31.110
Indirect cost rate certification and penalties on unallowable costs
Contractors must accurately certify indirect cost rates and exclude unallowable costs from final proposals to avoid penalties.
Overview
FAR 31.110 outlines requirements for certifying indirect cost rates and addresses penalties for including unallowable costs in final indirect cost settlement proposals. Contractors must certify the accuracy of their proposed indirect cost rates for final payment on certain contracts, following procedures detailed in FAR 42.703-2. If a contractor includes unallowable costs in their final indirect cost proposals, they may be subject to penalties as described in FAR 42.709. This section ensures accountability and accuracy in cost submissions, reinforcing the importance of compliance with cost principles and proper cost allocation.
Key Rules
- Indirect Cost Rate Certification
- Contractors must certify their proposed indirect cost rates for final payment on applicable contracts, following the procedures in FAR 42.703-2.
- Penalties for Unallowable Costs
- Contractors may face penalties if unallowable costs are included in final indirect cost settlement proposals, with procedures and penalties detailed in FAR 42.709.
Responsibilities
- Contracting Officers: Ensure contractors provide required certifications and assess penalties when unallowable costs are identified.
- Contractors: Certify indirect cost rates accurately and exclude unallowable costs from final proposals.
- Agencies: Oversee compliance and enforce penalties as necessary.
Practical Implications
- This section exists to promote integrity and accuracy in cost submissions for government contracts.
- Contractors must be diligent in identifying and excluding unallowable costs to avoid penalties.
- Failure to comply can result in financial penalties and reputational harm, making robust internal controls essential.