16.301-3  Limitations.

(a)  A cost-reimbursement contract may be used only when-

(1)  The contractor's accounting system is adequate for determining costs applicable to the contract; and

(2)  Appropriate Government surveillance during performance will provide reasonable assurance that efficient methods and effective cost controls are used.

(b)  The use of cost-reimbursement contracts is prohibited for the acquisition of commercial items (see Parts 2 and 12).