DFARS Cost Principles Revisions

Pursuant to a legislative requirement, GAO evaluated substantive changes to the Department of Defense's (DOD) regulations concerning allowable costs on certain DOD contracts. GAO noted that: (1) legislation permits waiver of foreign national severance pay restrictions under certain conditions and the interim Defense Federal Acquisition Regulation Supplement (DFARS) is consistent with the legislation; (2) legislation prohibits DOD from obligating appropriated funds to assist a contractor in preparing any material on the estimated economic or employment impact of an acquisition program when research, development, testing, and evaluation has not been completed; (3) legislation has changed the criteria under which a contractor incurs a penalty for submitting unallowable costs and provided for a waiver of the penalty under certain conditions; and (4) the revised DFARS rule on submission of unallowable costs states that the cost must be specifically unallowable under federal acquisition regulation or DFARS for penalty assessment, incorporates the revised penalty amounts, and provides for penalty waiver under specified conditions.