9000-0013_justification_2008

JUSTIFICATION FOR 9000-0013
COST OR PRICING DATA EXEMPTION INFORMATION
A.

Justification.

1. Administrative requirements. The Truth in Negotiations
Act, 10 U.S.C. 2306a and 40 U.S.C. 254(d), require that the
Government obtain certified cost or pricing data from
contractors prior to the award of certain contract actions.
Contractors may be exempt from this requirement under
certain conditions.
2. Uses of information. Certified cost or pricing data
are used by agencies to assure that contract prices are
fair and reasonable.
3. Consideration of information technology. We use
improved information technology to the maximum extent
practicable. Where both the Government agency and
contractors are capable of electronic interchange, the
contractors may submit this information collection
requirement electronically.
4. Efforts to identify duplication. This requirement was
issued under the Federal Acquisition Regulation (FAR) which
has been developed to standardize Federal procurement
practices and eliminate unnecessary duplication.
5. If the collection of information impacts small
businesses or other entities, describe methods used to
minimize burden. The burden applied to small businesses is
the minimum consistent with applicable laws, executive
orders, regulations, and prudent business practices.
6. Describe consequence to Federal program or policy
activities if the collection is not conducted or is
conducted less frequently. Similar information is not
already available to the contracting officer or buyer.
7. Special circumstances for collection. The data for
collection is not collected on a periodic basis, but
whenever the offeror submits a proposal on a contract
covered by the requirement to submit certified cost or
pricing data. The data must be submitted with each offer.
Collection is generally consistent with guidelines in
5 CFR 1320.6.

8. Efforts to consult with persons outside the agency.
Under the procedures established for development of the
FAR, agency and public comments were solicited and each
comment addressed before finalization of the text. A
notice published in the Federal Register at 73 FR 30611, on
May 28, 2008, made this requirement available to the public
and requested comments. No major problems regarding this
requirement were reported.
9. Explanation of any decision to provide any payment or
gift to respondents, other than reenumeration of
contractors or guarantees. Not applicable.
10. Describe assurance of confidentiality provided to
respondents. This information is disclosed only to the
extent consistent with prudent business practices and
current regulations.
11. Additional justification for questions of a sensitive
nature. No sensitive questions are involved.
12 & 13. Estimated total annual public hour and cost
burden. Time required to read and prepare information is
estimated at 3.89 hours per completion.
Estimated respondents/yr .............................
33,332
Responses annually ...................................
x 6
Total annual responses ...............................
199,992
Estimated hrs/response ...............................
x 50.51
Estimated total burden/hrs ........................... 10,101,684
Cost per hour ........................................
x $24
Benefits and overhead ................................
+ 100%
Total cost to public ................................$484,880,832
14. Estimated Cost to the Government. Time required for
Governmentwide review is estimated at .97 hour per
response.
Annual Reporting Burden and Cost
Reviewing time/hr ....................................
.97
Responses/yr ......................................... x 199,992
Review time/yr .......................................
193,992
Average wages/hr .....................................
x $20
Average wages/yr ..................................... $3,879,844
Benefits and overhead ................................ +$ 969,961
Total Government cost ................................ $4,849,805

2
2008 Justification

15. Explain reasons for program changes or adjustments
reported in Item 13 or 14. This submission requests an
extension of OMB approval of an information collection
requirement in the FAR. The information collection in the
FAR remains unchanged.
16. Outline plans for published results of information
collections. Results will not be tabulated or published.
17. Approval not to display expiration date.
applicable.

Not

18.
Explanation of exception to certification statement.
Not applicable.
B.
Methods.

Collections of Information Employing Statistical

Statistical methods are not employed.

3
2008 Justification

SUBPART 15.4—CONTRACT PRICING

Subpart 15.4—Contract Pricing
15.400 Scope of subpart.
This subpart prescribes the cost and price negotiation policies and procedures for pricing negotiated prime contracts
(including subcontracts) and contract modifications, including modifications to contracts awarded by sealed bidding.
15.401 Definitions.
As used in this subpart—
“Price” means cost plus any fee or profit applicable to the
contract type.
“Subcontract” (except as used in 15.407-2) also includes a
transfer of commercial items between divisions, subsidiaries,
or affiliates of a contractor or a subcontractor
(10 U.S.C. 2306a(h)(2) and 41 U.S.C. 254b(h)(2)).
15.402 Pricing policy.
Contracting officers must—
(a) Purchase supplies and services from responsible
sources at fair and reasonable prices. In establishing the reasonableness of the offered prices, the contracting officer must
not obtain more information than is necessary. To the extent
that cost or pricing data are not required by 15.403-4, the contracting officer must generally use the following order of preference in determining the type of information required:
(1) No additional information from the offeror, if the
price is based on adequate price competition, except as provided by 15.403-3(b).
(2) Information other than cost or pricing data:
(i) Information related to prices (e.g., established
catalog or market prices or previous contract prices), relying
first on information available within the Government; second,
on information obtained from sources other than the offeror;
and, if necessary, on information obtained from the offeror.
When obtaining information from the offeror is necessary,
unless an exception under 15.403-1(b)(1) or (2) applies, such
information submitted by the offeror shall include, at a minimum, appropriate information on the prices at which the same
or similar items have been sold previously, adequate for evaluating the reasonableness of the price.
(ii) Cost information, that does not meet the definition of cost or pricing data at 2.101.
(3) Cost or pricing data. The contracting officer should
use every means available to ascertain whether a fair and reasonable price can be determined before requesting cost or
pricing data. Contracting officers must not require unnecessarily the submission of cost or pricing data, because it leads
to increased proposal preparation costs, generally extends
acquisition lead time, and consumes additional contractor and
Government resources.
(b) Price each contract separately and independently and
not—

15.403-1
(1) Use proposed price reductions under other contracts
as an evaluation factor; or
(2) Consider losses or profits realized or anticipated
under other contracts.
(c) Not include in a contract price any amount for a specified contingency to the extent that the contract provides for a
price adjustment based upon the occurrence of that
contingency.
15.403 Obtaining cost or pricing data.
15.403-1 Prohibition on obtaining cost or pricing data
(10 U.S.C. 2306a and 41 U.S.C. 254b).
(a) Cost or pricing data shall not be obtained for acquisitions at or below the simplified acquisition threshold.
(b) Exceptions to cost or pricing data requirements. The
contracting officer shall not require submission of cost or pricing data to support any action (contracts, subcontracts, or
modifications) (but may require information other than cost or
pricing data to support a determination of price reasonableness or cost realism)—
(1) When the contracting officer determines that prices
agreed upon are based on adequate price competition (see
standards in paragraph (c)(1) of this subsection);
(2) When the contracting officer determines that prices
agreed upon are based on prices set by law or regulation (see
standards in paragraph (c)(2) of this subsection);
(3) When a commercial item is being acquired (see standards in paragraph (c)(3) of this subsection);
(4) When a waiver has been granted (see standards in
paragraph (c)(4) of this subsection); or
(5) When modifying a contract or subcontract for commercial items (see standards in paragraph (c)(3) of this
subsection).
(c) Standards for exceptions from cost or pricing data
requirements— (1) Adequate price competition. A price is
based on adequate price competition if— (i) Two or more
responsible offerors, competing independently, submit priced
offers that satisfy the Government’s expressed requirement
and if—
(A) Award will be made to the offeror whose proposal represents the best value (see 2.101) where price is a
substantial factor in source selection; and
(B) There is no finding that the price of the otherwise successful offeror is unreasonable. Any finding that the
price is unreasonable must be supported by a statement of the
facts and approved at a level above the contracting officer;
(ii) There was a reasonable expectation, based on
market research or other assessment, that two or more responsible offerors, competing independently, would submit priced
offers in response to the solicitation’s expressed requirement,
even though only one offer is received from a responsible offeror and if—
(FAC 2005–13)

