are compliant, scalable, and audit-ready.
Upcoming: In Blog 3, we provide a checklist for a DCAA Accounting System to help you understand the compliance requirements.
