# § 3322. Cost contracts
**(a)** **Cost-plus-a-percentage-of-cost System of Contracting Prohibited.—** The cost-plus-a-percentage-of-cost system of contracting may not be used.
**(b)** **Cost-plus-a-fixed-fee Contracts.—** The fee for performing a cost-plus-a-fixed-fee contract for experimental, developmental, or research work may not be more than 15 percent of the estimated cost of the contract, not including the fee. The fee for performing a cost-plus-a-fixed-fee contract for architectural or engineering services for a public work or utility plus the cost of those services to the contractor may not be more than 6 percent of the estimated cost of that work or project, not including fees. The fee for performing any other cost-plus-a-fixed-fee contract may not be more than 10 percent of the estimated cost of the contract, not including the fee. Determinations under this subsection of the estimated costs of a contract or project shall be made by the head of the agency at the time the contract is made.
**(c)** **Advance Notice of Certain Subcontracts.—**
**(1)** **In general.—** Except as provided in paragraph (2), each cost contract and each cost-plus-a-fixed-fee contract shall provide for notice to the agency by the contractor before the making, under the prime contract, of—
**(A)** a cost-plus-a-fixed-fee subcontract; or
**(B)** a fixed-price subcontract or purchase order involving more than the greater of (i) the simplified acquisition threshold, or (ii) 5 percent of the estimated cost of the prime contract.
**(2)** **Exception.—** Paragraph (1) shall not apply to a prime contract with a contractor that maintains a purchasing system approved by the contracting officer for the contract.
**(d)** **Limitation on Certain Options.—**
**(1)** **In general.—** Except as provided by paragraph (2), a covered contract shall limit the number of low-rate production lots for any production quantities procured using fixed-priced options under such covered contract to not more than one.
**(2)** **Waiver.—**
**(A)** **In general.—** The service acquisition executive of the military department concerned or, in the case of program that is a joint program, the Secretary of Defense may waive the limit required under paragraph (1) with respect to the number of low-rate production lots for a production quantity under a covered contract if such service acquisition executive or the Secretary of Defense, as applicable, determines that such waiver is in the best interest of the Department of Defense.
**(B)** **Delegation limit.—** Neither a service acquisition executive nor the Secretary of Defense may delegate the authority under subparagraph (A) to waive the limit required under paragraph (1) below the level of a service acquisition executive.
**(3)** **Definitions.—** In this subsection:
**(A)** The term “covered contract” means a cost reimbursement contract for the development of a major system.
**(B)** The term “low-rate initial production” has the same meaning as in section 4231 of this title.
**(C)** The term “major system” has the meaning given such term in section 3041 of this title.
---
**Source Credit**: (Added and amended Pub. L. 116–283, div. A, title XVIII, § 1817(a), (c), (e), (f), Jan. 1, 2021, 134 Stat. 4186, 4187; Pub. L. 118–159, div. A, title VIII, § 802(a), Dec. 23, 2024, 138 Stat. 1965.)
## Editorial Notes
### Codification
For derivation of subsec. (a) of this section, see Codification note related to subsec. (a) of set out under .
The text of subsec. (d) of , which was transferred to this section, redesignated as subsec. (b), and amended by , (f)(2), was based on , .
The text of subsec. (e) of , which was transferred to this section, redesignated as subsec. (c), and amended by , (f)(3), was based on , ; , , ; , , ; , 4401(c), , ; , , .
### Amendments
2024—Subsec. (d). added subsec. (d).
2021—Subsec. (a). , (f)(1), transferred first sentence of subsec. (a) of to this section, designated it as subsec. (a), and inserted heading.
Subsec. (b). , (f)(2), redesignated subsec. (d) of as subsec. (b) of this section and inserted heading.
Subsec. (c). , (f)(3), redesignated subsec. (e) of as subsec. (c) of this section, inserted subsec. and par. headings, and realigned margin of par. (2).
## Statutory Notes and Related Subsidiaries
### Effective Date
Section and amendment by effective , with additional provisions for delayed implementation and applicability of existing law, see , set out as an Effective Date of 2021 Amendment note preceding .
### Conforming Regulations
> “Not later than 120 days after the date of the enactment of this Act [
>
> ], the Secretary of Defense shall revise the Department of Defense Supplement to the Federal Acquisition Regulation to implement subsection (d) of
>
> , United States Code, as added by subsection (a) of this section.”
, , , provided that: