Auditor determination procedure
Auditor determination streamlines final indirect cost rate agreements for eligible business units, reducing administrative burden when both the auditor and contracting officer agree.
Overview
FAR 42.705-2 outlines the procedures for establishing final indirect cost rates through auditor determination, rather than by the contracting officer, for certain business units. This process applies primarily to business units not covered under 42.705-1(a), but may also be used for others when both the contracting officer and auditor agree that indirect costs can be settled easily and specific conditions are met (e.g., mostly fixed-price contracts, low administrative benefit, few disputes, or special circumstances). The section details the responsibilities of contractors to submit a final indirect cost rate proposal and the auditor’s role in auditing, negotiating, and formalizing the agreement. If agreement cannot be reached, the matter is escalated to the contracting officer for resolution. The process ensures efficient and appropriate settlement of indirect cost rates, especially where the administrative burden of contracting officer determination is not justified.
Key Rules
- Applicability and Responsibility
- Auditor determination is used for business units not covered by 42.705-1(a), or for certain units covered by 42.705-1(a) under specific, agreed-upon circumstances.
- Procedures
- Contractors must submit a final indirect cost rate proposal. The auditor audits the proposal, seeks agreement, prepares and signs the rate agreement, or escalates unresolved issues to the contracting officer.
Responsibilities
- Contracting Officers: Agree to auditor determination when appropriate, resolve disagreements if necessary.
- Contractors: Submit compliant indirect cost rate proposals and participate in negotiations.
- Auditors: Audit proposals, negotiate rates, prepare agreements, and escalate unresolved issues.
Practical Implications
- This section streamlines the indirect cost rate settlement process for eligible business units, reducing administrative burden and expediting agreement where possible. Contractors must ensure timely and accurate proposal submissions and be prepared for audit and negotiation. Failure to reach agreement results in escalation to the contracting officer, potentially delaying final rate determination.