42.705-4
State and local governments
State and local governments must use indirect cost rates negotiated by their cognizant agency, and all federal agencies must accept these rates for contract awards.
Overview
FAR 42.705-4 addresses how indirect cost rates for state and local governments are determined and applied in federal contracting. It references the OMB Uniform Guidance (2 CFR part 200, subpart E and appendix V), which sets out cost principles and the process for designating a cognizant agency responsible for negotiating and approving indirect cost rates for these entities. Once established, these rates must be accepted and used by all federal agencies awarding contracts to the same state or local government, ensuring consistency and avoiding duplicative negotiations.
Key Rules
- Cognizant Agency Designation
- The OMB Uniform Guidance establishes which federal agency is responsible for negotiating indirect cost rates with a state or local government.
- Uniform Application of Indirect Cost Rates
- All federal agencies must use the indirect cost rates approved by the cognizant agency for a given state or local government.
Responsibilities
- Contracting Officers: Must apply the approved indirect cost rates negotiated by the cognizant agency when awarding contracts to state or local governments.
- Contractors (State and Local Governments): Must work with their designated cognizant agency to negotiate and maintain approved indirect cost rates.
- Agencies: Must recognize and use the rates negotiated by the cognizant agency, avoiding separate negotiations.
Practical Implications
- This regulation ensures a single, consistent set of indirect cost rates for each state or local government across all federal contracts, reducing administrative burden and potential disputes. Contractors must ensure their rates are current and properly negotiated, while contracting officers must verify and apply the correct rates. Common issues include confusion over the cognizant agency or use of outdated rates.