15.4-1

FAC 2005–13 SEPTEMBER 28, 2006
15.403-2
(A) Based on the offer received, the contracting
officer can reasonably conclude that the offer was submitted
with the expectation of competition, e.g., circumstances indicate that—
(1) The offeror believed that at least one other
offeror was capable of submitting a meaningful offer; and
(2) The offeror had no reason to believe that
other potential offerors did not intend to submit an offer; and
(B) The determination that the proposed price is
based on adequate price competition, is reasonable, and is
approved at a level above the contracting officer; or
(iii) Price analysis clearly demonstrates that the proposed price is reasonable in comparison with current or recent
prices for the same or similar items, adjusted to reflect
changes in market conditions, economic conditions, quantities, or terms and conditions under contracts that resulted from
adequate price competition.
(2) Prices set by law or regulation. Pronouncements in
the form of periodic rulings, reviews, or similar actions of a
governmental body, or embodied in the laws, are sufficient to
set a price.
(3) Commercial items. (i) Any acquisition of an item
that meets the commercial item definition in 2.101, or any
modification, as defined in paragraph (3)(i) of that definition,
that does not change the item from a commercial item to a
noncommercial item, is exempt from the requirement for cost
or pricing data. If the contracting officer determines that an
item claimed to be commercial is, in fact, not commercial and
that no other exception or waiver applies, the contracting
officer must require submission of cost or pricing data.
(ii) The following requirements apply to minor modifications defined in paragraph (3)(ii) of the definition of a
commercial item at 2.101 that do not change the item from a
commercial item to a noncommercial item:
(A) For acquisitions funded by any agency other
than DoD, NASA, or Coast Guard, such modifications of a
commercial item are exempt from the requirement for submission of cost or pricing data.
(B) For acquisitions funded by DoD, NASA, or
Coast Guard, such modifications of a commercial item are
exempt from the requirement for submission of cost or pricing
data provided the total price of all such modifications under a
particular contract action does not exceed the greater of
$500,000 or 5 percent of the total price of the contract.
(C) For acquisitions funded by DoD, NASA, or
Coast Guard such modifications of a commercial item are not
exempt from the requirement for submission of cost or pricing
data on the basis of the exemption provided for at FAR
15.403-1(c)(3) if the total price of all such modifications
under a particular contract action exceeds the greater of
$500,000 or 5 percent of the total price of the contract.
(iii) Any acquisition for noncommercial supplies or
services treated as commercial items at 12.102(f)(1), except
15.4-2

FEDERAL ACQUISITION REGULATION
sole source contracts greater than $16 million, is exempt from
the requirements for cost or pricing data (41 U.S.C. 428a).
(4) Waivers. The head of the contracting activity (HCA)
may, without power of delegation, waive the requirement for
submission of cost or pricing data in exceptional cases. The
authorization for the waiver and the supporting rationale shall
be in writing. The HCA may consider waiving the requirement if the price can be determined to be fair and reasonable
without submission of cost or pricing data. For example, if
cost or pricing data were furnished on previous production
buys and the contracting officer determines such data are sufficient, when combined with updated information, a waiver
may be granted. If the HCA has waived the requirement for
submission of cost or pricing data, the contractor or higher-tier
subcontractor to whom the waiver relates shall be considered
as having been required to provide cost or pricing data. Consequently, award of any lower-tier subcontract expected to
exceed the cost or pricing data threshold requires the submission of cost or pricing data unless—
(i) An exception otherwise applies to the subcontract; or
(ii) The waiver specifically includes the subcontract
and the rationale supporting the waiver for that subcontract.
15.403-2 Other circumstances where cost or pricing data
are not required.
(a) The exercise of an option at the price established at contract award or initial negotiation does not require submission
of cost or pricing data.
(b) Cost or pricing data are not required for proposals used
solely for overrun funding or interim billing price
adjustments.
15.403-3 Requiring information other than cost or
pricing data.
(a) General. (1) The contracting officer is responsible for
obtaining information that is adequate for evaluating the reasonableness of the price or determining cost realism, but the
contracting officer should not obtain more information than is
necessary (see 15.402(a)). If the contracting officer cannot
obtain adequate information from sources other than the offeror, the contracting officer must require submission of information other than cost or pricing data from the offeror that is
adequate to determine a fair and reasonable price
(10 U.S.C. 2306a(d)(1) and 41 U.S.C. 254b(d)(1)). Unless an
exception under 15.403-1(b)(1) or (2) applies, the contracting
officer must require that the information submitted by the offeror include, at a minimum, appropriate information on the
prices at which the same item or similar items have previously
been sold, adequate for determining the reasonableness of the
price. To determine the information an offeror should be
required to submit, the contracting officer should consider the

SUBPART 15.4—CONTRACT PRICING
guidance in Section 3.3, Chapter 3, Volume I, of the Contract
Pricing Reference Guide cited at 15.404-1(a)(7).
(2) The contractor’s format for submitting the information should be used (see 15.403-5(b)(2)).
(3) The contracting officer must ensure that information
used to support price negotiations is sufficiently current to
permit negotiation of a fair and reasonable price. Requests for
updated offeror information should be limited to information
that affects the adequacy of the proposal for negotiations, such
as changes in price lists.

15.403-3
(4) As specified in Section 808 of Public Law 105-261,
an offeror who does not comply with a requirement to submit
information for a contract or subcontract in accordance with
paragraph (a)(1) of this subsection is ineligible for award
unless the HCA determines that it is in the best interest of the
Government to make the award to that offeror, based on consideration of the following:
(i) The effort made to obtain the data.
(ii) The need for the item or service.

(FAC 2005–04)

15.4-2.1

SUBPART 42.7—INDIRECT COST RATES

Subpart 42.7—Indirect Cost Rates
42.700 Scope of subpart.
This subpart prescribes policies and procedures for
establishing—
(a) Billing rates; and
(b) Final indirect cost rates.
42.701 Definition.
“Billing rate,” as used in this subpart, means an indirect
cost rate—
(1) Established temporarily for interim reimbursement
of incurred indirect costs; and
(2) Adjusted as necessary pending establishment of
final indirect cost rates.
42.702 Purpose.
(a) Establishing final indirect cost rates under this subpart
provides—
(1) Uniformity of approach with a contractor when
more than one contract or agency is involved;
(2) Economy of administration; and
(3) Timely settlement under cost-reimbursement
contracts.
(b) Establishing billing rates provides a method for interim
reimbursement of indirect costs at estimated rates subject to
adjustment during contract performance and at the time the
final indirect cost rates are established.
42.703 General.
42.703-1 Policy.
(a) A single agency (see 42.705-1) shall be responsible for
establishing final indirect cost rates for each business unit.
These rates shall be binding on all agencies and their contracting offices, unless otherwise specifically prohibited by statute. An agency shall not perform an audit of indirect cost rates
when the contracting officer determines that the objectives of
the audit can reasonably be met by accepting the results of an
audit that was conducted by any other department or agency
of the Federal Government (10 U.S.C. 2313(d) and
41 U.S.C. 254d(d)).
(b) Billing rates and final indirect cost rates shall be used
in reimbursing indirect costs under cost-reimbursement contracts and in determining progress payments under fixed-price
contracts.
(c) To ensure compliance with 10 U.S.C. 2324(a) and
41 U.S.C. 256(a)—
(1) Final indirect cost rates shall be used for contract
closeout for a business unit, unless the quick-closeout procedure in 42.708 is used. These final rates shall be binding for
all cost-reimbursement contracts at the business unit, subject

