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Precontract Costs SOP

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This SOP has internal roles only.

This standard operating procedure (SOP) includes the following sections: Purpose, Procedure, Contacts, and Links.


To enable costs to be incurred before a contract's effective date—after the negotiation and in anticipation of a contract award—when necessary to comply with its delivery schedule.


Precontract costs are costs that would normally be allowed after the effective date of the contract.

The contracting officer and contractor must agree on the treatment of precontract costs before they are incurred. This agreement must be in writing, signed by both parties, and incorporated into the final contract.


  • Before costs are incurred, request approval for precontract costs from your contracting officer. This request must include rationale to support precontract costs, the total amount requested, and the time period covered.
  • If contracting officer approves precontract costs, sign the agreement letter.

Contracting Officers

  • Analyze information in contractor's request to determine whether precontract costs should be approved or disapproved.
  • Forward the request to a contracting officer's representative for technical review and determination of scientific necessity.
  • Discuss recommendation to approve or disapprove precontract costs with Office of Acquisitions (OA) director and obtain concurrence before moving forward with negotiations.
  • Once you have concurrence, negotiate with the prospective contractor, discussing the duration for which the precontract costs will be required, the amount of costs to be incurred, and what the costs consist of.
  • Notify the cognizant NIAID administrative officer of the negotiated precontract costs.
  • Prepare an agreement letter that is bilaterally signed and included in the official contract file. The summary of negotiations must reflect the use of precontract costs.
  • Incorporate the advance agreement into the final contract document. The effective date cited in the contract should follow the period covered by any precontract costs. The contract's period of performance should not include the time covered by precontract costs.

Contracting Officer's Representatives

  • Review contractor's request for precontract costs and provide recommendations regarding the technical necessity of these costs.


See the Office of Acquisitions staff listing for the appropriate contract specialist.

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FAR 31.109, Advance agreements

FAR 31.205-32, Precontract costs

Sample Precontract Cost Agreement Letter


Last Updated June 16, 2015

Last Reviewed June 16, 2015