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Public Works and Government Services Canada

10.5.1. Annex: Cost Interpretation Bulletin - Number 01 Excess Facilities

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Section 07 (k) of Contract Cost Principles 1031-2 provides that the expenses and depreciation of excess facilities shall be considered non-applicable costs to the contract.

This Bulletin explains the costs that should be considered for the purpose of the application of the above section.


For the purpose of this Bulletin:

"Facilities" in this context means plant or any portion thereof (including land integral to the operation), equipment individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the contractor.


The costs that are associated with facilities that are excess to the contractor's current needs should be examined to determine if these costs are non-applicable.

In examining these costs, the following factors should also be considered:

  1. Vacant, or largely vacant space;
  2. Inactive or unused equipment;
  3. Idle capacity required for stand-by purposes;
  4. Indirect supporting staff no longer required either in full or part;
  5. Other costs such as maintenance, repair, rent, property taxes, insurance, depreciation, etc.;
  6. Management costs that should be reduced because of the reduction in active facilities.