42.703-2
to any specific limitation in a contract or advance agreement;
and
(2) Established final indirect cost rates shall be used in
negotiating the final price of fixed-price incentive and fixedprice redeterminable contracts and in other situations requiring that indirect costs be settled before contract prices are
established, unless the quick-closeout procedure in 42.708 is
used.1010
42.703-2 Certificate of indirect costs.
(a) General. In accordance with 10 U.S.C. 2324(h) and
41 U.S.C. 256(h), a proposal shall not be accepted and no
agreement shall be made to establish final indirect cost rates
unless the costs have been certified by the contractor.
(b) Waiver of certification. (1) The agency head, or designee, may waive the certification requirement when—
(i) It is determined to be in the interest of the United
States; and
(ii) The reasons for the determination are put in writing and made available to the public.
(2) A waiver may be appropriate for a contract with—
(i) A foreign government or international organization, such as a subsidiary body of the North Atlantic Treaty
Organization;
(ii) A state or local government subject to OMB
Circular A-87;
(iii) An educational institution subject to OMB
Circular A-21; and
(iv) A nonprofit organization subject to OMB
Circular A-122.
(c) Failure to certify. (1) If the contractor has not certified
its proposal for final indirect cost rates and a waiver is not
appropriate, the contracting officer may unilaterally establish
the rates.
(2) Rates established unilaterally should be—
(i) Based on audited historical data or other available
data as long as unallowable costs are excluded; and
(ii) Set low enough to ensure that unallowable costs
will not be reimbursed.
(d) False certification. The contracting officer should consult with legal counsel to determine appropriate action when
a contractor’s certificate of final indirect costs is thought to be
false.
(e) Penalties for unallowable costs. 10 U.S.C. 2324(a)
through (d) and 41 U.S.C. 256(a) through (d) prescribe penalties for submission of unallowable costs in final indirect cost
rate proposals (see 42.709 for penalties and contracting officer
responsibilities).
(f) Contract clause. (1) Except as provided in
paragraph (f)(2) of this subsection, the clause at 52.242-4,
Certification of Final Indirect Costs, shall be incorporated into
all solicitations and contracts which provide for establishment
of final indirect cost rates.
42.7-1

42.704
(2) The Department of Energy may provide an alternate
clause in its agency supplement for its Management and Operating contracts.
42.704 Billing rates.
(a) The contracting officer (or cognizant Federal agency
official) or auditor responsible under 42.705 for establishing
the final indirect cost rates also shall be responsible for determining the billing rates.
(b) The contracting officer (or cognizant Federal agency
official) or auditor shall establish billing rates on the basis of
information resulting from recent review, previous rate audits
or experience, or similar reliable data or experience of other
contracting activities. In establishing billing rates, the contracting officer (or cognizant Federal agency official) or auditor should ensure that the billing rates are as close as possible
to the final indirect cost rates anticipated for the contractor’s
fiscal period, as adjusted for any unallowable costs. When the
contracting officer (or cognizant Federal agency official) or
auditor determines that the dollar value of contracts requiring
use of billing rates does not warrant submission of a detailed
billing rate proposal, the billing rates may be established by
making appropriate adjustments from the prior year’s indirect
cost experience to eliminate unallowable and nonrecurring
costs and to reflect new or changed conditions.
(c) Once established, billing rates may be prospectively or
retroactively revised by mutual agreement of the contracting
officer (or cognizant Federal agency official) or auditor and
the contractor at either party’s request, to prevent substantial
overpayment or underpayment. When agreement cannot be
reached, the billing rates may be unilaterally determined by
the contracting officer (or cognizant Federal agency official).
(d) The elements of indirect cost and the base or bases used
in computing billing rates shall not be construed as determinative of the indirect costs to be distributed or of the bases of
distribution to be used in the final settlement.
(e) When the contractor provides to the cognizant contracting officer the certified final indirect cost rate proposal in
accordance with 42.705-1(b) or 42.705-2(b), the contractor
and the Government may mutually agree to revise billing rates
to reflect the proposed indirect cost rates, as approved by the
Government to reflect historically disallowed amounts from
prior years’ audits, until the proposal has been audited and settled. The historical decrement will be determined by either the
cognizant contracting officer (42.705-1(b)) or the cognizant
auditor (42.705-2(b)).
42.705 Final indirect cost rates.
(a) Final indirect cost rates shall be established on the basis
of—
(1) Contracting officer determination procedure (see
42.705-1), or
(2) Auditor determination procedure (see 42.705-2).
42.7-2

FEDERAL ACQUISITION REGULATION
(b) Within 120 days (or longer period, if approved in writing by the contracting officer,) after settlement of the final
annual indirect cost rates for all years of a physically complete
contract, the contractor must submit a completion invoice or
voucher reflecting the settled amounts and rates. To determine
whether a period longer than 120 days is appropriate, the contracting officer should consider whether there are extenuating
circumstances, such as the following:
(1) Pending closeout of subcontracts awaiting Government audit.
(2) Pending contractor, subcontractor, or Government
claims.
(3) Delays in the disposition of Government property.
(4) Delays in contract reconciliation.
(5) Any other pertinent factors.
(c)(1) If the contractor fails to submit a completion invoice
or voucher within the time specified in paragraph (b) of this
section, the contracting officer may—
(i) Determine the amounts due to the contractor
under the contract; and
(ii) Record this determination in a unilateral modification to the contract.
(2) This contracting officer determination must be
issued as a final decision in accordance with 33.211.
42.705-1 Contracting officer determination procedure.
(a) Applicability and responsibility. Contracting officer
determination shall be used for the following, with the indicated cognizant contracting officer (or cognizant Federal
agency official) responsible for establishing the final indirect
cost rates:
(1) Business units of a multidivisional corporation
under the cognizance of a corporate administrative contracting officer (see Subpart 42.6), with that officer responsible for
the determination, assisted, as required, by the administrative
contracting officers, assigned to the individual business units.
Negotiations may be conducted on a coordinated or centralized basis, depending upon the degree of centralization within
the contractor’s organization.
(2) Business units not under the cognizance of a corporate administrative contracting officer, but having a resident
administrative contracting officer (see 42.602), with that
officer responsible for the determination. For this purpose, a
nonresident administrative contracting officer is considered
as resident if at least 75 percent of the administrative contracting officer’s time is devoted to a single contractor.
(3) For business units not included in paragraph (a)(1)
or (a)(2) of this subsection, the contracting officer (or cognizant Federal agency official) will determine whether the rates
will be contracting officer or auditor determined.
(4) Educational institutions (see 42.705-3).
(5) State and local governments (see 42.705-4).

FAC 2005–17 JUNE 14, 2007
SUBPART 42.7—INDIRECT COST RATES
(6) Nonprofit organizations other than educational and
state and local governments (see 42.705-5).
(b) Procedures. (1) In accordance with the Allowable Cost
and Payment clause at 52.216-7, the contractor shall submit to
the contracting officer (or cognizant Federal agency official)
and to the cognizant auditor a final indirect cost rate proposal.
The required content of the proposal and supporting data will
vary depending on such factors as business type, size, and
accounting system capabilities. The contractor, contracting
officer, and auditor must work together to make the proposal,
audit, and negotiation process as efficient as possible. Accordingly, each contractor shall submit an adequate proposal to the
contracting officer (or cognizant Federal agency official) and
auditor within the 6-month period following the expiration of
each of its fiscal years. Reasonable extensions, for exceptional
circumstances only, may be requested in writing by the contractor and granted in writing by the contracting officer. A
contractor shall support its proposal with adequate supporting
data. For guidance on what generally constitutes an adequate
final indirect cost rate proposal and supporting data, contractors should refer to the Model Incurred Cost Proposal in
Chapter 6 of the Defense Contract Audit Agency Pamphlet
No. 7641.90, Information for Contractors, available via the
Internet at http://www.dcaa.mil.
(2) The auditor shall submit to the contracting officer
(or cognizant Federal agency official) an advisory audit report
identifying any relevant advance agreements or restrictive
terms of specific contracts.
(3) The contracting officer (or cognizant Federal agency
official) shall head the Government negotiating team, which
includes the cognizant auditor and technical or functional personnel as required. Contracting offices having significant dollar interest shall be invited to participate in the negotiation and
in the preliminary discussion of critical issues. Individuals or
offices that have provided a significant input to the Government position should be invited to attend.
(4) The Government negotiating team shall develop a
negotiation position. Pursuant to 10 U.S.C. 2324(f) and
41 U.S.C. 256(f), the contracting officer shall—
(i) Not resolve any questioned costs until
obtaining—
(A) Adequate documentation on the costs; and
(B) The contract auditor’s opinion on the
allowability of the costs.
(ii) Whenever possible, invite the contract auditor to
serve as an advisor at any negotiation or meeting with the contractor on the determination of the contractor’s final indirect
cost rates.
(5) The cognizant contracting officer shall—
(i) Conduct negotiations;
(ii) Prepare a written indirect cost rate agreement
conforming to the requirements of the contracts;

