§ 3750. Proceeding costs not allowable

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(a)Definitions.— In this section:

(1)Costs.— The term “costs”, with respect to a proceeding—

(A)means all costs incurred by a contractor or subcontractor, or personal services contractor, whether before or after the commencement of any such proceeding; and

(B)includes—

(i)administrative and clerical expenses;

(ii)the cost of legal services, including legal services performed by an employee of the contractor or subcontractor, or personal services contractor;

(iii)the cost of the services of accountants and consultants retained by the contractor or subcontractor, or personal services contractor; and

(iv)the pay of directors, officers, and employees of the contractor or subcontractor, or personal services contractor for time devoted by such directors, officers, and employees to such proceeding.

(2)Penalty.— The term “penalty” does not include restitution, reimbursement, or compensatory damages.

(3)Proceedings.— The term “proceeding” includes an investigation.

(b)In General.— Except as otherwise provided in this section, costs incurred by a contractor or subcontractor, or personal services contractor in connection with any criminal, civil, or administrative proceeding commenced by the United States, by a State, or by a contractor or subcontractor, or personal services contractor employee submitting a complaint under section 4701 of this title are not allowable as reimbursable costs under a covered contract, subcontract, or personal services contract if the proceeding—

(1)relates to a violation of, or failure to comply with, a Federal or State statute or regulation or to any other activity described in section 4701(a)(1) of this title; and

(2)results in a disposition described in subsection (c).

(c)Covered Dispositions.— A disposition referred to in subsection (b)(2) is any of the following:

(1)In the case of a criminal proceeding, a conviction (including a conviction pursuant to a plea of nolo contendere) by reason of the violation or failure referred to in subsection (b).

(2)In the case of a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of contractor or subcontractor, or personal services contractor liability on the basis of the violation or failure referred to in subsection (b).

(3)In the case of any civil or administrative proceeding, the imposition of a monetary penalty or an order to take corrective action under section 4701 of this title by reason of the violation or failure referred to in subsection (b).

(4)A final decision—

(A)to debar or suspend the contractor or subcontractor, or personal services contractor;

(B)to rescind or void the contract, subcontract, or personal services contract; or

(C)to terminate the contract, subcontract, or personal services contract for default;

by reason of the violation or failure referred to in subsection (b).

(5)A disposition of the proceeding by consent or compromise if such action could have resulted in a disposition described in paragraphs (1), (2), (3), or (4).

(d)Costs Allowed by Settlement Agreement in Proceeding Commenced by United States.— In the case of a proceeding referred to in subsection

(b)that is commenced by the United States and is resolved by consent or compromise pursuant to an agreement entered into by a contractor or subcontractor, or personal services contractor and the United States, the costs incurred by the contractor or subcontractor, or personal services contractor in connection with such proceeding that are otherwise not allowable as reimbursable costs under such subsection may be allowed to the extent specifically provided in such agreement.

(e)Costs Specifically Authorized in Proceeding Commenced by State.— In the case of a proceeding referred to in subsection

(b)that is commenced by a State, the head of the agency or Secretary of the military department concerned that awarded the covered contract, subcontract, or personal services contract involved in the proceeding may allow the costs incurred by the contractor or subcontractor, or personal services contractor in connection with such proceeding as reimbursable costs if the agency head or Secretary determines, in accordance with the Federal Acquisition Regulation, that the costs were incurred as a result of

(1)a specific term or condition of the contract, subcontract, or personal services contract, or

(2)specific written instructions of the agency or military department.

(f)Other Allowable Costs.—

(1)In general.— Except as provided in paragraph (3), costs incurred by a contractor or subcontractor, or personal services contractor in connection with a criminal, civil, or administrative proceeding commenced by the United States or a State in connection with a covered contract, subcontract, or personal services contract may be allowed as reimbursable costs under the contract, subcontract, or personal services contract if such costs are not disallowable under subsection (b), but only to the extent provided in paragraph (2).

(2)Amount of Allowable Costs.—

(A)Maximum amount allowed.— The amount of the costs allowable under paragraph

(1)in any case may not exceed the amount equal to 80 percent of the amount of the costs incurred, to the extent that such costs are determined to be otherwise allowable and allocable under the Federal Acquisition Regulation.

(B)Content of regulations.— Regulations issued for the purpose of subparagraph

(A)shall provide for appropriate consideration of—

(i)the complexity of procurement litigation;

(ii)generally accepted principles governing the award of legal fees in civil actions involving the United States as a party; and

(iii)such other factors as may be appropriate.

(3)When otherwise allowable costs are not allowable.— In the case of a proceeding referred to in paragraph (1), contractor or subcontractor, or personal services contractor costs otherwise allowable as reimbursable costs under this subsection are not allowable if—

(A)such proceeding involves the same contractor or subcontractor, or personal services contractor misconduct alleged as the basis of another criminal, civil, or administrative proceeding; and

(B)the costs of such other proceeding are not allowable under subsection (b).

(Added and amended Pub. L. 116–283, div. A, title XVIII, § 1832(a), (i), Jan. 1, 2021, 134 Stat. 4218, 4222; Pub. L. 117–81, div. A, title XVII, § 1701(b)(11), Dec. 27, 2021, 135 Stat. 2134.)

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