What do allowable costs in contract management refer to?

Allowable costs in contract management refer specifically to expenses that are outlined and authorized within a contract for reimbursement. This means that these costs have been pre-approved as necessary for fulfilling the terms of the contract and are permitted under the specific guidelines set forth in the agreement.

When managing contracts, distinguishing between allowable and unallowable costs is critical because only the expenses that fit within the defined parameters of the contract can be submitted for reimbursement. This protects both parties: it ensures that the contractor is reimbursed for legitimate expenses while safeguarding the interests of the entity providing funding.

In contrast, options suggesting that certain costs are always reimbursed or can be incurred without regard to contract terms do not accurately reflect the systematic definitions used within contract management. Additionally, the idea of negotiating expenses after contract signing typically means that those costs are not predefined in the contract and therefore may not be classified as allowable.