42.705-2
(iii) Prepare, sign, and place in the contractor general
file (see 4.801(c)(3)) a negotiation memorandum covering—
(A) The disposition of significant matters in the
advisory audit report;
(B) Reconciliation of all costs questioned, with
identification of items and amounts allowed or disallowed in
the final settlement as well as the disposition of period costing
or allocability issues;
(C) Reasons why any recommendations of the
auditor or other Government advisors were not followed; and
(D) Identification of cost or pricing data submitted during the negotiations and relied upon in reaching a settlement; and
(iv) Distribute resulting documents in accordance
with 42.706.
(v) Notify the contractor of the individual costs
which were considered unallowable and the respective
amounts of the disallowance.
42.705-2 Auditor determination procedure.
(a) Applicability and responsibility. (1) The cognizant
Government auditor shall establish final indirect cost rates for
business units not covered in 42.705-1(a).
(2) In addition, auditor determination may be used for
business units that are covered in 42.705-1(a) when the contracting officer (or cognizant Federal agency official) and
auditor agree that the indirect costs can be settled with little
difficulty and any of the following circumstances apply:
(i) The business unit has primarily fixed-price contracts, with only minor involvement in cost-reimbursement
contracts.
(ii) The administrative cost of contracting officer
determination would exceed the expected benefits.
(iii) The business unit does not have a history of disputes and there are few cost problems.
(iv) The contracting officer (or cognizant Federal
agency official) and auditor agree that special circumstances
require auditor determination.
(b) Procedures. (1) The contractor shall submit to the cognizant contracting officer (or cognizant Federal agency official) and auditor a final indirect cost rate proposal in
accordance with 42.705-1(b)(1).
(2) Upon receipt of a proposal, the auditor shall—
(i) Audit the proposal and seek agreement on indirect
costs with the contractor;
(ii) Prepare an indirect cost rate agreement conforming to the requirements of the contracts. The agreement shall
be signed by the contractor and the auditor;
(iii) If agreement with the contractor is not reached,
forward the audit report to the contracting officer (or cognizant Federal agency official) identified in the Directory of
Contract Administration Services Components (see 42.203),
who will then resolve the disagreement; and
42.7-3

FAC 2005–17 JUNE 14, 2007
42.705-3
(iv) Distribute resulting documents in accordance
with 42.706.
42.705-3 Educational institutions.
(a) General. (1) Postdetermined final indirect cost rates
shall be used in the settlement of indirect costs for all costreimbursement contracts with educational institutions, unless
predetermined final indirect cost rates are authorized and used
(see paragraph (b) of this subsection).
(2) OMB Circular No. A-21, Cost Principles for Educational Institutions, assigns each educational institution to a
single Government agency for the negotiation of indirect cost
rates and provides that those rates shall be accepted by all Federal agencies. Cognizant Government agencies and educational institutions are listed in the Directory of Federal
Contract Audit Offices (see 42.103).
(3) The cognizant agency shall establish the billing rates
and final indirect cost rates at the educational institution, consistent with the requirements of this subpart, Subpart 31.3,
and the OMB Circular. The agency shall follow the procedures outlined in 42.705-1(b).
(4) If the cognizant agency is unable to reach agreement
with an institution, the appeals system of the cognizant agency
shall be followed for resolution of the dispute.
(b) Predetermined final indirect cost rates. (1)
Under
cost-reimbursement research and development contracts with
universities, colleges, or other educational institutions
(41 U.S.C. 254a), payment for reimbursable indirect costs
may be made on the basis of predetermined final indirect cost
rates. The cognizant agency is not required to establish predetermined rates, but if they are established, their use must be
extended to all the institution’s Government contracts.
(2) In deciding whether the use of predetermined rates
would be appropriate for the educational institution concerned, the agency should consider both the stability of the
institution’s indirect costs and bases over a period of years and
any anticipated changes in the amount of the direct and indirect costs.
(3) Unless their use is approved at a level in the agency
(see paragraph (a)(2) of this subsection) higher than the contracting officer, predetermined rates shall not be used when—
(i) There has been no recent audit of the indirect
costs;
(ii) There have been frequent or wide fluctuations in
the indirect cost rates and the bases over a period of years; or
(iii) The estimated reimbursable costs for any individual contract are expected to exceed $1 million annually.
(4)(i) If predetermined rates are to be used and no rates
have been previously established for the institution’s current
fiscal year, the agency shall obtain from the institution a proposal for predetermined rates.
(ii) If the proposal is found to be generally acceptable, the agency shall negotiate the predetermined rates with
42.7-4

FEDERAL ACQUISITION REGULATION
the institution. The rates should be based on an audit of the
institution’s costs for the year immediately preceding the year
in which the rates are being negotiated. If this is not possible,
an earlier audit may be used, but appropriate steps should be
taken to identify and evaluate significant variations in costs
incurred or in bases used that may have a bearing on the reasonableness of the proposed rates. However, in the case of
smaller contracts (i.e.,contracts that do not exceed the simplified acquisition threshold), an audit made at an earlier date is
acceptable if—
(A) There have been no significant changes in the
contractor’s organization; and
(B) It is reasonably apparent that another audit
would have little effect on the rates finally agreed upon and
the potential for overpayment of indirect cost is relatively
insignificant.
(5) If predetermined rates are used—
(i) The contracting officer shall include the negotiated rates and bases in the contract Schedule; and
(ii) See 16.307(g), which prescribes the clause at
52.216-15, Predetermined Indirect Cost Rates.
(6) Predetermined indirect cost rates shall be applicable
for a period of not more than four years. The agency shall
obtain the contractor’s proposal for new predetermined rates
sufficiently in advance so that the new rates, based on current
data, may be promptly negotiated near the beginning of the
new fiscal year or other period agreed to by the parties (see
paragraphs (b) and (d) of the clause at 52.216-15, Predetermined Indirect Cost Rates).
(7) Contracting officers shall use billing rates established by the agency to reimburse the contractor for work performed during a period not covered by predetermined rates.
42.705-4 State and local governments.
OMB Circular No. A-87 concerning cost principles for
state and local governments (see Subpart 31.6) establishes the
cognizant agency concept and procedures for determining a
cognizant agency for approving state and local government
indirect costs associated with federally-funded programs and
activities. The indirect cost rates negotiated by the cognizant
agency will be used by all Federal agencies that also award
contracts to these same state and local governments.
42.705-5 Nonprofit organizations other than educational
and state and local governments.
(See OMB Circular No. A-122.)
42.706 Distribution of documents.
(a) The contracting officer or auditor shall promptly distribute executed copies of the indirect cost rate agreement to
the contractor and to each affected contracting agency and
shall provide copies of the agreement for the contract files, in

FAC 2005–17 JUNE 14, 2007
SUBPART 42.7—INDIRECT COST RATES
accordance with the guidance for contract modifications in
Subpart 4.2, Contract Distribution.
(b) Copies of the negotiation memorandum prepared under
contracting officer determination or audit report prepared
under auditor determination shall be furnished, as appropriate,
to the contracting offices and Government audit offices.
42.707 Cost-sharing rates and limitations on indirect cost
rates.
(a) Cost-sharing arrangements, when authorized, may call
for the contractor to participate in the costs of the contract by
accepting indirect cost rates lower than the anticipated actual
rates. In such cases, a negotiated indirect cost rate ceiling may
be incorporated into the contract for prospective application.
For cost sharing under research and development contracts,
see 35.003(b).
(b)(1) Other situations may make it prudent to provide a
final indirect cost rate ceiling in a contract. Examples of such
circumstances are when the proposed contractor—
(i) Is a new or recently reorganized company, and
there is no past or recent record of incurred indirect costs;
(ii) Has a recent record of a rapidly increasing indirect cost rate due to a declining volume of sales without a commensurate decline in indirect expenses; or
(iii) Seeks to enhance its competitive position in a
particular circumstance by basing its proposal on indirect cost
rates lower than those that may reasonably be expected to
occur during contract performance, thereby causing a cost
overrun.
(2) In such cases, an equitable ceiling covering the final
indirect cost rates may be negotiated and specified in the
contract.
(c) When ceiling provisions are utilized, the contract shall
also provide that—
(1) The Government will not be obligated to pay any
additional amount should the final indirect cost rates exceed
the negotiated ceiling rates, and
(2) In the event the final indirect cost rates are less than
the negotiated ceiling rates, the negotiated rates will be
reduced to conform with the lower rates.
42.708 Quick-closeout procedure.
(a) The contracting officer responsible for contract closeout shall negotiate the settlement of indirect costs for a specific contract, in advance of the determination of final indirect
cost rates, if—
(1) The contract is physically complete;
(2) The amount of unsettled indirect cost to be allocated
to the contract is relatively insignificant. Indirect cost
amounts will be considered insignificant when—
(i) The total unsettled indirect cost to be allocated to
any one contract does not exceed $1,000,000; and

