[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR42.709-3]

[Page 776]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 42_CONTRACT ADMINISTRATION AND AUDIT SERVICES--Table of Contents
 
                    Subpart 42.7_Indirect Cost Rates
 
Sec.  42.709-3  Assessing the penalty.

    Unless a waiver is granted pursuant to 42.709-5, the cognizant 
contracting officer shall--
    (a) Assess the penalty in 42.709-1(a)(1), when the submitted cost is 
expressly unallowable under a cost principle in the FAR or an executive 
agency supplement that defines the allowability of specific selected 
costs; or
    (b) Assess the penalty in 42.709-1(a)(2), when the submitted cost 
was determined to be unallowable for that contractor prior to submission 
of the proposal. Prior determinations of unallowability may be evidenced 
by--
    (1) A DCAA Form 1, Notice of Contract Costs Suspended and/or 
Disapproved (see 48 CFR 242.705-2), or any similar notice which the 
contractor elected not to appeal and was not withdrawn by the cognizant 
Government agency;
    (2) A contracting officer final decision which was not appealed;
    (3) A prior executive agency Board of Contract Appeals or court 
decision involving the contractor, which upheld the cost disallowance; 
or
    (4) A determination or agreement of unallowability under 31.201-6.
    (c) Issue a final decision (see 33.211) which includes a demand for 
payment of any penalty assessed under paragraph (a) or (b) of this 
section. The letter shall state that the determination is a final 
decision under the Disputes clause of the contract. (Demanding payment 
of the penalty is separate from demanding repayment of any paid portion 
of the disallowed cost.)

[60 FR 42658, Aug. 16, 1995]