Growing Your Government Business
What Is a Cost-Reimbursement Government Contract?
Understand allowable-cost payment, funding limits, accounting needs, and why not every expenditure is reimbursable.
Payment for prescribed allowable costs
A cost-reimbursement contract provides for payment of allowable incurred costs under its terms. Contract varieties and fee arrangements differ. It does not reimburse every expense a company chooses to incur.
Review the operating requirements
- 01Read cost allowability, funding, fee, and notification clauses.
- 02Evaluate accounting and timekeeping suitability.
- 03Distinguish direct, indirect, and unallowable costs consistently.
- 04Track funding and any limits on performance or reimbursement.
- 05Establish supporting records and oversight responsibilities.
Do not treat funding as unlimited
Ceilings, approvals, and required notifications can materially affect performance. Review when work must stop or when additional authorization is needed rather than assuming costs will be accepted later.
Price and manage responsibly
Estimate costs realistically, understand the buyer's cost analysis or realism approach, and maintain records supporting charges. Accounting infrastructure can be important before award, not only after an invoice is rejected.
Use qualified finance and contracts advice for complex arrangements. The contract's terms determine payment and risk; the label alone does not guarantee profitability or full cost recovery.
Official sources
Check current instructions and requirements directly with the relevant agency.
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This guide is provided for general informational purposes only and does not constitute legal or compliance advice. Specific obligations depend on your contracts and the data you handle.