Even though the Federal Acquisition Regulations (FAR) specifically state that interest is not an allowable cost, there are certain circumstances in which some or even all interest can be reimbursed. One example is the facilities capital cost of money (FCCM).

FCCM is an imputed cost related to the cost of contractor capital committed to facilities. Cost Accounting Standards Chapter 414 provides detailed guidance on calculating the amount due under a specific contract. FCCM is calculated by multiplying the net book value of the business facilities investment, including land, by a cost of money rate based on the interest rates specified semi-annually by the Secretary of the Treasury under Public Law 92-41. The rate for the first half of 2015 was 2.125 percent and it was raised to 2.375 percent for the second half of 2015.

Since FCCM is not technically considered interest, you don’t have to actually borrow money to be entitled to the reimbursement.

To be eligible for reimbursement, the estimated FCCM must be specifically identified or proposed in cost proposals relating to the contract under which the cost is to be claimed. If it is not included in a commercial contract that is subject to the FAR, it will be presumed unallowable.

DD form 1061 can be used to calculate FCCM.  The electronic version is available here.

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If you have any questions or comments about this topic, please contact David E. Shaffer, Director, Government Contracting Industry Group, at Email or 215-441-4600.

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