42.803 Disallowing costs after incurrence
Source: FAR 42.803 on acquisition.gov
FAR 42.803 establishes the process for reviewing, suspending, and disputing costs claimed under cost-reimbursement and similar contracts, ensuring only allowable costs are reimbursed.
Overview
FAR 42.803 outlines the procedures for disallowing costs after they have been incurred under certain contract types, including cost-reimbursement, time-and-material, and labor-hour contracts. It details the roles of contracting officers and auditors in reviewing, approving, or disapproving contractor vouchers for reimbursement, and provides a process for suspending or disallowing questionable costs. The regulation also establishes the contractor's right to dispute disallowed costs through written requests or formal claims under the Disputes clause.
Key Rules
- Voucher Review and Approval
- Contracting officers or authorized auditors review contractor vouchers for cost reimbursement, following agency-specific procedures.
- Auditor Authority
- Auditors may receive, approve, or suspend payment of vouchers, and must notify relevant parties if costs are suspended or disapproved.
- Notification of Disallowed Costs
- If costs are questioned, auditors can issue a notice of suspended/disapproved costs to the contractor, disbursing officer, and contracting officer.
- Contractor Dispute Process
- Contractors may contest disallowed costs by submitting a written request to the contracting officer, filing a claim under the Disputes clause, or both.
Responsibilities
- Contracting Officers: Review and approve/disapprove vouchers, address contractor disputes, and follow agency procedures.
- Contractors: Submit accurate vouchers, respond to notices of disallowed costs, and follow dispute procedures if necessary.
- Agencies: Establish and enforce procedures for voucher review, auditor authority, and dispute resolution.
Practical Implications
- Ensures only allowable costs are reimbursed, protecting government funds.
- Provides a clear process for handling questionable costs and contractor disputes.
- Contractors must maintain thorough documentation and be prepared to justify costs or challenge disallowances.
Cost-reimbursement contracts, the cost-reimbursement portion of fixed-price contracts, letter contracts that provide for reimbursement of costs, and time-and-material and labor-hour contracts provide for disallowing costs during the course of performance after the costs have been incurred. The following procedures shall apply:
(a) Contracting officer receipt of vouchers. When contracting officers receive vouchers directly from the contractor and, with or without auditor assistance, approve or disapprove them, the process shall be conducted in accordance with the normal procedures of the individual agency.
(b) Auditor receipt of vouchers.
(1) When authorized by agency regulations, the contract auditor may be authorized to (i) receive reimbursement vouchers directly from contractors, (ii) approve for payment those vouchers found acceptable, and (iii)suspend payment of questionable costs. The auditor shall forward approved vouchers for payment to the cognizant contracting, finance, or disbursing officer, as appropriate under the agency’s procedures.
(2) If the examination of a voucher raises a question regarding the allowability of a cost under the contract terms, the auditor, after informal discussion as appropriate, may, where authorized by agency regulations, issue a notice of contract costs suspended and/or disapproved simultaneously to the contractor and the disbursing officer, with a copy to the cognizant contracting officer, for deduction from current payments with respect to costs claimed but not considered reimbursable.
(3) If the contractor disagrees with the deduction from current payments, the contractor may-
(i) Submit a written request to the cognizant contracting officer to consider whether the unreimbursed costs should be paid and to discuss the findings with the contractor;
(ii) File a claim under the Disputes clause, which the cognizant contracting officer will process in accordance with agency procedures; or
(iii) Do both of the above.