[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR42.709-5]



[Page 801]

 

            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. 42.709-5  Waiver of the penalty.



    The cognizant contracting officer shall waive the penalties at 

42.709-1(a) when--

    (a) The contractor withdraws the proposal before the Government 

formally initiates an audit of the proposal and the contractor submits a 

revised proposal (an audit will be deemed to be formally initiated when 

the Government provides the contractor with written notice, or holds an 

entrance conference, indicating that audit work on a specific final 

indirect cost proposal has begun);

    (b) The amount of the unallowable costs under the proposal which are 

subject to the penalty is $10,000 or less (i.e., if the amount of 

expressly or previously determined unallowable costs which would be 

allocated to the contracts specified in 42.709(b) is $10,000 or less); 

or

    (c) The contractor demonstrates, to the cognizant contracting 

officer's satisfaction, that--

    (1) It has established policies and personnel training and an 

internal control and review system that provide assurance that 

unallowable costs subject to penalties are precluded from being included 

in the contractor's final indirect cost rate proposals (e.g., the types 

of controls required for satisfactory participation in the Department of 

Defense sponsored self-governance programs, specific accounting controls 

over indirect costs, compliance tests which demonstrate that the 

controls are effective, and Government audits which have not disclosed 

recurring instances of expressly unallowable costs); and

    (2) The unallowable costs subject to the penalty were inadvertently 

incorporated into the proposal; i.e., their inclusion resulted from an 

unintentional error, notwithstanding the exercise of due care.



[60 FR 42659, Aug. 16, 1995]