DFARS Part 231: Contract Cost Principles and Procedures

In plain English

DFARS Part 231 implements and supplements the FAR cost principles for DoD contracts, covering selected costs, IR&D/B&P, insurance, lobbying, restructuring, and counterfeit parts. It matters because it determines which costs contractors can recover and imposes specific allowability conditions and clauses.

Key rules

• Use the clause at 252.231-7000, Supplemental Cost Principles, in all solicitations and contracts subject to FAR subpart 31.1, 31.2, 31.6, or 31.7. (231.100-70)
• Unallowable public relations and advertising costs include monies paid to the Government for leasing Government equipment, such as lease payments and reimbursement for support services, except for foreign military sales contracts as provided at 225.7303-2. (231.205-1)
• Costs for bonuses or other payments in excess of normal salary that are part of restructuring costs associated with a business combination are unallowable under DoD contracts funded by fiscal year 1996 or subsequent appropriations; this does not apply to severance or early retirement incentive payments. (231.205-6)
• Fringe benefit costs that are contrary to law, employer-employee agreement, or an established policy of the contractor are unallowable. (231.205-6)
• For IR&D and B&P costs, a covered contract is a DoD prime contract or subcontract exceeding the simplified acquisition threshold, except fixed-price contracts without cost incentives; a covered segment is a product division that allocated more than $1,100,000 in IR&D and B&P costs to covered contracts in the preceding fiscal year; and a major contractor is one whose covered segments allocated a to (231.205-18)
• Departments and agencies shall not supplement the regulation in any way that limits IR&D or B&P cost allowability. (231.205-18)
• Self-insurance and purchased insurance costs are subject to the requirements of the clauses at 252.217-7012, Liability and Insurance, and 252.228-7001, Ground and Flight Risk. (231.205-19)
• Costs associated with preparing any material, report, list, or analysis on the actual or projected economic or employment impact in a particular State or congressional district of an acquisition program for which all research, development, testing, and evaluation has not been completed are unallowable. (231.205-22, 231.303, 231.603, 231.703)

Who does what

In practice

• When bidding, ensure you understand which costs are allowable and unallowable under DFARS Part 231, especially for IR&D, B&P, insurance, and restructuring.
• If you have counterfeit electronic parts, you must have an approved detection system and provide timely notice to avoid unallowable costs.
• For institutions of higher education, indirect cost reimbursement is protected from certain limitations unless applied uniformly.

Common pitfalls

• Assuming all bonuses are allowable; restructuring-related bonuses in excess of normal salary are unallowable under DoD contracts funded by FY1996 or later appropriations.
• Failing to provide timely notice (within 60 days) of counterfeit electronic parts to the contracting officer and GIDEP, which can make related costs unallowable.
• Charging public relations and advertising costs that include monies paid to the Government for leasing Government equipment, which are unallowable except for foreign military sales contracts.

Written by AI from this part's codified text (2026-10-04); cited sections are checked against the part. A guide, not legal advice: the regulation text, the solicitation and your contract rule.