Financing for covered activities

(a) Financing costs Financing costs incurred for a covered activity shall be allowable and allocable as a direct or an indirect overhead cost for contracts and subcontracts of the Department of Defense, provided such costs are— (1) reasonable in amount and consistent with prevailing market rates for similar financing; and (2) incurred to pay a financing entity. (b) Definitions In this section: (1) The term covered activity means an activity taken by a prime contractor or subcontractor— (A) to manage an inventory of completed products or components used in production; (B) to improve inventory management of products or components necessary for sustainment or maintenance; (C) to materially expand the capacity of production or sustainment and maintenance through capital expenditures; or (D) to carry out any other purpose identified by the Secretary of Defense. (2) The term financing costs means interest on borrowings, bond discounts, and costs of financing and refinancing capital. (3) The term financing entity means any corporation, limited liability company, partnership, trust, or other organization that is created under Federal or State law and that, as part of its regular business activities, extends credit, loans, or other forms of financing to other persons or entities, provided that such legal entity is not owned by, controlled by, or under common control with the person or entity receiving such financing.

(a) Financing costs Financing costs incurred for a covered activity shall be allowable and allocable as a direct or an indirect overhead cost for contracts and subcontracts of the Department of Defense, provided such costs are— (1) reasonable in amount and consistent with prevailing market rates for similar financing; and (2) incurred to pay a financing entity. (b) Definitions In this section: (1) The term covered activity means an activity taken by a prime contractor or subcontractor— (A) to manage an inventory of completed products or components used in production; (B) to improve inventory management of products or components necessary for sustainment or maintenance; (C) to materially expand the capacity of production or sustainment and maintenance through capital expenditures; or (D) to carry out any other purpose identified by the Secretary of Defense. (2) The term financing costs means interest on borrowings, bond discounts, and costs of financing and refinancing capital. (3) The term financing entity means any corporation, limited liability company, partnership, trust, or other organization that is created under Federal or State law and that, as part of its regular business activities, extends credit, loans, or other forms of financing to other persons or entities, provided that such legal entity is not owned by, controlled by, or under common control with the person or entity receiving such financing.