41 U.S.C. § 4304: Specific costs not allowable

Costs of entertainment, including amusement, diversion, and social activities, and any costs directly associated with those costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities). 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. Costs incurred in defense of any civil or criminal fraud proceeding or similar proceeding (including filing of any false certification) brought by the Federal Government where the contractor is found liable or had pleaded nolo contendere to a charge of fraud or similar proceeding (including filing of a false certification). 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 those payments in accordance with applicable provisions of the Federal Acquisition Regulation. Costs of membership in any social, dining, or country club or organization. Costs of alcoholic beverages. Contributions or donations, regardless of the recipient. Costs of advertising designed to promote the contractor or its products. Costs of promotional items and memorabilia, including models, gifts, and souvenirs. Costs for travel by commercial aircraft that exceed the amount of the standard commercial fare. in an amount in excess of the normal severance pay paid by the contractor to an employee on termination of employment; and paid to the employee contingent on, and following, a change in management control over, or ownership of, the contractor or a substantial portion of the contractor’s assets. Costs of commercial insurance that protects against the costs of the contractor for correction of the contractor’s own defects in materials or workmanship. 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 severance pay paid in 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 under the Federal Acquisition Regulation. 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 the curtailment of activities at, a Federal Government facility in that country at the request of the government of that country. Costs incurred by a contractor or subcontractor, or personal service 1 contractor in connection with any criminal, civil, or administrative proceeding commenced by the Federal Government or a State, to the extent provided in 1 So in original. Probably should be “services”. section 4310 of this title . 2 Costs of compensation of any contractor employee for a fiscal year, regardless of the contract funding source, to the extent that such compensation exceeds $625,000 adjusted annually for the U.S. Bureau of Labor Statistics Employment Cost Index for total compensation for private industry workers, by occupational and industry group not seasonally adjusted, except that the executive agency may establish exceptions for positions in the science, technology, engineering, mathematics, medical, and cybersecurity fields and other fields requiring unique areas of expertise upon a determination that such exceptions are needed to ensure that the executive agency has continued access to needed skills and capabilities. 2 So in original. Two pars. (16) have been enacted. 2 Costs of compensation of contractor and subcontractor employees for a fiscal year, regardless of the contract funding source, to the extent that such compensation exceeds $487,000 per year, adjusted annually to reflect the change in the Employment Cost Index for all workers, as calculated by the Bureau of Labor Statistics, except that the head of an executive agency may establish one or more narrowly targeted exceptions for scientists, engineers, or other specialists upon a determination that such exceptions are needed to ensure that the executive agency has continued access to needed skills and capabilities. the application of those provisions to that contract would adversely affect the continuation of a program, project, or activity that provides significant support services for employees of the executive agency posted outside the United States; the contractor has taken (or has established plans to take) appropriate actions within the contractor’s control to minimize the amount and number of incidents of the payment of severance pay by the contractor to employees under the contract who are foreign nationals; and the payment of severance pay is necessary to comply with a law that is generally applicable to a significant number of businesses in the country in which the foreign national receiving the payment performed services under the contract or is necessary to comply with a collective bargaining agreement. that a waiver has been granted under paragraph (1) for the contract; or whether the executive agency will consider granting a waiver and, if the executive agency will consider granting a waiver, the criteria to be used in granting the waiver. An executive agency shall make the final determination whether to grant a waiver under paragraph (1) with respect to a covered contract before award of the contract. The provisions of the Federal Acquisition Regulation implementing this chapter may establish appropriate definitions, exclusions, limitations, and qualifications. A submission by a contractor of costs that are incurred by the contractor and that are claimed to be allowable under Department of Energy management and operating contracts shall be considered a proposal for settlement of indirect costs incurred by the contractor for any period after those costs have been accrued. the Committee on Armed Services of the Senate; the Committee on Armed Services of the House of Representatives; the Committee on Homeland Security and Governmental Affairs of the Senate; the Committee on Oversight and Government Reform [now Committee on Oversight and Accountability] of the House of Representatives; the Committee on Appropriations of the Senate; and the Committee on Appropriations of the House of Representatives. the total number of contractor employees, by executive agency, in the narrowly targeted exception positions described under subsection (a) during the preceding fiscal year; the taxpayer-funded compensation amounts received by each contractor employee in a narrowly targeted exception position during such fiscal year; and the duties and services performed by contractor employees in the narrowly targeted exception positions during such fiscal year.” The costs of gifts or recreation for employees of a contractor or members of their families that are provided by the contractor to improve employee morale or performance or for any other purpose are not allowable under a covered contract unless, within 120 days after the date of the enactment of this Act [ Oct. 13, 1994 ], the Federal Acquisition Regulatory Council prescribes amendments to the Federal Acquisition Regulation specifying circumstances under which such costs are allowable under a covered contract. by inserting in the cost principle a statement that costs made specifically unallowable under that cost principle are not allowable under any other cost principle; and by striking out ‘(but see 31.205–1 and 31.205–13)’. The term ‘employee’ includes officers and directors of a contractor. The term ‘covered contract’ has the meaning given such term in section 2324( l ) of title 10, United States Code (as amended by section 2101(c) [2101(d)]), and section 306( l ) of the Federal Property and Administrative Services Act of 1949 (as added by section 2151) [see 41 U.S.C. 4301(2) ]. Any amendments to the Federal Acquisition Regulation made pursuant to subsection (a) shall apply with respect to costs incurred after the date on which the amendments made by section 2101 apply (as provided in section 10001 [set out as an Effective Date of 1994 Amendment note under section 2302 of Title 10 , Armed Forces]) or the date on which the amendments made by section 2151 apply (as provided in section 10001), whichever is later.”