42.709-1
(ii) Unless otherwise provided in agency procedures,
the cumulative unsettled indirect costs to be allocated to one
or more contracts in a single fiscal year do not exceed
15 percent of the estimated, total unsettled indirect costs allocable to cost-type contracts for that fiscal year. The contracting officer may waive the 15 percent restriction based upon a
risk assessment that considers the contractor’s accounting,
estimating, and purchasing systems; other concerns of the
cognizant contract auditors; and any other pertinent information; and
(3) Agreement can be reached on a reasonable estimate
of allocable dollars.
(b) Determinations of final indirect costs under the quickcloseout procedure provided for by the Allowable Cost and
Payment clause at 52.216-7 shall be final for the contract it
covers and no adjustment shall be made to other contracts for
over- or under-recoveries of costs allocated or allocable to the
contract covered by the agreement.
(c) Indirect cost rates used in the quick closeout of a contract shall not be considered a binding precedent when establishing the final indirect cost rates for other contracts.
42.709 Scope.
(a) This section implements 10 U.S.C. 2324(a) through (d)
and 41 U.S.C. 256(a) through (d). 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
$650,000, except fixed-price contracts without cost incentives
or any firm-fixed-price contracts for the purchase of commercial items.
42.709-1 General.
(a) The following penalties apply to contracts covered by
this section:
(1) If the indirect cost is expressly unallowable under a
cost principle in the FAR, or an executive agency supplement
to the FAR, that defines the allowability of specific selected
costs, the penalty is equal to—
(i) The amount of the disallowed costs allocated to
contracts that are subject to this section for which an indirect
cost proposal has been submitted; plus
(ii) Interest on the paid portion, if any, of the
disallowance.
(2) If the indirect cost was determined to be unallowable
for that contractor before proposal submission, the penalty is
two times the amount in paragraph (a)(1)(i) of this section.
(b) These penalties are in addition to other administrative,
civil, and criminal penalties provided by law.
42.7-5

FAC 2005–13 SEPTEMBER 28, 2006
42.709-2

FEDERAL ACQUISITION REGULATION

(c) It is not necessary for unallowable costs to have been
paid to the contractor in order to assess a penalty.

rate from demanding repayment of any paid portion of the disallowed cost.)

42.709-2 Responsibilities.
(a) The cognizant contracting officer is responsible for—
(1) Determining whether the penalties in 42.709-1(a)
should be assessed;
(2) Determining whether such penalties should be
waived pursuant to 42.709-5; 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
42.709-1(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.

42.709-4 Computing interest.
For 42.709-1(a)(1)(ii), compute interest on any paid portion of the disallowed cost as follows:
(a) Consider the overpayment to have occurred, and interest to have begun accumulating, from the midpoint of the contractor’s fiscal year. Use an alternate equitable method if the
cost was not paid evenly over the fiscal year.
(b) Use the interest rate specified by the Secretary of the
Treasury pursuant to Pub. L. 92-41 (85 Stat. 97).
(c) Compute interest from the date of overpayment to the
date of the demand letter for payment of the penalty.
(d) Determine the paid portion of the disallowed costs in
consultation with the contract auditor.

42.709-3 Assessing the penalty.
Unless a waiver is granted pursuant to 42.709-5, the cognizant contracting officer shall—
(a) Assess the penalty in 42.709-1(a)(1), when the submitted cost is expressly unallowable under a cost principle in the
FAR or an executive agency supplement that defines the
allowability of specific selected costs; or
(b) Assess the penalty in 42.709-1(a)(2), when the submitted cost was determined to be unallowable for that contractor
prior to submission of the proposal. Prior determinations of
unallowability may be evidenced by—
(1) A DCAA Form 1, Notice of Contract Costs Suspended and/or Disapproved (see 48 CFR 242.705-2), or any
similar notice which the contractor elected not to appeal and
was not withdrawn by the cognizant Government agency;
(2) A contracting officer final decision which was not
appealed;
(3) A prior executive agency Board of Contract Appeals
or court decision involving the contractor, which upheld the
cost disallowance; or
(4) A determination or agreement of unallowability
under 31.201-6.
(c) Issue a final decision (see 33.211) which includes a
demand for payment of any penalty assessed under
paragraph (a) or (b) of this section. The letter shall state that
the determination is a final decision under the Disputes clause
of the contract. (Demanding payment of the penalty is sepa42.7-6

42.709-5 Waiver of the penalty.
The cognizant contracting officer shall waive the penalties
at 42.709-1(a) when—
(a) The contractor withdraws the proposal before the Government formally initiates an audit of the proposal and the
contractor submits a revised proposal (an audit will be deemed
to be formally initiated when the Government provides the
contractor with written notice, or holds an entrance conference, indicating that audit work on a specific final indirect
cost proposal has begun);
(b) The amount of the unallowable costs under the proposal
which are subject to the penalty is $10,000 or less (i.e., if the
amount of expressly or previously determined unallowable
costs which would be allocated to the contracts specified in
42.709(b) is $10,000 or less); or
(c) The contractor demonstrates, to the cognizant contracting officer’s satisfaction, that—
(1) It has established policies and personnel training and
an internal control and review system that provide assurance
that unallowable costs subject to penalties are precluded from
being included in the contractor’s final indirect cost rate proposals (e.g., the types of controls required for satisfactory participation in the Department of Defense sponsored selfgovernance programs, specific accounting controls over indirect costs, compliance tests which demonstrate that the controls are effective, and Government audits which have not
disclosed recurring instances of expressly unallowable costs);
and
(2) The unallowable costs subject to the penalty were
inadvertently incorporated into the proposal; i.e., their inclusion resulted from an unintentional error, notwithstanding the
exercise of due care.
42.709-6 Contract clause.
Use the clause at 52.242-3, Penalties for Unallowable
Costs, in all solicitations and contracts over $650,000 except

FAC 2005–17 JUNE 14, 2007
SUBPART 42.7—INDIRECT COST RATES
fixed-price contracts without cost incentives or any firmfixed-price contract for the purchase of commercial items.
Generally, covered contracts are those which contain one of

42.709-6
the clauses at 52.216-7, 52.216-16, or 52.216-17, or a similar
clause from an executive agency’s supplement to the FAR.

