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FAR and DFARS › DFARS Part 217: Special Contracting Methods › Subpart 217.74

DFARS 217.7404-6 Allowable profit.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section governs how profit is set when the final price of an undefinitized contract action (UCA) is negotiated after a substantial portion of the work is already done. It requires the head of the contracting activity to ensure the profit reflects reduced cost risk to the contractor and to document the risk assessment in the price negotiation memorandum.

Applies to: The head of the contracting activity for UCAs whose final price is negotiated after substantial performance

What it requires

  • Ensure the profit allowed reflects any reduced cost risk for costs incurred before final price negotiation
  • Ensure the profit allowed reflects any reduced cost risk for costs expected after final price negotiation
  • Ensure the profit allowed reflects the requirements at 215.404-71-3(d)(2)
  • Document the risk assessment in the price negotiation memorandum

Key terms: UCA · final price · qualifying proposal · definitize · price negotiation memorandum

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

When the final price of a UCA is negotiated after a substantial portion of the required performance has been completed, the head of the contracting activity shall ensure the profit allowed reflects—

(a) Any reduced cost risk to the contractor for costs incurred during contract performance before negotiation of the final price. However, if a contractor submits a qualifying proposal to definitize a UCA, and the contracting officer for such action definitizes the contract after the end of the 180-day period beginning on the date on which the contractor submitted the qualifying proposal, the profit allowed on the contract shall accurately reflect the cost risk of the contractor as such risk existed on the date the contractor submitted the qualifying proposal;

(b) Any reduced cost risk to the contractor for costs expected to be incurred during performance of the remainder of the contract after negotiation of the final price; and

(c) The requirements at 215.404-71-3(d)(2). The risk assessment shall be documented in the price negotiation memorandum.

Sections it refers to

Sections that refer to it

  • 215.404-71-3 Contract type risk and working capital adjustment.

← 217.7404-5 Exceptions. · 217.7405 Plans and reports. →

Rule changes for DFARS Part 217

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

DFARS 217.7404-6 Allowable profit · SpendQuery