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FAR and DFARS › FAR Part 42: Contract Administration and Audit Services › Subpart 42.7

FAR 42.709-1 Scope.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section explains when the government can assess penalties against contractors for including unallowable indirect costs in final indirect cost rate proposals or in the final statement of costs under a fixed-price incentive contract. It matters because it defines the scope of the penalty rules, which apply to most contracts over $1 million but exclude certain fixed-price contracts.

Applies to: contractors with contracts in excess of $1 million, except those with fixed-price contracts without cost incentives or firm-fixed-price contracts for commercial products or commercial services

Key terms: unallowable indirect costs · final indirect cost rate proposals · final statement of costs incurred · fixed-price incentive contract · penalties

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) This section implements 10 U.S.C. 3743 and 41 U.S.C. 4303. It covers the assessment of penalties against contractors which include unallowable indirect costs in—

(1) Final indirect cost rate proposals; or

(2) The final statement of costs incurred or estimated to be incurred under a fixed-price incentive contract.

(b) This section applies to all contracts in excess of $1 million, except fixed-price contracts without cost incentives or any firm-fixed-price contracts for the purchase of commercial products or commercial services.

Sections that refer to it

← 42.709 Penalties for Unallowable Costs. · 42.709-2 General. →

Rule changes for FAR Part 42

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 42.709-1 Scope · SpendQuery