42.702
Purpose
Establishing final indirect cost and billing rates ensures consistent, efficient, and timely reimbursement of indirect costs across multiple contracts and agencies.
Overview
FAR 42.702 outlines the purpose of establishing final indirect cost rates and billing rates in government contracting. The section emphasizes the need for a uniform approach when multiple contracts or agencies are involved, promotes administrative efficiency, and ensures timely settlements for cost-reimbursement contracts. It also clarifies that billing rates are used for interim reimbursement of indirect costs, which are later adjusted to reflect actual costs once final rates are determined. This process is essential for managing indirect costs consistently and fairly across contracts, reducing administrative burden, and ensuring contractors are reimbursed appropriately during contract performance.
Key Rules
- Uniformity Across Contracts and Agencies
- Final indirect cost rates ensure a consistent approach when a contractor works with multiple contracts or agencies.
- Administrative Efficiency
- The process is designed to streamline administration and reduce redundant efforts.
- Timely Settlement
- Establishing final rates allows for prompt settlement of cost-reimbursement contracts.
- Interim Billing Rates
- Billing rates enable contractors to receive interim payments for indirect costs, subject to later adjustment.
Responsibilities
- Contracting Officers: Must ensure final indirect cost rates and billing rates are established and applied consistently.
- Contractors: Must comply with the process for establishing and adjusting indirect cost rates and use billing rates for interim reimbursement.
- Agencies: Should coordinate to maintain uniformity and efficiency in rate establishment and settlement.
Practical Implications
- This section exists to promote fairness, consistency, and efficiency in handling indirect costs across multiple contracts and agencies.
- It impacts daily contracting by requiring both contractors and agencies to follow standardized procedures for indirect cost reimbursement.
- Common pitfalls include delays in establishing final rates, inconsistent application across contracts, and errors in interim billing rates.