Request for Advance Decision

The Rocky Mountain Region, Federal Aviation Administration (FAA) requested an opinion as to whether certain costs incurred under contracts awarded pursuant to two grant projects of the Airport Development Aid Program (ADAP) were payable. Portions of the engineering contracts for the projects were based on a cost-plus-percentage-of-cost (CPPC) method of contracting. Appendix M of the Federal Aviation Regulations states that the CPPC method of contracting will not be used in connection with ADAP projects. The FAA advised that at the time the contracts were approved, the contracts contained a "not to exceed" cost limitation and, therefore, it was concluded they were not CPPC type contracts. The presence of a cost limitation in the contract does not save the contract from violating the prohibition contained in the FAA regulations. As FAA determined the costs in question to be fair and reasonable and the Government received the benefit of the service, the costs may be paid.