42.7-7

52.214-28

FEDERAL ACQUISITION REGULATION

the Contracting Officer based upon the facts shall be allowed
against the amount of a contract price reduction if—
(A) The Contractor certifies to the Contracting
Officer that, to the best of the Contractor’s knowledge and
belief, the Contractor is entitled to the offset in the amount
requested; and
(B) The Contractor proves that the cost or pricing
data were available before the date of agreement on the price
of the contract (or price of the modification) and that the data
were not submitted before such date.
(ii) An offset shall not be allowed if—
(A) The understated data was known by the Contractor to be understated when the Certificate of Current Cost
or Pricing Data was signed; or
(B) The Government proves that the facts demonstrate that the contract price would not have increased in the
amount to be offset even if the available data had been submitted before the date of agreement on price.
(e) If any reduction in the contract price under this clause
reduces the price of items for which payment was made prior
to the date of the modification reflecting the price reduction,
the Contractor shall be liable to and shall pay the United States
at the time such overpayment is repaid—
(1) Simple interest on the amount of such overpayment
to be computed from the date(s) of overpayment to the Contractor to the date the Government is repaid by the Contractor
at the applicable underpayment rate effective for each quarter
prescribed by the Secretary of the Treasury under
26 U.S.C. 6621(a)(2); and
(2) A penalty equal to the amount of the overpayment,
if the Contractor or subcontractor knowingly submitted cost
or pricing data which were incomplete, inaccurate, or
noncurrent.

date of award, whichever is later; or before pricing any subcontract modifications involving aggregate increases and/or
decreases in costs, plus applicable profits, expected to exceed
the threshold for submission of cost or pricing data at
FAR 15.403-4(a)(1), the Contractor shall require the subcontractor to submit cost or pricing data (actually or by specific
identification in writing), unless an exception under
FAR 15.403-1(b) applies.
(c) The Contractor shall require the subcontractor to certify
in
substantially
the
form
prescribed
in
FAR subsection 15.406-2 that, to the best of its knowledge
and belief, the data submitted under paragraph (b) of this
clause were accurate, complete, and current as of the date of
agreement on the negotiated price of the subcontract or subcontract modification.
(d) The Contractor shall insert the substance of this clause,
including this paragraph (d), in each subcontract that, when
entered into, exceeds the threshold for submission of cost or
pricing data at FAR 15.403-4(a)(1).

(End of clause)

(End of clause)

52.214-28 Subcontractor Cost or Pricing Data—
Modifications—Sealed Bidding.
As prescribed in 14.201-7(c), insert the following clause in
solicitations and contracts:
SUBCONTRACTOR COST OR PRICING DATA—
MODIFICATIONS—SEALED BIDDING (OCT 1997)
(a) The requirements of paragraphs (b) and (c) of this
clause shall—
(1) Become operative only for any modification to this
contract involving aggregate increases and/or decreases in
costs, plus applicable profits, expected to exceed the threshold
for submission of cost or pricing data at FAR 15.403-4(a)(1);
and
(2) Be limited to such modifications.
(b) Before awarding any subcontract expected to exceed
the threshold for submission of cost or pricing data at
FAR 15.403-4(a)(1), on the date of agreement on price or the
52.2-50

(End of clause)
52.214-29 Order of Precedence—Sealed Bidding.
As prescribed in 14.201-7(d), insert the following clause:
ORDER OF PRECEDENCE—SEALED BIDDING (JAN 1986)
Any inconsistency in this solicitation or contract shall be
resolved by giving precedence in the following order:
(a) The Schedule (excluding the specifications);
(b) Representations and other instructions;
(c) Contract clauses;
(d) Other documents, exhibits, and attachments; and
(e) The specifications.

52.214-30 [Reserved]
52.214-31 Facsimile Bids.
As prescribed in 14.201-6(v), insert the following
provision:
FACSIMILE BIDS (DEC 1989)
(a) Definition. “Facsimile bid,” as used in this solicitation,
means a bid, modification of a bid, or withdrawal of a bid that
is transmitted to and received by the Government via electronic equipment that communicates and reproduces both
printed and handwritten material.
(b) Bidders may submit facsimile bids as responses to this
solicitation. These responses must arrive at the place and by
the time, specified in the solicitation.
(c) Facsimile bids that fail to furnish required representations or information or that reject any of the terms, conditions,

SUBPART 52.2—TEXT OF PROVISIONS AND CLAUSES
(c) Any reduction in the contract price under paragraph (b)
of this clause due to defective data from a prospective subcontractor that was not subsequently awarded the subcontract
shall be limited to the amount, plus applicable overhead and
profit markup, by which—
(1) The actual subcontract; or
(2) The actual cost to the Contractor, if there was no subcontract, was less than the prospective subcontract cost estimate submitted by the Contractor; provided, that the actual
subcontract price was not itself affected by defective cost or
pricing data.
(d)(1) If the Contracting Officer determines under
paragraph (b) of this clause that a price or cost reduction
should be made, the Contractor agrees not to raise the following matters as a defense:
(i) The Contractor or subcontractor was a sole source
supplier or otherwise was in a superior bargaining position
and thus the price of the contract would not have been modified even if accurate, complete, and current cost or pricing
data had been submitted.
(ii) The Contracting Officer should have known that
the cost or pricing data in issue were defective even though the
Contractor or subcontractor took no affirmative action to
bring the character of the data to the attention of the Contracting Officer.
(iii) The contract was based on an agreement about
the total cost of the contract and there was no agreement about
the cost of each item procured under the contract.
(iv) The Contractor or subcontractor did not submit
a Certificate of Current Cost or Pricing Data.
(2)(i) Except as prohibited by paragraph (d)(2)(ii) of
this clause, an offset in an amount determined appropriate by
the Contracting Officer based upon the facts shall be allowed
against the amount of a contract price reduction if—
(A) The Contractor certifies to the Contracting
Officer that, to the best of the Contractor’s knowledge and
belief, the Contractor is entitled to the offset in the amount
requested; and
(B) The Contractor proves that the cost or pricing
data were available before the “as of” date specified on its
Certificate of Current Cost or Pricing Data, and that the data
were not submitted before such date.
(ii) An offset shall not be allowed if—
(A) The understated data were known by the Contractor to be understated before the “as of” date specified on
its Certificate of Current Cost or Pricing Data; or
(B) The Government proves that the facts demonstrate that the contract price would not have increased in the
amount to be offset even if the available data had been submitted before the “as of” date specified on its Certificate of
Current Cost or Pricing Data.
(e) If any reduction in the contract price under this clause
reduces the price of items for which payment was made prior

52.215-13
to the date of the modification reflecting the price reduction,
the Contractor shall be liable to and shall pay the United States
at the time such overpayment is repaid—
(1) Simple interest on the amount of such overpayment
to be computed from the date(s) of overpayment to the Contractor to the date the Government is repaid by the Contractor
at the applicable underpayment rate effective for each quarter
prescribed by the Secretary of the Treasury under
26 U.S.C. 6621(a)(2); and
(2) A penalty equal to the amount of the overpayment,
if the Contractor or subcontractor knowingly submitted cost
or pricing data that were incomplete, inaccurate, or
noncurrent.
(End of clause)
52.215-12 Subcontractor Cost or Pricing Data.
As prescribed in 15.408(d), insert the following clause:
SUBCONTRACTOR COST OR PRICING DATA (OCT 1997)
(a) Before awarding any subcontract expected to exceed
the threshold for submission of cost or pricing data at
FAR 15.403-4, on the date of agreement on price or the date
of award, whichever is later; or before pricing any subcontract
modification involving a pricing adjustment expected to
exceed the threshold for submission of cost or pricing data at
FAR 15.403-4, the Contractor shall require the subcontractor
to submit cost or pricing data (actually or by specific identification in writing), unless an exception under FAR 15.403-1
applies.
(b) The Contractor shall require the subcontractor to certify
in substantially the form prescribed in FAR 15.406-2 that, to
the best of its knowledge and belief, the data submitted under
paragraph (a) of this clause were accurate, complete, and current as of the date of agreement on the negotiated price of the
subcontract or subcontract modification.
(c) In each subcontract that exceeds the threshold for submission of cost or pricing data at FAR 15.403-4, when entered
into, the Contractor shall insert either—
(1) The substance of this clause, including this
paragraph (c), if paragraph (a) of this clause requires submission of cost or pricing data for the subcontract; or
(2) The substance of the clause at FAR 52.215-13, Subcontractor Cost or Pricing Data—Modifications.
(End of clause)
52.215-13 Subcontractor Cost or Pricing Data—
Modifications.
As prescribed in 15.408(e), insert the following clause:
SUBCONTRACTOR COST OR PRICING DATA—
MODIFICATIONS (OCT 1997)
52.2-59

