On February 17, 2016 the FAR Council proposed to amend the FAR to implement Section 857 of the National Defense Authorization Act for Fiscal Year 2015 (NDAA 2015). Section 857 of NDAA 2015 amended 10 U.S.C. § 2324(e)(1) to make unallowable “[c]osts incurred by a contractor in connection with a congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition,” such as a criminal conviction, a determination of contractor civil liability for fraud, a penalty for whistleblower reprisal, suspension or debarment, rescission of a contract, termination of a contract for default, or a settlement of an action that might have resulted in any of these penalties. 10 U.S.C. § 2324(e)(1)(Q), (k)(2). The proposed rule would amend FAR 31.205-47 to add as unallowable those costs incurred in any congressional investigation or inquiry that is associated with a criminal conviction, suspension or debarment, termination for default, etc., the costs of which are already unallowable under FAR 31.205-47. Even though Section 857 of NDAA 2015 applies only to DoD, NASA, and Coast Guard contracts, the proposed rule would make Section 857 applicable to all agencies subject to the FAR.
While this particular change is restricted to the FAR, nonprofits should keep a wary eye on whether a similar change is made to the Uniform Guidance’s Cost Principles, which currently provide that certain types of costs associated with congressional inquiries are allowable. See 2 C.F.R. § 200.450.