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Reasonable cost

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Definition Edit

Reasonable cost is a

[c]ost which, in its nature and amount, does not exceed that which would be incurred by a prudent person in the conduct of a competitive business.[1]

Overview Edit

"In determining reasonableness of a specific cost, the contracting officer (CO) shall consider:

(a) Whether it is the type of cost generally recognized as ordinary and necessary for the conduct of a contractor's business or the contract performance;
(b) Generally accepted sound business practices, arm's length bargaining, and federal and state laws and regulations;
(c) The contractor's responsibilities to the government, other customers, the owners of the business, employees, and public at large; and
(d) Any significant deviation from the contractor's established practices."[2]

References Edit

  1. Department of Defense, Glossary of Defense Acquisition Acronyms and Terms (14th ed. July 2011) (full-text).
  2. Defense Acquisition University, Glossary, at B-152, B-153 (13th ed. Nov. 2009) (full-text).

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