What is it?
The GACC is a contractual clause that governs cost allocation and indirect expense sharing in multi‑party agreements.
gacc
Contract LawLegal glossary term
Quick answer
GACC usually means a government‑approved cost allocation clause. In contracts, it matters because it determines how indirect expenses are divided and can trigger payment holds. Before signing, check the allocation formula and reporting requirements.
Definitions
What is gacc?
Legal Definition
A GACC clause inserts a government‑approved cost allocation method into a commercial contract, dictating how indirect expenses are spread among parties. It obligates the contractor to apply the prescribed allocation and report compliance, otherwise the client can withhold payment. The most contested point is whether the clause overrides the parties' own cost‑sharing provisions.
Plain-English Translation
Think of a GACC like a school cafeteria menu that forces every kid to eat the same portion of veggies, no matter what they prefer on their plate.
Contract relevance
Why gacc matters in contracts
Misapplying the GACC can trigger payment withholding and breach claims, putting the contractor at financial risk.
Document context
Where gacc appears in documents
| Document type | Section | Why it matters |
|---|---|---|
| Construction contract | Article 5 – Cost Allocation | Sets indirect expense sharing rules |
| Joint‑venture agreement | Schedule B – GACC Formula | Defines overhead distribution method |
| ISDA master agreement | Annex – Clearing Fee Allocation | Aligns fee sharing across counterparties |
| Federal grant award | Clause 7 – Cost Principles | Mandates GACC compliance for funded projects |
Contract language
Common contract wording
| Contract wording | Plain-English meaning | What to check |
|---|---|---|
| "Costs shall be allocated pursuant to the GACC schedule" | Indirect costs follow the government formula | Verify the schedule is attached |
| "The Contractor shall submit a GACC compliance report within 30 days" | Report on cost allocation must be filed monthly | Ensure reporting timeline is feasible |
| "Any deviation from the GACC requires prior written consent" | Changes need client approval | Check consent process |
Red flags
Red flags to watch for
Wording examples
Clearer wording examples
Vague wording
"Costs shall be allocated pursuant to the GACC schedule"
Clearer wording
"Costs shall be allocated using the GACC formula attached as Exhibit A"
Vague wording
"Compliance report due upon request"
Clearer wording
"Compliance report shall be submitted within 30 days after each invoice"
Note: “clearer” means easier to read — not legally reviewed or guaranteed safe.
Pre-signature checklist
What to check before signing
1
Confirm the GACC formula is attached and matches project expectations
2
Verify the reporting deadline and required documentation
3
Assess whether you can obtain consent to deviate from the formula
4
Determine the audit rights the client retains
5
Calculate the impact of the allocation on your profit margin
6
Check for any conflicting cost‑allocation clauses elsewhere in the contract
7
Ensure the definition of indirect expenses aligns with your accounting practices
Party impact
How gacc affects each party
| Party | What this party should check |
|---|---|
| Contractor | Must track direct costs accurately and follow the GACC formula |
| Client | Can enforce compliance and withhold payment for violations |
| Subcontractor | Needs to understand its share of allocated overhead |
Comparison
gacc vs similar terms
| Related term | Plain meaning | Main difference from gacc |
|---|---|---|
| Cost Allocation Clause | General rule for dividing costs | GACC is a government‑mandated version |
| Indirect Expense Formula | Calculates overhead share | GACC prescribes a specific statutory formula |
| Direct Cost Allocation | Assigns only direct costs | GACC deals with indirect, not direct, expenses |
Missing or vague
If gacc is missing or vague
If the GACC is omitted or described vaguely, parties may disagree on how to split overhead, leading to billing disputes. The contractor might under‑allocate costs, causing the client to withhold funds. Conversely, the client could over‑allocate, inflating the contractor's expense burden. Without a clear formula, audits become contentious and delay project completion.
Document map
Document section map
| Contract section | What to inspect |
|---|---|
| Definitions | Look for a clear definition of "Indirect Expenses" |
| Cost Allocation | Inspect the GACC formula and attached schedule |
| Reporting | Verify deadlines and required compliance documents |
| Audit Rights | Check client’s authority to review cost allocations |
| Amendments | Review procedures for modifying the GACC |
Visual model
Understand gacc fast
01
A federal contractor applies the GACC to split overhead across three subcontractors and receives full payment after audit approval.
02
A joint‑venture between a developer and a builder uses a GACC clause, but the builder fails to allocate costs correctly, resulting in a $150,000 payment hold.
03
An ISDA master agreement includes a GACC provision that forces all counterparties to allocate clearing fees uniformly, avoiding disputes over fee distribution.
Document context
How gacc shows up in legal documents
Why does it matter?
Misapplying the GACC can trigger payment withholding and breach claims, putting the contractor at financial risk.
When does it matter?
When a multi‑party project contract is executed and the parties agree to allocate indirect costs, the GACC becomes operative.
Where is it usually seen?
The clause appears in government‑funded construction contracts, joint‑venture agreements, and ISDA master agreements under the cost‑allocation section.
Who is affected?
The contractor must follow the allocation method or face payment delays; the client gains the right to audit and enforce the prescribed formula.
How does it work?
First, the contract lists the GACC formula in the cost‑allocation schedule. Then, each party records its direct costs and applies the formula to compute its share of indirect expenses. Within 30 days of invoicing, the contractor submits a compliance report to the client.
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Wikipedia
External reference for gacc
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Where gacc connects to real contract work
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Source & disclosure
This page is an AI-assisted plain-English explanation based on LexPredict Legal Dictionary context and contract-review patterns. It is not legal advice. Meaning may vary by jurisdiction, industry, and exact clause wording.
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