Now that we are done with Compensation for Personal Services, we can turn our attention to some more cost principles. Contingencies and Contributions are both straightforward, so we will touch on them both here.
FAR 31.205-7, Contingencies
My intro accounting students hear my lecture about contingencies – a possible future event arising from a presently known or unknown cause, the outcome of which is indeterminable at the present time. Liabilities for these contingencies may be established as the event becomes clearer, even though there is not an amount owed. Generally speaking, these costs are unallowable for Government contracting. Contingencies that arise from known and existing conditions where the effect can be reasonably determined should be included in the estimate of performance costs. Otherwise, contingencies should be excluded from cost estimates and disclosed separately.
FAR 31.205-8, Contributions or Donations
Except for the costs of participating in community service activities (made allowable under FAR 31.205-1), contributions and donations are unallowable. This exclusion includes cash, property, and services, regardless of who receives the donation or contribution.
FAR 31.205-9, [Reserved]
This is one of those times in the FAR where you are left to wonder whether or not someone was just having fun or if there was a reason for skipping a number. It could have been “nonaphobia.” Or, I could imagine the original meeting of the “FAR council of elders”…
Member 1: But we were told we had to have 10 of these things before Friday’s presentation.
Member 2: I just can’t think of anything off the top of my head… WAIT! What about Cost of Money!
Member 1: Yeah! Great idea, the only problem is, we only have 9 now.
Member 2: Oh, right.
Member 3: Just skip one and come back later.
Member 1: Can we do that?
Member 2: I don’t see why not.
Member 3: Besides, I never really liked 9 anyway. Let’s just call it “Reserved.”
Member 1: Done, let’s talk about number 10 – this Cost of Money thing…