Allowable Costs guidance

Contents: The price of a qualifying contract is determined in accordance with the formula: (Contract profit rate × Allowable Costs) + Allowable Costs. This part of the SSRO's guidance covers the Allowable Costs, whose requirements are set out in section 20.

Contents

• 1. Introduction to Allowable Costs

• 2. Application of the Allowable Costs guidance

• 3. The AAR principles

• Appropriate

• Attributable to the contract

• Reasonable in the circumstances

• 4. Cost accounting and financial reporting

• 5. Guidance on specific cost types

• A. Labour costs

• B. Material costs

• C. Sales, marketing, bid, entertainment and third party costs

• D. Research and development costs

• E. Costs associated with loss, poor performance or other events

• F. Exceptional or abnormal costs

• G. Non-cash and financing costs

• H. Risk and uncertainty