42.705 Final indirect cost rates
Source: FAR 42.705 on acquisition.gov
Contractors must submit a completion invoice or voucher reflecting final indirect cost rates within 120 days of rate settlement, or risk unilateral determination by the contracting officer.
Overview
FAR 42.705 outlines the procedures for establishing final indirect cost rates for government contracts. These rates are determined after contract completion using either the contracting officer determination procedure or the auditor determination procedure. Once the final rates are settled, contractors must submit a completion invoice or voucher within 120 days (unless an extension is granted by the contracting officer). If the contractor fails to submit the required documentation on time, the contracting officer may unilaterally determine the amounts due and issue a final decision. The regulation also provides examples of extenuating circumstances that may justify an extension of the 120-day deadline.
Key Rules
- Establishment of Final Indirect Cost Rates
- Final rates are set using either the contracting officer or auditor determination procedures.
- Submission Deadline
- Contractors must submit a completion invoice or voucher within 120 days after settlement of final rates, unless an extension is approved.
- Extenuating Circumstances for Extensions
- Extensions may be granted for reasons such as pending audits, unresolved claims, property disposition delays, or contract reconciliation issues.
- Unilateral Determination by Contracting Officer
- If the contractor fails to submit required documentation, the contracting officer may determine the amounts due and issue a unilateral contract modification as a final decision.
Responsibilities
- Contracting Officers: Establish final indirect cost rates, approve extensions, and issue unilateral determinations if necessary.
- Contractors: Submit completion invoices/vouchers within specified timeframes and request extensions if needed.
- Agencies: Oversee compliance and ensure proper closeout of contracts.
Practical Implications
This section ensures timely and accurate settlement of indirect costs, which is critical for contract closeout and financial reconciliation. Delays or failures in submitting required documentation can result in unilateral government action, potentially impacting contractor payments. Contractors should closely monitor deadlines and maintain communication with contracting officers to avoid adverse determinations.
(a) Final indirect cost rates shall be established on the basis of-
(1) Contracting officer determination procedure (see 42.705-1), or
(2) Auditor determination procedure (see 42.705-2).
(b) Within 120 days (or longer period, if approved in writing by the contracting officer,) after settlement of the final annual indirect cost rates for all years of a physically complete contract, the contractor must submit a completion invoice or voucher reflecting the settled amounts and rates. To determine whether a period longer than 120 days is appropriate, the contracting officer should consider whether there are extenuating circumstances, such as the following:
(1) Pending closeout of subcontracts awaiting Government audit.
(2) Pending contractor, subcontractor, or Government claims.
(3) Delays in the disposition of Government property.
(4) Delays in contract reconciliation.
(5) Any other pertinent factors.
(c)
(1) If the contractor fails to submit a completion invoice or voucher within the time specified in paragraph (b) of this section, the contracting officer may-
(i) Determine the amounts due to the contractor under the contract; and
(ii) Record this determination in a unilateral modification to the contract.
(2) This contracting officer determination must be issued as a final decision in accordance with 33.211.