10 U.S.C. § 3322 — Cost contracts

**(a) Cost-plus-a-percentage-of-cost System of Contracting Prohibited.—** The cost-plus-a-percentage-of-cost system of contracting may not be used. **(b) Cost-plus-a-fixed-fee Contracts.—** The fee for performing a cost-plus-a-fixed-fee contract for experimental, developmental, or research work may not be more than 15 percent of the estimated cost of the contract, not including the fee. The fee for performing a cost-plus-a-fixed-fee contract for architectural or engineering services for a public work or utility plus the cost of those services to the contractor may not be more than 6 percent of the estimated cost of that work or project, not including fees. The fee for performing any other cost-plus-a-fixed-fee contract may not be more than 10 percent of the estimated cost of the contract, not including the fee. Determinations under this subsection of the estimated costs of a contract or project shall be made by the head of the agency at the time the contract is made. **(c) Advance Notice of Certain Subcontracts.—** (1) **In general.—** — Except as provided in paragraph (2), each cost contract and each cost-plus-a-fixed-fee contract shall provide for notice to the agency by the contractor before the making, under the prime contract, of— (A) a cost-plus-a-fixed-fee subcontract; or (B) a fixed-price subcontract or purchase order involving more than the greater of (i) the simplified acquisition threshold, or (ii) 5 percent of the estimated cost of the prime contract. (2) **Exception.—** — Paragraph (1) shall not apply to a prime contract with a contractor that maintains a purchasing system approved by the contracting officer for the contract. **(d) Limitation on Certain Options.—** (1) **In general.—** — Except as provided by paragraph (2), a covered contract shall limit the number of low-rate production lots for any production quantities procured using fixed-priced options under such covered contract to not more than one. (2) **Waiver.—** (A) *In general.—* — The service acquisition executive of the military department concerned or, in the case of program that is a joint program, the Secretary of Defense may waive the limit required under paragraph (1) with respect to the number of low-rate production lots for a production quantity under a covered contract if such service acquisition executive or the Secretary of Defense, as applicable, determines that such waiver is in the best interest of the Department of Defense. (B) *Delegation limit.—* — Neither a service acquisition executive nor the Secretary of Defense may delegate the authority under subparagraph (A) to waive the limit required under paragraph (1) below the level of a service acquisition executive. (3) **Definitions.—** — In this subsection: (A) The term “covered contract” means a cost reimbursement contract for the development of a major system. (B) The term “low-rate initial production” has the same meaning as in [section 4231 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title10-section4231&num=0&edition=prelim). (C) The term “major system” has the meaning given such term in [section 3041 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title10-section3041&num=0&edition=prelim).