The Same Proposed Rule Would Strip Four Items Out of the 52.216-7 Incurred Cost Submission

What changed

Buried in the same proposed rule that rewrites FAR Part 16 is a set of changes to the clause at 52.216-7, Allowable Cost and Payment. FAR Case 2026-006 was published at 91 FR 59476 on 18 September 2026, and comments are due 19 October 2026.

The rule would remove a number of the items currently required for an adequate indirect cost proposal under paragraph (d)(2)(iii). Paragraph (j), Subcontract Information, would be limited to subcontracts with a value exceeding the threshold for requiring certified cost or pricing data as prescribed in FAR 15.403-3. The detailed information in paragraph (k) for time-and-materials and labor-hour contracts, including labor rates, labor hours and other detailed cost elements, would be removed, with the summary-level information moved to paragraph (h). Paragraph (l), the reconciliation of total payroll per IRS Form 941 to total labor cost distribution, would be removed in its entirety.

The information in paragraph (o) for contracts physically completed during the fiscal year would move to paragraph (h) and would be limited to level-of-effort information, the contract ceiling amount, and an indication of whether the contract is ready to close. Contract fee computations would no longer be required.

Why it matters for estimating and pricing

The FAR Council's stated rationale is that removing these items reduces the information required for an incurred cost audit submission and therefore reduces the time required for contract closeout and settlement agreements. That is a real cost reduction on the contractor side, and it lands on the indirect side of the rate structure rather than on direct program cost.

The second-order effect is the one to watch. An incurred cost submission is also the government's evidence base for actual rates, and several of the items proposed for removal are the ones that tie claimed labor cost back to an independent record. The Form 941 reconciliation in particular is the cross-check between what a contractor tells the government it paid in labor and what it told the IRS. Removing it does not change what is allowable, but it changes what an auditor has in hand without asking for it.

For anyone building forward rates off historical actuals, the practical question is whether the data you have been relying on from prior submissions will still be assembled at all. If it is no longer required, it may stop being produced on the same schedule, and a rate proposal that assumed it would be available may need a different basis. Nothing here is in effect yet; this is a proposed rule.

Primary sources

Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 16, 17, and 35, 91 FR 59476 (18 September 2026), FR document 2026-19160, at the summary of substantive changes proposed for FAR part 16, items 9 and 10. Current clause text at FAR 52.216-7. Certified cost or pricing data threshold at FAR 15.403-3.