Should Interest Be an Allowable Expense on Government Contracts

摘要

Interest expense is not allowable cost in Government contracts. Interest expense is not reimbursed on cost-type contracts nor is it allowed to be considered when negotiating fixed price contracts. This has been the Government's policy for over forty years. Contractor interest expense has become the largest unallowable cost. This research examines how contractors view interest expense. Additionally, the reactions of contractors if interest expense were to be allowed is discussed. Interest theory, financial structure, and the history of the Government's policies on interest expense are reviewed. The research was conducted through the use of literature search and personal interviews. As a result of the research, it was concluded that interest expense should remain unallowable and the current policy had no direct deleterious impact.