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

FAR 42.709-3 Responsibilities.

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 assigns responsibilities for handling penalties related to unallowable costs in contractor indirect cost proposals. The contracting officer decides whether penalties should be assessed or waived, and both the contracting officer and contract auditor must refer any evidence of knowingly submitted unallowable costs to criminal investigators. It matters because it defines who evaluates and escalates these cost issues, which can lead to penalties or criminal review.

Applies to: Contracting officers and contract auditors for contracts subject to this section

What it requires

  • Contracting officer must determine whether penalties should be assessed.
  • Contracting officer must determine whether penalties should be waived.
  • Contracting officer must refer evidence of knowingly submitted unallowable costs to criminal investigators.
  • Contract auditor must recommend which costs may be unallowable and subject to penalties.

Key terms: cognizant contracting officer · penalties · waived · criminal investigative organization · unallowable costs

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

The text

(a) The cognizant contracting officer is responsible for—

(1) Determining whether the penalties in 42.709-2(a) should be assessed;

(2) Determining whether such penalties should be waived pursuant to 42.709-6; and

(3) Referring the matter to the appropriate criminal investigative organization for review and for appropriate coordination of remedies, if there is evidence that the contractor knowingly submitted unallowable costs.

(b) The contract auditor, in the review and/or the determination of final indirect cost proposals for contracts subject to this section, is responsible for—

(1) Recommending to the contracting officer which costs may be unallowable and subject to the penalties in 42.709-2(a);

(2) Providing rationale and supporting documentation for any recommendation; and

(3) Referring the matter to the appropriate criminal investigative organization for review and for appropriate coordination of remedies, if there is evidence that the contractor knowingly submitted unallowable costs.

Sections it refers to

← 42.709-2 General. · 42.709-4 Assessing the penalty. →

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 42.709-3 Responsibilities · SpendQuery