Authority/Reference(s) Uniform Grant Guidance §200.402-11 and §200.420
Revision Date September 7, 2018


In accordance with federal and state guidelines, DFPS reimburses its contractors for only costs that are allowable. The Contract Manager is responsible for determining, or securing a determination, as to whether costs are allowable.

Allowable costs must meet the following criteria:

  • Be reasonable, allocable, and necessary for the performance of the contract;
  • Conform to any limitations or exclusions set forth in applicable cost guidelines, principles, and definitions;
  • Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization;
  • Be treated consistently with other costs incurred for the same purpose in like circumstances;
  • Be determined in accordance with Generally Accepted Accounting Principles (GAAP);
  • Not be included as a cost or be used to meet the match requirements of any other federally-financed program in either the current or a prior period; and
  • Be adequately documented.

For further guidance, Contract Managers should refer to the Uniform Grant Guidelines (UGG) at 2 CFR §200.400 for allowable (and unallowable costs).


The following considerations should be used in determining the reasonableness of a given cost:

  • Any restraints or requirements imposed by generally accepted sound business practices, arms-length bargaining, federal and state laws and regulations, and terms and conditions of the contract;
  • Whether the individuals concerned acted with prudence in the circumstances, considering their responsibilities to the organization; it members, employees and clients; the public at large; and the government; and
  • Significant deviations from the established practices of the organization which may unjustifiably increase the contract costs.

Allocable Costs

A cost is allocable if the goods or services involved are chargeable or assignable to the contract in accordance with relative benefits received.


A cost is necessary if it is reasonable for the performance of the contract and allocable under state or federal Cost Principles. A cost is also necessary if it is of a type generally recognized as ordinary and necessary for the operation of the contractor or the proper and efficient performance of the contract.