52.215-14

FEDERAL ACQUISITION REGULATION

(a) The requirements of paragraphs (b) and (c) of this
clause shall—
(1) Become operative only for any modification to this
contract involving a pricing adjustment expected to exceed
the threshold for submission of cost or pricing data at
FAR 15.403-4; and
(2) Be limited to such modifications.
(b) Before awarding any subcontract expected to exceed
the threshold for submission of cost or pricing data at
FAR 15.403-4, on the date of agreement on price or the date
of award, whichever is later; or before pricing any subcontract
modification involving a pricing adjustment expected to
exceed the threshold for submission of cost or pricing data at
FAR 15.403-4, the Contractor shall require the subcontractor
to submit cost or pricing data (actually or by specific identification in writing), unless an exception under FAR 15.403-1
applies.
(c) The Contractor shall require the subcontractor to certify
in substantially the form prescribed in FAR 15.406-2 that, to
the best of its knowledge and belief, the data submitted under
paragraph (b) of this clause were accurate, complete, and current as of the date of agreement on the negotiated price of the
subcontract or subcontract modification.
(d) The Contractor shall insert the substance of this clause,
including this paragraph (d), in each subcontract that exceeds
the threshold for submission of cost or pricing data at
FAR 15.403-4 on the date of agreement on price or the date of
award, whichever is later.
(End of clause)
52.215-14 Integrity of Unit Prices.
As prescribed in 15.408(f)(1), insert the following clause:
INTEGRITY OF UNIT PRICES (OCT 1997)
(a) Any proposal submitted for the negotiation of prices for
items of supplies shall distribute costs within contracts on a
basis that ensures that unit prices are in proportion to the
items’ base cost (e.g., manufacturing or acquisition costs).
Any method of distributing costs to line items that distorts unit
prices shall not be used. For example, distributing costs
equally among line items is not acceptable except when there
is little or no variation in base cost. Nothing in this paragraph
requires submission of cost or pricing data not otherwise
required by law or regulation.
(b) When requested by the Contracting Officer, the Offeror/Contractor shall also identify those supplies that it will
not manufacture or to which it will not contribute significant
value.
(c) The Contractor shall insert the substance of this clause,
less paragraph (b), in all subcontracts for other than: acquisitions at or below the simplified acquisition threshold in
FAR Part 2; construction or architect-engineer services under
FAR Part 36; utility services under FAR Part 41; services
52.2-60

where supplies are not required; commercial items; and petroleum products.
(End of clause)
Alternate I (Oct 1997). As prescribed in 15.408(f)(2), substitute the following paragraph (b) for paragraph (b) of the
basic clause:
(b) The Offeror/Contractor shall also identify those supplies that it will not manufacture or to which it will not contribute significant value.

52.215-15 Pension Adjustments and Asset Reversions.
As prescribed in 15.408(g), insert the following clause:
PENSION ADJUSTMENTS AND ASSET REVERSIONS
(OCT 2004)
(a) The Contractor shall promptly notify the Contracting
Officer in writing when it determines that it will terminate a
defined-benefit pension plan or otherwise recapture such pension fund assets.
(b) For segment closings, pension plan terminations, or
curtailment of benefits, the amount of the adjustment shall
be—
(1) For contracts and subcontracts that are subject to full
coverage under the Cost Accounting Standards (CAS) Board
rules and regulations (48 CFR Chapter 99), the amount measured, assigned, and allocated in accordance with
48 CFR 9904.413-50(c)(12); and
(2) For contracts and subcontracts that are not subject to
full coverage under the CAS, the amount measured, assigned,
and
allocated
in
accordance
with
48 CFR 9904.413-50(c)(12), except the numerator of the
fraction at 48 CFR 9904.413-50(c)(12)(vi) shall be the sum of
the pension plan costs allocated to all non-CAS covered contracts and subcontracts that are subject to Federal Acquisition
Regulation (FAR) Subpart 31.2 or for which cost or pricing
data were submitted.
(c) For all other situations where assets revert to the Contractor, or such assets are constructively received by it for any
reason, the Contractor shall, at the Government’s option,
make a refund or give a credit to the Government for its equitable share of the gross amount withdrawn. The Government’s
equitable share shall reflect the Government’s participation in
pension costs through those contracts for which cost or pricing
data were submitted or that are subject to FAR Subpart 31.2.
(d) The Contractor shall include the substance of this
clause in all subcontracts under this contract that meet the
applicability requirement of FAR 15.408(g).
(End of clause)
52.215-16 Facilities Capital Cost of Money.
As prescribed in 15.408(h), insert the following provision:

FAC 2005–04 JULY 8, 2005
SUBPART 52.2—TEXT OF PROVISIONS AND CLAUSES
FACILITIES CAPITAL COST OF MONEY (JUNE 2003)
(a) Facilities capital cost of money will be an allowable
cost under the contemplated contract, if the criteria for
allowability in FAR 31.205-10(b) are met. One of the
allowability criteria requires the prospective Contractor to
propose facilities capital cost of money in its offer.
(b) If the prospective Contractor does not propose this cost,
the resulting contract will include the clause Waiver of Facilities Capital Cost of Money.
(End of provision)
52.215-17 Waiver of Facilities Capital Cost of Money.
As prescribed in 15.408(i), insert the following clause:
WAIVER OF FACILITIES CAPITAL COST OF MONEY
(OCT 1997)
The Contractor did not include facilities capital cost of
money as a proposed cost of this contract. Therefore, it is an
unallowable cost under this contract.
(End of clause)
52.215-18 Reversion or Adjustment of Plans for
Postretirement Benefits (PRB) Other Than Pensions.
As prescribed in 15.408(j), insert the following clause:
REVERSION OR ADJUSTMENT OF PLANS FOR
POSTRETIREMENT BENEFITS (PRB) OTHER THAN
PENSIONS (JULY 2005)
(a) The Contractor shall promptly notify the Contracting
Officer in writing when the Contractor determines that it will
terminate or reduce the benefits of a PRB plan.
(b) If PRB fund assets revert or inure to the Contractor, or
are constructively received by it under a plan termination or
otherwise, the Contractor shall make a refund or give a credit
to the Government for its equitable share as required by
31.205-6(o)(5) of the Federal Acquisition Regulation (FAR).
When determining or agreeing on the method for recovery of
the Government’s equitable share, the contracting parties
should consider the following methods: cost reduction, amortizing the credit over a number of years (with appropriate
interest), cash refund, or some other agreed upon method.
Should the parties be unable to agree on the method for recovery of the Government’s equitable share, through good faith
negotiations, the Contracting Officer shall designate the
method of recovery.
(c) The Contractor shall insert the substance of this clause
in all subcontracts that meet the applicability requirements of
FAR 15.408(j).
(End of clause)

52.215-20
52.215-19 Notification of Ownership Changes.
As prescribed in 15.408(k), insert the following clause:
NOTIFICATION OF OWNERSHIP CHANGES (OCT 1997)
(a) The Contractor shall make the following notifications
in writing:
(1) When the Contractor becomes aware that a change
in its ownership has occurred, or is certain to occur, that could
result in changes in the valuation of its capitalized assets in the
accounting records, the Contractor shall notify the Administrative Contracting Officer (ACO) within 30 days.
(2) The Contractor shall also notify the ACO within
30 days whenever changes to asset valuations or any other
cost changes have occurred or are certain to occur as a result
of a change in ownership.
(b) The Contractor shall—
(1) Maintain current, accurate, and complete inventory
records of assets and their costs;
(2) Provide the ACO or designated representative ready
access to the records upon request;
(3) Ensure that all individual and grouped assets, their
capitalized values, accumulated depreciation or amortization,
and remaining useful lives are identified accurately before and
after each of the Contractor’s ownership changes; and
(4) Retain and continue to maintain depreciation and
amortization schedules based on the asset records maintained
before each Contractor ownership change.
(c) The Contractor shall include the substance of this
clause in all subcontracts under this contract that meet the
applicability requirement of FAR 15.408(k).
(End of clause)
52.215-20 Requirements for Cost or Pricing Data or
Information Other Than Cost or Pricing Data.
As prescribed in 15.408(l), insert the following provision:
REQUIREMENTS FOR COST OR PRICING DATA OR
INFORMATION OTHER THAN COST OR PRICING DATA
(OCT 1997)
(a) Exceptions from cost or pricing data. (1) In lieu of
submitting cost or pricing data, offerors may submit a written
request for exception by submitting the information described
in the following paragraphs. The Contracting Officer may
require additional supporting information, but only to the
extent necessary to determine whether an exception should be
granted, and whether the price is fair and reasonable.
(i) Identification of the law or regulation establishing the price offered. If the price is controlled under law by
periodic rulings, reviews, or similar actions of a governmental
body, attach a copy of the controlling document, unless it was
previously submitted to the contracting office.
(ii) Commercial item exception. For a commercial
item exception, the offeror shall submit, at a minimum, infor52.2-61

