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    Government Contracting Database

    Reasonable Cost

    Previously, a contractor’s incurred costs were entitled to a presumption of reasonableness, and the government bore the burden of proving that the costs were unreasonable. See Bruce Constr. Corp. v. United States, 324 F.2d 516, 519 (Ct.Cl.1963). This presumption, however, was superseded in 1987 by an amendment to FAR 31.201–3. See 52 Fed. Reg. 19,800, 19,804 (May 27, 1987) (codified at FAR 31.201–3); see Ace Constructors, Inc. v. United States, 70 Fed.Cl. 253, 275 (2006); George Sollitt Constr. Co. v. United States, 64 Fed.Cl. 229, 245 (2005). The current version of FAR 31.201–3 squarely acknowledges the lack of that presumption and imposes on the contractor the burden of proof of reasonableness. See FAR 31.201–3(a) (“No presumption of reasonableness shall be attached to the incurrence of costs by a contractor…. [T]he burden of proof shall be upon the contractor to establish that such cost is reasonable.”); see also Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 767 (Fed.Cir.1987) (“The government was under no obligation to present evidence attacking an item if [the contractor] did not prove prima facie that it was properly included.”); Thermalon Indus., Ltd. v. United States, 51 Fed.Cl. 464, 472 (2002); McDonnell Douglas Corp. v. United States, 40 Fed.Cl. 529, 536 (1998), rev’d on other grounds, 182 F.3d 1319 (Fed.Cir.1999); Fiber Materials, Inc., ASBCA No. 53616, 07–1 BCA ¶ 33,563, 2007 WL 1252481 (Apr. 17, 2007). Thus, the plaintiff’s burden is to prove by a preponderance of evidence the reasonableness of its claimed costs.

    FAR 31.201–3 affords the court significant discretion in determining whether claimed costs are reasonable and sets forth a non-exhaustive list of circumstances to be considered. See FAR 31.201–3(b)(1)–(4). Despite this guidance, case law in which a court or the Armed Services Board of Contract Appeals (the “ASBCA”) has exercised its discretion and evaluated the reasonableness of a claimed cost in similar circumstances is limited.

    Kellogg Brown & Root Servs., Inc. v. United States, 107 Fed. Cl. 16, 38–39 (2012), aff’d, 742 F.3d 967 (Fed. Cir. 2014).

    Updated: August 3, 2018

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