Regulation (EU) No 377/2014 of the European Parliament and of the CouncilShow full title

Article 20 U.K. Cost-reimbursement contracts

1. The contracting authority may opt for a full or partial cost-reimbursement contract up to a ceiling price, under the conditions laid down in paragraph 2.

The price to be paid for such contracts shall consist of reimbursement of all direct costs incurred by the contractor in performing the contract, such as expenditure on labour, materials, consumables, and use of the equipment and infrastructures necessary to perform the contract. These costs shall be increased by a fixed fee covering indirect costs and the profit, or a sum covering indirect costs and incentive fee compensation based on achieving objectives in respect of performance and delivery schedules.

2. The contracting authority may opt for a full or partial cost-reimbursement contract when it is objectively impossible to specify an accurate fixed price and if it can be reasonably shown that such a fixed price would be abnormally high due to the uncertainties inherent in performance of the contract because:

(a) the contract has very complex features or features which require the use of a new technology and, therefore, includes a significant number of technical risks; or

(b) the activities subject to the contract must, for operational reasons, start immediately even though it is not yet possible to determine a firm fixed price in full due to significant risks or because the performance of the contract depends in part on the performance of other contracts.

3. The ceiling price for a full or partial cost-reimbursement contract shall be the maximum price payable. It may only be exceeded in duly justified exceptional circumstances subject to prior agreement by the contracting authority.

4. The tender documents of a procurement procedure for a full or partial cost-reimbursement contract shall specify:

(a) the type of contract, namely whether it is a full or partial cost-reimbursement contract up to a ceiling price;

(b) for a partial cost-reimbursement contract, the elements of the contract subject to cost-reimbursement;

(c) the total ceiling price;

(d) the award criteria, which must enable evaluation of the plausibility of the estimated overall budget, the reimbursable costs, the mechanisms for determining these costs, and the profit referred to in the tender to be evaluated;

(e) the mechanics of the increase referred to in paragraph 1 to be applied to direct costs;

(f) the rules and procedures which determine the eligibility of the costs planned by the tenderer for the performance of the contract, in accordance with the principles set out in paragraph 5;

(g) the accounting rules with which tenderers must comply;

(h) in the case of a partial cost-reimbursement contract to be converted into a firm fixed-price contract, the parameters for such conversion.

5. The costs declared by the contractor during the performance of a full or partial cost-reimbursement contract shall only be eligible if they:

(a) are actually incurred in the course of the contract, with the exception of costs for equipment, infrastructures and intangible fixed assets necessary for performance of the contract which may be deemed eligible for the whole of their purchase value;

(b) are referred to in the estimated overall budget which may be revised by amendments to the initial contract;

(c) are necessary for the performance of the contract;

(d) result from and are attributable to the performance of the contract;

(e) are identifiable, verifiable, recorded in the contractor's accounting record and determined in accordance with the accounting standards referred to in the specifications and in the contract;

(f) comply with the requirements of applicable tax and social law;

(g) do not derogate from the terms of the contract;

(h) are reasonable, justified, and comply with the requirements of sound financial management, in particular regarding economy and efficiency.

The contractor shall be responsible for its own cost accounting, and for keeping sound accounting records or any other document required to show that the costs for which reimbursement is requested have been incurred and comply with the principles set out in this Article. Costs which cannot be substantiated by the contractor shall be deemed ineligible and their reimbursement shall be refused.

6. The contracting authority shall be responsible for the following tasks in order to ensure correct performance of cost-reimbursement contracts:

(a) determining the most realistic possible ceiling price, while providing the necessary flexibility to account for technical difficulties;

(b) converting a partial cost-reimbursement contract into a full firm fixed-price contract as soon as it is possible to determine such a firm fixed-price during performance of the contract. For this reason, it shall determine the conversion parameters to convert a contract concluded on a cost-reimbursement basis to a firm fixed-price contract;

(c) implementing monitoring and control measures which provide, in particular, an estimated cost forecast system;

(d) determining suitable principles, tools and procedures for the implementation of contracts, in particular for identifying and checking the eligibility of costs declared by the contractor or its subcontractors during the performance of the contract, and for entering amendments to the contract;

(e) checking that the contractor and its subcontractors comply with the accounting standards stipulated in the contract and with the obligation to provide their accounting documents which should present a true and fair view of the accounts;

(f) throughout performance of the contract, continuously ensuring the effectiveness of the principles, tools and procedures referred to in point (d).