[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: 48CFR31.603]

[Page 619-620]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents
 
  Subpart 31.6--Contracts With State, Local, and Federally Recognized 
                        Indian Tribal Governments
 
Sec. 31.603  Requirements.

    (a) Contracts that refer to this subpart 31.6 for determining 
allowable costs under contracts with State, local and Indian tribal 
governments shall be deemed to refer to, and shall have the allowability 
of costs determined by the contracting officer in accordance with, the 
revision of OMB Circular A-87 which is in effect on the date of the 
contract.
    (b) Agencies are not expected to place additional restrictions on 
individual items of cost. However, under 10 U.S.C. 2324(e) and 41 U.S.C. 
256(e), the following costs are unallowable:
    (1) Costs of entertainment, including amusement, diversion, and 
social activities, and any costs directly associated with such costs 
(such as tickets to shows or sports events, meals, lodging, rentals, 
transportation, and gratuities).
    (2) Costs incurred to influence (directly or indirectly) legislative 
action on any matter pending before Congress, a State legislature, or a 
legislative body of a political subdivision of a State.
    (3) Costs incurred in defense of any civil or criminal fraud 
proceeding or similar proceeding (including filing of any false 
certification) brought by the United States where the contractor is 
found liable or has pleaded nolo contendere to a charge of fraud or 
similar proceeding (including filing of a false certification).
    (4) Payments of fines and penalties resulting from violations of, or 
failure to comply with, Federal, state, local, or foreign laws and 
regulations, except when incurred as a result of compliance with 
specific terms and conditions of the contract or specific written 
instructions from the contracting officer authorizing in advance such 
payments in accordance with applicable regulations in the FAR or an 
executive agency supplement to the FAR.
    (5) Costs of any membership in any social, dining, or country club 
or organization.
    (6) Costs of alcoholic beverages.
    (7) Contributions or donations, regardless of the recipient.
    (8) Costs of advertising designed to promote the contractor or its 
products.
    (9) Costs of promotional items and memorabilia, including models, 
gifts, and souvenirs.
    (10) Costs for travel by commercial aircraft which exceed the amount 
of the standard commercial fare.
    (11) Costs incurred in making any payment (commonly known as a 
``golden parachute payment'') which is--
    (i) In an amount in excess of the normal severance pay paid by the 
contractor to an employee upon termination of employment; and
    (ii) Is paid to the employee contingent upon, and following, a 
change in management control over, or ownership of, the contractor or a 
substantial portion of the contractor's assets.
    (12) Costs of commercial insurance that protects against the costs 
of the contractor for correction of the contractor's own defects in 
materials or workmanship.
    (13) Costs of severance pay paid by the contractor to foreign 
nationals employed by the contractor under a service contract performed 
outside the United States, to the extent that the amount of the 
severance pay paid in

[[Page 620]]

any case exceeds the amount paid in the industry involved under the 
customary or prevailing practice for firms in that industry providing 
similar services in the United States, as determined by regulations in 
the FAR or in an executive agency supplement to the FAR.
    (14) Costs of severance pay paid by the contractor to a foreign 
national employed by the contractor under a service contract performed 
in a foreign country if the termination of the employment of the foreign 
national is the result of the closing of, or curtailment of activities 
at, a United States facility in that country at the request of the 
government of that country.
    (15) Costs incurred by a contractor in connection with any criminal, 
civil, or administrative proceedings commenced by the United States or a 
State, to the extent provided in 10 U.S.C. 2324(k) or 41 U.S.C. 256(k).

[48 FR 42301, Sept. 19, 1983, as amended at 42660, Aug. 16, 1995]