An Allowable Cost (FAR 31.201) must be: (1) reasonable in nature and amount, (2) allocable to the contract, (3) in accordance with GAAP and contract terms, and (4) not specifically prohibited. Unallowable costs include entertainment, alcohol, fines/penalties, and lobbying.
is a metric concept federal contractors and grant writers run into across solicitations, regulations, and award filings
Allowable Cost is a measurement used in federal contract evaluation, source selection, oversight, or performance management. Understanding Allowable Cost matters because evaluators use metrics like it to compare proposals quantitatively, score past performance, set award-fee outcomes, and decide who gets the next option year. Contractors who track how Allowable Cost is calculated — and what target values look like in their NAICS or service area — write proposals that are concrete and defensible instead of generic and easily dismissed. Allowable Cost also has implications for contract administration: getting the calculation methodology wrong post-award is a common source of disputes and contracting-officer modifications. Pair Allowable Cost with the related metrics above to see how the federal government composes evaluation criteria into source-selection narratives.
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