GovCon Compliance
Allowable Cost
A cost that the government will reimburse under a cost-type contract because it satisfies all four FAR 31.201-2 tests: it is reasonable, it is allocable to the contract, it conforms to the Cost Accounting Standards or GAAP as applicable, and it complies with the terms of the contract and any limitations in FAR Subpart 31.2. Allowability is a contractual concept, not an accounting one. A cost can be properly recorded, fully documented, and economically justified, and still be unallowable for government billing purposes because FAR 31.205 specifically excludes it.