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FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.3

FAR 49.303-4 Adjustment of indirect costs.

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 how a contracting officer can handle indirect costs when waiting for final indirect cost rates would delay settling a contract. If the contract includes the Allowable Cost and Payment clause, the officer may negotiate indirect costs for the open period or reserve the adjustment for later. When an amount is negotiated this way, the contractor must remove that indirect cost and its related direct costs from the pool and base used for other contracts in the same accounting period.

Applies to: Contracts containing the clause at 52.216-7, Allowable Cost and Payment, and the contractors performing them

What it requires

  • Eliminate the negotiated indirect cost and the related direct costs from the total pool and base used to compute indirect costs for other contracts performed during the applicable accounting period.

Key terms: indirect costs · final settlement · TCO · billing rates · final indirect cost rates

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

The text

(a) If the contract contains the clause at 52.216-7, Allowable Cost and Payment, and it appears that adjustment of indirect costs will unduly delay final settlement, the TCO, after obtaining information from the appropriate audit agency, may agree with the contractor to—

(1) Negotiate the amount of indirect costs for the contract period for which final indirect cost rates have not been negotiated, or to use billing rates as final rates for this period if the billing rates appear reasonable; or

(2) Reserve any indirect cost adjustment in the final settlement agreement, pending establishment of negotiated rates under subpart 42.7.

(b) When an amount of indirect cost is negotiated under subparagraph (a)(1) above, the contractor shall eliminate the indirect cost and the related direct costs on which it was based from the total pool and base used to compute indirect costs for other contracts performed during the applicable accounting period.

Sections it refers to

← 49.303-3 Audit of settlement proposal. · 49.303-5 Final settlement. →

Rule changes for FAR Part 49

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

FAR 49.303-4 Adjustment of indirect costs · SpendQuery