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FAR and DFARS › FAR Part 31: Contract Cost Principles and Procedures › Subpart 31.1

FAR 31.103 Contracts with commercial organizations.

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 explains that contracts with commercial organizations for supplies, services, or experimental, developmental, or research work are subject to the cost principles in FAR Subpart 31.2 and agency supplements. It matters because these principles must be used when pricing such contracts and incorporated by reference as the basis for determining reimbursable costs, negotiating indirect rates, and handling terminations, price revisions, and modifications.

Applies to: Contracts and contract modifications with commercial organizations (other than educational institutions, construction and architect-engineer contracts, State and local governments, and nonprofit organ

What it requires

  • Use the cost principles and procedures in subpart 31.2 and agency supplements when pricing negotiated supply, service, experimental, developmental, and research contracts and modifications with commercial organizations whenever cost analysis is performed as required by 15.404-1(c).
  • Incorporate the cost principles and procedures in subpart 31.2 and agency supplements by reference in contracts with commercial organizations as the basis for determining reimbursable costs, negotiating indirect cost rates, proposing/negotiating/determining costs under terminated contracts, price re

Key terms: commercial organizations · cost principles and procedures · subpart 31.2 · cost analysis · cost-reimbursement contracts

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

The text

This category includes all contracts and contract modifications for supplies, services, or experimental, developmental, or research work negotiated with organizations other than educational institutions (see 31.104), construction and architect-engineer contracts (see 31.105), State and local governments (see 31.107) and nonprofit organizations (see 31.108) on the basis of cost.

(a) The cost principles and procedures in subpart 31.2 and agency supplements shall be used in pricing negotiated supply, service, experimental, developmental, and research contracts and contract modifications with commercial organizations whenever cost analysis is performed as required by 15.404-1(c).

(b) In addition, the contracting officer shall incorporate the cost principles and procedures in subpart 31.2 and agency supplements by reference in contracts with commercial organizations as the basis for—

(1) Determining reimbursable costs under (i) cost-reimbursement contracts and cost-reimbursement subcontracts under these contracts performed by commercial organizations and (ii) the cost-reimbursement portion of time-and-materials contracts except when material is priced on a basis other than at cost (see 16.601(c)(3));

(2) Negotiating indirect cost rates (see subpart 42.7);

(3) Proposing, negotiating, or determining costs under terminated contracts (see 49.103 and 49.113);

(4) Price revision of fixed-price incentive contracts (see 16.204 and 16.403);

(5) Price redetermination of price redetermination contracts (see 16.205 and 16.206); and

(6) Pricing changes and other contract modifications.

Sections it refers to

  • 31.104 Contracts with educational institutions.
  • 31.105 Construction and architect-engineer contracts.
  • 31.107 Contracts with State, local, and federally recognized Indian tribal governments.
  • 31.108 Contracts with nonprofit organizations.
  • 15.404-1 Proposal analysis techniques.
  • 16.601 Time-and-materials contracts.
  • 49.103 Methods of settlement.
  • 49.113 Cost principles.
  • 16.204 Fixed-price incentive contracts.
  • 16.403 Fixed-price incentive contracts.
  • 16.205 Fixed-price contracts with prospective price redetermination.
  • 16.206 Fixed-ceiling-price contracts with retroactive price redetermination.

← 31.102 Fixed-price contracts. · 31.104 Contracts with educational institutions. →

Rule changes for FAR Part 31

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

FAR 31.103 Contracts with commercial organizations · SpendQuery