42.709-3
Responsibilities
FAR 42.709-3 assigns clear responsibilities to contracting officers and auditors for assessing, documenting, and escalating penalties for unallowable costs, including referral for criminal investigation if fraud is suspected.
Overview
FAR 42.709-3 outlines the specific responsibilities of the cognizant contracting officer and the contract auditor regarding the assessment and handling of penalties for unallowable costs submitted by contractors. The section details the decision-making and referral processes when unallowable costs are identified, including the potential for criminal investigation if there is evidence of knowing submission. It ensures clear accountability and procedural steps for both government officials involved in the review of final indirect cost proposals subject to penalty provisions.
Key Rules
- Contracting Officer Responsibilities
- Determines whether penalties for unallowable costs should be assessed or waived, and refers cases with evidence of knowing submission to criminal investigators.
- Contract Auditor Responsibilities
- Recommends which costs are unallowable and subject to penalties, provides supporting documentation, and refers cases of knowing submission to criminal investigators.
Responsibilities
- Contracting Officers: Must assess or waive penalties, and refer cases with evidence of knowing submission to authorities.
- Contractors: Must avoid submitting unallowable costs and be aware of the consequences of knowingly doing so.
- Agencies: Must ensure proper coordination between contracting officers, auditors, and investigative organizations.
Practical Implications
- This section exists to enforce accountability and deter the submission of unallowable costs by contractors.
- It impacts daily contracting by requiring thorough review and documentation of cost proposals, and by establishing clear escalation procedures for suspected fraud.
- Common pitfalls include inadequate documentation, failure to refer cases when required, or misunderstanding the threshold for "knowing" submission.