(a) Airport development. To be an allowable project cost, for the purposes of computing the amount of an airport development grant, an item that is paid or incurred must, in the opinion of the Administrator—

1. (1) Have been necessary to accomplish airport development in conformity with—

   1. (i) The approved plans and specifications for an approved project; and
   2. (ii) The terms of the grant agreement for the project;
2. (2) Be reasonable in amount (subject to partial disallowance to the extent the Administrator determines it is unreasonable);
3. (3) Have been incurred after the date the grant agreement was executed, except that project formulation costs may be allowed even though they were incurred before that date;
4. (4) Be supported by satisfactory evidence;
5. (5) Have not been included in an airport planning grant; and
6. (6) Be a cost determined in accordance with the cost principles for State and local governments in Federal Management Circular 74-4 (39 FR 27133; 43 FR 50977).

(b) Airport Planning. To be an allowable project cost, for the purposes of computing the amount of an airport planning grant, an item that is paid or incurred must, in the opinion of the Administrator—

1. (1) Have been necessary to accomplish airport planning in comformity with an approved project and the terms of the grant agreement for the project;
2. (2) Be reasonable in amount;
3. (3) Have been incurred after the date the grant agreement was entered into, except for substantiated and reasonable costs incurred in designing the study effort;
4. (4) Be supported by satisfactory evidence; and
5. (5) Be figured in accordance with Federal Management Circular 74-4 (39 FR 27133; 43 FR 50977).