Educational institutions
FAR 42.705-3 requires educational institutions to use negotiated indirect cost rates established by a cognizant agency for all federal cost-reimbursement contracts, ensuring consistency and compliance with OMB Uniform Guidance.
Overview
FAR 42.705-3 outlines the procedures for establishing and applying indirect cost rates for educational institutions under cost-reimbursement contracts. It distinguishes between postdetermined final indirect cost rates (the default) and predetermined final indirect cost rates (used only under specific conditions). The section references the OMB Uniform Guidance, which assigns each educational institution a cognizant federal agency responsible for negotiating and establishing indirect cost rates, and mandates that these rates be accepted by all federal agencies. The regulation also details the process for negotiating rates, the conditions under which predetermined rates may be used, and the requirements for audits, proposals, and contract clauses.
Key Rules
- Postdetermined Final Indirect Cost Rates
- Default method for settling indirect costs with educational institutions unless predetermined rates are authorized.
- Cognizant Agency Role
- Each institution is assigned a single federal agency to negotiate indirect cost rates, which must be accepted government-wide.
- Predetermined Final Indirect Cost Rates
- May be used for cost-reimbursement R&D contracts if certain stability and audit conditions are met, and must be applied to all contracts with that institution if established.
- Audit and Proposal Requirements
- Recent audits and acceptable proposals are required for negotiating rates; special provisions apply for smaller contracts.
- Contracting Officer Responsibilities
- Must include negotiated rates in the contract and use appropriate clauses; use billing rates for periods not covered by predetermined rates.
Responsibilities
- Contracting Officers: Ensure correct rate type is used, negotiate and document rates, include required clauses, and follow audit/proposal procedures.
- Contractors (Educational Institutions): Submit proposals for rates, cooperate with audits, and comply with negotiated rates.
- Agencies: Assign cognizant agency, conduct/accept audits, resolve disputes, and ensure compliance with OMB Uniform Guidance.
Practical Implications
- Ensures consistency and fairness in indirect cost reimbursement for educational institutions.
- Reduces administrative burden by assigning a single agency for rate negotiation.
- Contractors must be prepared for audits and timely proposal submissions; failure to comply can delay payments or contract awards.