52.242-1
Notice of Intent to Disallow Costs
FAR 52.242-1 gives contractors a formal process to contest disallowed costs, but requires timely written response and justification to protect their interests.
Overview
FAR 52.242-1, Notice of Intent to Disallow Costs, establishes the process by which a Contracting Officer can formally notify a contractor that certain costs incurred or planned under a contract are considered unallowable. This clause applies to cost-reimbursement, fixed-price incentive, and price redetermination contracts. It ensures both parties have a clear, documented process for disputing and resolving cost allowability issues during contract performance.
Key Rules
- Written Notice Requirement
- The Contracting Officer may issue a written notice to the contractor identifying specific costs that are determined to be unallowable under the contract terms.
- Contractor Response and Justification
- Upon receiving the notice, the contractor has the right to submit a written response with justification for why the costs should be allowed. The contractor must respond within 60 days.
- Government Decision Timeline
- If the contractor responds, the Contracting Officer must, within 60 days, either withdraw the notice or issue a written decision regarding the costs.
- Government Rights Preserved
- The Government retains the right to challenge costs even if a notice is not issued under this clause.
Responsibilities
- Contracting Officers: Must issue written notices for disallowed costs and respond to contractor justifications within specified timeframes.
- Contractors: Must respond in writing within 60 days if they wish to contest the notice and provide justification for the costs.
- Agencies: Ensure proper documentation and adherence to dispute resolution timelines.
Practical Implications
- This clause provides a formal mechanism for addressing cost allowability disputes, helping prevent misunderstandings and ensuring due process.
- Contractors must be diligent in tracking cost allowability and responding promptly to notices to protect their interests.
- Failure to respond or justify costs may result in permanent disallowance, while the Government’s rights to challenge costs are preserved regardless of notice issuance.