[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR31.109]

[Page 573-574]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents
 
                       Subpart 31.1--Applicability
 
Sec. 31.109  Advance agreements.

    (a) The extent of allowability of the costs covered in this part 
applies broadly to many accounting systems in varying contract 
situations. Thus, the reasonableness, the allocability and the 
allowability under the specific cost principles at subparts 31.2, 31.3, 
31.6, and 31.7 of certain costs may be difficult to determine. To avoid 
possible subsequent disallowance or dispute based on unreasonableness, 
unallocability or unallowability under the specific cost principles at 
subparts 31.2, 31.3, 31.6, and 31.7, contracting officers and 
contractors should seek advance agreement on the treatment of special or 
unusual costs. However, an advance agreement is not an absolute 
requirement and the absence of an advance agreement on any cost will 
not, in itself, affect the reasonableness, allocability or the 
allowability under the specific cost principles at subparts 31.2, 31.3, 
31.6, and 31.7 of that cost.
    (b) Advance agreements may be negotiated either before or during a 
contract but should be negotiated before incurrence of the costs 
involved. The agreements must be in writing, executed by both 
contracting parties, and incorporated into applicable current and future 
contracts. An advance agreement shall contain a statement of its 
applicability and duration.
    (c) The contracting officer is not authorized by this 31.109 to 
agree to a treatment of costs inconsistent with this part. For example, 
an advance agreement may not provide that, notwithstanding 31.205-20, 
interest is allowable.
    (d) Advance agreements may be negotiated with a particular 
contractor for a single contract, a group of contracts, or all the 
contracts of a contracting office, an agency, or several agencies.
    (e) The cognizant administrative contracting officer (ACO), or other 
contracting officer established in part 42, shall negotiate advance 
agreements except that an advance agreement affecting only one contract, 
or class of contracts from a single contracting office, shall be 
negotiated by a contracting officer in the contracting office, or an ACO 
when delegated by the contracting officer. When the negotiation 
authority is delegated, the ACO shall coordinate the proposed agreement 
with the contracting officer before executing the advance agreement.
    (f) Before negotiating an advance agreement, the Government 
negotiator shall--

[[Page 574]]

    (1) Determine if other contracting offices inside the agency or in 
other agencies have a significant unliquidated dollar balance in 
contracts with the same contractor;
    (2) Inform any such office or agency of the matters under 
consideration for negotiation; and
    (3) As appropriate, invite the office or agency and the responsible 
audit agency to participate in prenegotiation discussions and/or in the 
subsequent negotiations.
    (g) Upon completion of the negotiation, the sponsor shall prepare 
and distribute to other interested agencies and offices, including the 
audit agency, copies of the executed agreement and a memorandum 
providing the information specified in 15.406-3, as applicable.
    (h) Examples of costs for which advance agreements may be 
particularly important are--
    (1) Compensation for personal services, including but not limited to 
allowances for off-site pay, incentive pay, location allowances, 
hardship pay, cost of living differential, and termination of defined 
benefit pension plans;
    (2) Use charges for fully depreciated assets;
    (3) Deferred maintenance costs;
    (4) Precontract costs;
    (5) Independent research and development and bid and proposal costs;
    (6) Royalties and other costs for use of patents;
    (7) Selling and distribution costs;
    (8) Travel and relocation costs, as related to special or mass 
personnel movements, as related to travel via contractor-owned, -leased, 
or -chartered aircraft, or as related to maximum per diem rates;
    (9) Costs of idle facilities and idle capacity;
    (10) Severance pay to employees on support service contracts;
    (11) Plant reconversion;
    (12) Professional services (e.g., legal, accounting, and 
engineering);
    (13) General and administrative costs (e.g., corporate, division, or 
branch allocations) attributable to the general management, supervision, 
and conduct of the contractor's business as a whole. These costs are 
particularly significant in construction, job-site, architect-engineer, 
facilities, and Government-owned contractor operated (GOCO) plant 
contracts (see 31.203(f));
    (14) Costs of construction plant and equipment (see 31.105(d)).
    (15) Costs of public relations and advertising; and
    (16) Training and education costs (see 31.205-44(h)).

[48 FR 42301, Sept. 19, 1983, as amended at 51 FR 12298, Apr. 9, 1986; 
51 FR 27489, July 31, 1986; 52 FR 9038, Mar. 20, 1987; 52 FR 27806, July 
24, 1987; 54 FR 34755, Aug. 21, 1989; 59 FR 67045, Dec. 28, 1994; 61 FR 
69288, Dec. 31, 1996; 62 FR 51271, Sept. 30, 1997; 63 FR 9061, Feb. 23, 
1998]