Which cost principles determine the basis for certifying costs?

• A. Allowability, reasonableness, and allocability.
• B. Tax treatment, exchange rate, and overhead.
• C. Vendor preference.
• D. Delivery times.

Answer: (A)

When certifying costs for a government contract, the charges must be evaluated on three criteria: allowability, reasonableness, and allocability. Allowable means the cost is permitted under the contract terms and applicable regulations and isn’t explicitly disallowed. Reasonableness means the cost is appropriate given the circumstances and reflects what a prudent person would pay under similar conditions. Allocable means the cost can be assigned to the contract or benefits the contract in a fair and logical way.

Putting these together, a cost must be something the government is allowed to pay for, the amount paid isn’t excessive, and the cost can be tied to the contract receiving the benefit. For example, travel expenses charged to a contract are allowable if they follow policy, reasonable in amount, and directly relate to tasks performed on that contract so they can be allocated to it.

Other factors like tax treatment, exchange rates, or vendor preferences can influence how costs are recorded or priced, but they don’t determine certifiability by themselves.