52.215-21

FEDERAL ACQUISITION REGULATION

mation on prices at which the same item or similar items have
previously been sold in the commercial market that is adequate for evaluating the reasonableness of the price for this
acquisition. Such information may include—
(A) For catalog items, a copy of or identification
of the catalog and its date, or the appropriate pages for the
offered items, or a statement that the catalog is on file in the
buying office to which the proposal is being submitted. Provide a copy or describe current discount policies and price lists
(published or unpublished), e.g., wholesale, original equipment manufacturer, or reseller. Also explain the basis of each
offered price and its relationship to the established catalog
price, including how the proposed price relates to the price of
recent sales in quantities similar to the proposed quantities;
(B) For market-priced items, the source and date
or period of the market quotation or other basis for market
price, the base amount, and applicable discounts. In addition,
describe the nature of the market;
(C) For items included on an active Federal Supply Service Multiple Award Schedule contract, proof that an
exception has been granted for the schedule item.
(2) The offeror grants the Contracting Officer or an
authorized representative the right to examine, at any time
before award, books, records, documents, or other directly
pertinent records to verify any request for an exception under
this provision, and the reasonableness of price. For items
priced using catalog or market prices, or law or regulation,
access does not extend to cost or profit information or other
data relevant solely to the offeror’s determination of the prices
to be offered in the catalog or marketplace.
(b) Requirements for cost or pricing data. If the offeror is
not granted an exception from the requirement to submit cost
or pricing data, the following applies:
(1) The offeror shall prepare and submit cost or pricing
data and supporting attachments in accordance with
Table 15-2 of FAR 15.408.
(2) As soon as practicable after agreement on price, but
before contract award (except for unpriced actions such as letter contracts), the offeror shall submit a Certificate of Current
Cost or Pricing Data, as prescribed by FAR 15.406-2.
(End of provision)
Alternate I (Oct 1997). As prescribed in 15.408(l), substitute the following paragraph (b)(1) for paragraph (b)(1) of the
basic provision:
(b)(1) The offeror shall submit cost or pricing data and supporting attachments in the following format:

Alternate II (Oct 1997). As prescribed in 15.408(l), add the
following paragraph (c) to the basic provision:
(c) When the proposal is submitted, also submit one copy
each to: (1) the Administrative Contracting Officer, and (2) the
Contract Auditor.

52.2-62

(FAC 2005–04)

Alternate III (Oct 1997). As prescribed in 15.408(l), add
the following paragraph (c) to the basic provision (if
Alternate II is also used, redesignate the following paragraph
as paragraph (d)).
(c) Submit the cost portion of the proposal via the following electronic media: [Insert media format, e.g., electronic
spreadsheet format, electronic mail, etc.]

Alternate IV (Oct 1997). As prescribed in 15.408(l),
replace the text of the basic provision with the following:
(a) Submission of cost or pricing data is not required.
(b) Provide information described below: [Insert description of the information and the format that are required, including access to records necessary to permit an adequate
evaluation of the proposed price in accordance with 15.403-3.]

52.215-21 Requirements for Cost or Pricing Data or
Information Other Than Cost or Pricing Data—
Modifications.
As prescribed in 15.408(m), insert the following clause:
REQUIREMENTS FOR COST OR PRICING DATA OR
INFORMATION OTHER THAN COST OR PRICING DATA—
MODIFICATIONS (OCT 1997)
(a) Exceptions from cost or pricing data. (1) In lieu of
submitting cost or pricing data for modifications under this
contract, for price adjustments expected to exceed the threshold set forth at FAR 15.403-4 on the date of the agreement on
price or the date of the award, whichever is later, the Contractor may submit a written request for exception by submitting
the information described in the following paragraphs. The
Contracting Officer may require additional supporting information, but only to the extent necessary to determine whether
an exception should be granted, and whether the price is fair
and reasonable—
(i) Identification of the law or regulation establishing the price offered. If the price is controlled under law by
periodic rulings, reviews, or similar actions of a governmental
body, attach a copy of the controlling document, unless it was
previously submitted to the contracting office.
(ii) Information on modifications of contracts or subcontracts for commercial items. (A) If—
(1) The original contract or subcontract was
granted an exception from cost or pricing data requirements
because the price agreed upon was based on adequate price
competition or prices set by law or regulation, or was a contract or subcontract for the acquisition of a commercial item;
and
(2) The modification (to the contract or subcontract) is not exempted based on one of these exceptions,
then the Contractor may provide information to establish that
the modification would not change the contract or subcontract
from a contract or subcontract for the acquisition of a com-

SUBPART 52.2—TEXT OF PROVISIONS AND CLAUSES
mercial item to a contract or subcontract for the acquisition of
an item other than a commercial item.
(B) For a commercial item exception, the Contractor shall provide, at a minimum, information on prices at
which the same item or similar items have previously been
sold that is adequate for evaluating the reasonableness of the
price of the modification. Such information may include—
(1) For catalog items, a copy of or identification of the catalog and its date, or the appropriate pages for the
offered items, or a statement that the catalog is on file in the
buying office to which the proposal is being submitted. Provide a copy or describe current discount policies and price lists
(published or unpublished), e.g., wholesale, original equipment manufacturer, or reseller. Also explain the basis of each
offered price and its relationship to the established catalog
price, including how the proposed price relates to the price of
recent sales in quantities similar to the proposed quantities.
(2) For market-priced items, the source and
date or period of the market quotation or other basis for market
price, the base amount, and applicable discounts. In addition,
describe the nature of the market.
(3) For items included on an active Federal
Supply Service Multiple Award Schedule contract, proof that
an exception has been granted for the schedule item.
(2) The Contractor grants the Contracting Officer or an
authorized representative the right to examine, at any time
before award, books, records, documents, or other directly
pertinent records to verify any request for an exception under
this clause, and the reasonableness of price. For items priced
using catalog or market prices, or law or regulation, access
does not extend to cost or profit information or other data relevant solely to the Contractor’s determination of the prices to
be offered in the catalog or marketplace.

52.215-21
(b) Requirements for cost or pricing data. If the Contractor
is not granted an exception from the requirement to submit
cost or pricing data, the following applies:
(1) The Contractor shall submit cost or pricing data and
supporting attachments in accordance with Table 15-2 of
FAR 15.408.
(2) As soon as practicable after agreement on price, but
before award (except for unpriced actions), the Contractor
shall submit a Certificate of Current Cost or Pricing Data, as
prescribed by FAR 15.406-2.
(End of clause)
Alternate I (Oct 1997). As prescribed in 15.408(m), substitute the following paragraph (b)(1) for paragraph (b)(1) of the
basic clause.
(b)(1) The Contractor shall submit cost or pricing data and
supporting attachments prepared in the following format:

Alternate II (Oct 1997). As prescribed in 15.408(m), add
the following paragraph (c) to the basic clause:
(c) When the proposal is submitted, also submit one copy
each to: (1) the Administrative Contracting Officer, and (2) the
Contract Auditor.

Alternate III (Oct 1997). As prescribed in 15.408(m), add
the following paragraph (c) to the basic clause (if Alternate II
is also used, redesignate the following paragraph as
paragraph (d)):
(c) Submit the cost portion of the proposal via the following electronic media: [Insert media format]

Alternate IV (Oct 1997). As prescribed in 15.408(m),
replace the text of the basic clause with the following:
(a) Submission of cost or pricing data is not required.
(b) Provide information described below: [Insert description of the information and the format that are required, including access to records necessary to permit an adequate
evaluation of the proposed price in accordance with 15.403-3.]

(FAC 2005–04)

52.2-63