49.303-3
Audit of settlement proposal
Settlement proposals after contract termination must be audited unless they are limited to fee adjustments, streamlining oversight and compliance.
Overview
FAR 49.303-3 outlines the requirement for the Termination Contracting Officer (TCO) to submit a contractor's settlement proposal to the appropriate audit agency for review after contract termination. This audit is a key step in ensuring the accuracy and legitimacy of the costs claimed in the settlement proposal. However, if the settlement proposal only involves an adjustment of the contractor's fee (and not costs), the TCO is not required to refer the proposal for audit. This provision helps streamline the process for fee-only adjustments while maintaining oversight for more complex settlements.
Key Rules
- Audit Requirement for Settlement Proposals
- The TCO must submit settlement proposals to the audit agency for review, ensuring independent verification of claimed costs.
- Exception for Fee-Only Adjustments
- If the proposal is solely for an adjustment of fee, no audit referral is necessary, expediting the process for simpler settlements.
Responsibilities
- Contracting Officers: Must determine the nature of the settlement proposal and submit it for audit unless it is fee-only.
- Contractors: Should prepare settlement proposals with the understanding that most will be audited, except for fee-only adjustments.
- Agencies: Audit agencies are responsible for reviewing and verifying the accuracy of settlement proposals referred by the TCO.
Practical Implications
- This section ensures financial oversight and integrity in contract terminations by requiring audits of most settlement proposals.
- Contractors should anticipate audits and maintain thorough documentation, except in fee-only cases.
- Failure to follow this process can delay settlement or result in disallowed costs.