[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: 48CFR49]



[Page 926]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 49_TERMINATION OF CONTRACTS--Table of Contents

 

                     Subpart 49.1_General Principles

 

49.107  Audit of prime contract settlement proposals and subcontract settlements.



    (a) The TCO shall refer each prime contractor settlement proposal of 

$100,000 or more to the appropriate audit agency for review and 

recommendations. The TCO may submit settlement proposals of less than 

$100,000 to the audit agency. Referrals shall indicate any specific 

information or data that the TCO desires and shall include facts and 

circumstances that will assist the audit agency in performing its 

function. The audit agency shall develop requested information and may 

make any further accounting reviews it considers appropriate. After its 

review, the audit agency shall submit written comments and 

recommendations to the TCO. When a formal examination of settlement 

proposals under $100,000 is not warranted, the TCO will perform or have 

performed a desk review and include a written summary of the review in 

the termination case file.

    (b) The TCO shall refer subcontract settlements received for 

approval or ratification to the appropriate audit agency for review and 

recommendations when (1) the amount exceeds $100,000 or (2) the TCO 

wants a complete or partial accounting review. The audit agency shall 

submit written comments and recommendations to the TCO. The review by 

the audit agency does not relieve the prime contractor or higher tier 

subcontractor of the responsibility for performing an accounting review.

    (c)(1) The responsibility of the prime contractor and of each 

subcontractor (see 49.108) includes performance of accounting reviews 

and any necessary field audits. However, the TCO should request the 

Government audit agency to perform the accounting review of a 

subcontractor's settlement proposal when--

    (i) A subcontractor objects, for competitive reasons, to an 

accounting review of its records by an upper tier contractor;

    (ii) The Government audit agency is currently performing audit work 

at the subcontractor's plant, or can perform the audit more economically 

or efficiently;

    (iii) Audit by the Government is necessary for consistent audit 

treatment and orderly administration; or

    (iv) The contractor has a substantial or controlling financial 

interest in the subcontractor.

    (2) The audit agency should avoid duplication of accounting reviews 

performed by the upper tier contractor on subcontractor settlement 

proposals. However, this should not preclude the Government from making 

additional reviews when appropriate. When the contractor is performing 

accounting reviews according to this section, the TCO should request the 

audit agency to periodically examine the contractor's accounting review 

procedures and performance, and to make appropriate comments and 

recommendations to the TCO.

    (d) The audit report is advisory only, and is for the TCO to use in 

negotiating a settlement or issuing a unilateral determination. 

Government personnel handling audit reports must be careful not to 

reveal privileged information or information that will jeopardize the 

negotiation position of the Government, the prime contractor, or a 

higher tier subcontractor. Consistent with this, and when in the 

Government's interest, the TCO may furnish audit reports under paragraph 

(c) above to prime and higher tier subcontractors for their use in 

settling subcontract settlement proposals.



[48 FR 42447, Sept. 19, 1983, as amended at 55 FR 52797, Dec. 21, 1990]