FAR Part 31 vs. 2 CFR 200 Cost Principles

FAR Part 31 governs contract cost allowability; 2 CFR 200 Subpart E governs grants. Compare both regimes and see when FAR 31.3 routes you back to 2 CFR 200.

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In summary

FAR Part 31 (48 CFR Part 31) and 2 CFR 200 Subpart E are both federal cost-allowability regimes, but they attach to different instruments: FAR Part 31 governs procurement contracts, 2 CFR 200 Subpart E governs grants and cooperative agreements. The two regimes share the same underlying logic — a cost must be reasonable, allocable, and consistently treated — but differ in how prescriptive they are and who they were written for. The one exception every research administrator needs to know: FAR Subpart 31.3, which covers contracts with educational institutions, directs the contracting officer to determine cost allowability using 2 CFR 200 Subpart E and Appendix III, not the FAR 31.2 commercial-organization rules. So a university that holds a federal contract is often still applying 2 CFR 200 cost principles, just under a FAR-governed instrument.

How do FAR Part 31, 2 CFR 200 Subpart E compare side by side?

The table below compares FAR Part 31, 2 CFR 200 Subpart E across 12 procurement-relevant dimensions, from what it governs through where audit findings cite it.

Side-by-side comparison

Dimension	FAR Part 31	2 CFR 200 Subpart E
What it governs	Cost allowability on federal procurement contracts — the government is buying a good or service	Cost allowability on federal grants and cooperative agreements — the government is funding a public-purpose activity
Codified at	Title 48 CFR Part 31 (the Federal Acquisition Regulation); "FAR Part 31" and "48 CFR Part 31" cite the identical text	Title 2 CFR Part 200, Subpart E, §§200.400–200.475 (the OMB Uniform Guidance)
Issuing body	FAR Council (DoD, GSA, NASA) under the Federal Property and Administrative Services Act	Office of Management and Budget (OMB), binding on all federal grant-making agencies
Who it applies to	Any organization holding a federal procurement contract — subpart depends on contractor type: 31.2 commercial organizations, 31.3 educational institutions, 31.6 state/local/tribal governments, 31.7 nonprofits	Any non-federal entity (university, nonprofit, state/local government) receiving a federal grant, cooperative agreement, or other federal financial assistance award
General allowability test	FAR 31.201-2: reasonableness, allocability, Cost Accounting Standards (or GAAP where CAS doesn't apply), compliance with contract terms, and compliance with any 31.2 limitations — five conditions, all must be met	§200.403: necessary and reasonable, allocable, consistent with how the institution treats like costs, conforming to GAAP and award terms, not double-counted toward cost sharing, and adequately documented — six criteria
Burden of proof on reasonableness	FAR 31.201-3: no presumption of reasonableness attaches to a contractor's incurrence of a cost; once challenged, the contractor must prove reasonableness	§200.404 uses a similar "prudent person" reasonableness standard; documentation adequacy is what a sponsored-programs office is typically asked to produce in an audit
Allocability test	FAR 31.201-4: incurred specifically for the contract; benefits the contract and other work in reasonably proportionate shares; or necessary to overall business operations — the conceptual basis for indirect cost pools	See CASRAI's allocability dictionary term — a materially similar three-condition test, developed independently for the grants context
Selected-cost list	FAR 31.205 ("Selected costs") — applies to Subpart 31.2 commercial-organization contracts; a long, itemized list (advertising, entertainment, bad debts, alcoholic beverages, lobbying, and dozens more) each with its own allowability rule	§§200.420–200.475 ("Selected items of cost") — the grants-context equivalent list, covering many of the same categories (travel, memberships, entertainment) with different specifics
Unallowable-cost accounting treatment	FAR 31.201-6: unallowable costs, and any directly associated costs they trigger, must be identified and excluded from billings/claims/proposals, following CAS 405 (48 CFR 9904.405)	§200.410 requires the same wall-off-and-exclude treatment for costs identified as unallowable under the award or applicable law
Cost Accounting Standards (CAS) applicability	CAS can apply directly to large negotiated contracts (48 CFR Part 9903/9904) — a separate, more rigorous cost-measurement regime layered on top of Part 31 allowability	CAS does not apply to grants; §200.419 addresses cost accounting standards for educational institutions through a Uniform Guidance-specific mechanism, not full CAS coverage
The exception that collapses the split	FAR 31.303(a): for contracts under Subpart 31.3 (educational institutions), the contracting officer must determine allowability "in accordance with" 2 CFR Part 200, Subpart E and Appendix III — not the 31.2/31.205 rules	Subpart E becomes the operative cost-principles text even though the instrument is a FAR-governed contract, not a grant — only non-cost terms (deliverables, IP/data rights, disputes) stay purely FAR-governed
Where audit findings cite it	DCAA/agency contract audits, incurred-cost submissions, contract closeout on procurement instruments	Single Audit (Uniform Guidance Subpart F) findings, cost-disallowance letters on grant awards

Common questions

Common questions about FAR Part 31 vs 2 CFR 200 Subpart E

Does FAR Part 31 or 2 CFR 200 apply to my award?

It depends on the instrument, not the funding agency. If the award document is a procurement contract, start with FAR Part 31 — but check which subpart it invokes. If it's a grant or cooperative agreement, 2 CFR 200 Subpart E applies. Read the cost-principles clause the award actually cites rather than assuming from the agency or the subject matter.

Why would a university ever be subject to FAR Part 31?

Universities sometimes hold federal procurement contracts — for example, a deliverable-based R&D contract rather than a grant. In that case FAR Subpart 31.3 (Contracts with Educational Institutions) applies, and FAR 31.303 directs the contracting officer to determine cost allowability using 2 CFR 200 Subpart E and Appendix III — the same cost principles the institution already applies to its grant portfolio.

Is FAR 31.205 the same list as 2 CFR 200's selected items of cost?

They cover many of the same categories — travel, entertainment, memberships, alcoholic beverages — but are separately numbered, separately worded regulatory texts (FAR 31.205-x versus 2 CFR 200.42x-200.47x) with their own specific allowability conditions. Don't assume a rule under one automatically carries over to the other; check the actual cited text for the instrument in front of you.

What's the practical risk of using the wrong cost-principles regime?

Applying FAR 31.2 commercial-organization rules to a Subpart 31.3 educational-institution contract (or vice versa) can misstate which costs are allowable, which documentation is required, and which unallowable-cost wall-off obligations apply — exactly the kind of mismatch an incurred-cost audit or Single Audit finding is built to catch.

Going deeper