FAR 52.242-3 Penalties for Unallowable Costs. Basic (May 2014)

As prescribed in 42.709-6, use the clause at 52.242-3, Penalties for Unallowable Costs, in all solicitations and contracts over $750,000 except fixed-price contracts without cost incentives or any firm-fixed-price contract for the purchase of commercial items. Generally, covered contracts are those which contain one of 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.

Penalties for Unallowable Costs (May 2014)

(a) Definition.“Proposal,” as used in this clause, means either—

    (1) A final indirect cost rate proposal submitted by the Contractor after the expiration of its fiscal year which—

        (i) Relates to any payment made on the basis of billing rates; or

        (ii) Will be used in negotiating the final contract price; or

    (2) The final statement of costs incurred and estimated to be incurred under the Incentive Price Revision clause (if applicable), which is used to establish the final contract price.

(b) Contractors which include unallowable indirect costs in a proposal may be subject to penalties. The penalties are prescribed in 10 U.S.C. 2324 or 41 U.S.C. chapter 43, as applicable, which is implemented in Section 42.709-0 of the Federal Acquisition Regulation (FAR).

(c) The Contractor shall not include in any proposal any cost that is unallowable, as defined in Subpart 2.1 of the FAR, or an executive agency supplement to the FAR.

(d) If the Contracting Officer determines that a cost submitted by the Contractor in its proposal 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 Contractor shall be assessed a penalty equal to—

    (1) The amount of the disallowed cost allocated to this contract; plus

    (2) Simple interest, to be computed—

        (i) On the amount the Contractor was paid (whether as a progress or billing payment) in excess of the amount to which the Contractor was entitled; and

        (ii) Using the applicable rate effective for each six-month interval prescribed by the Secretary of the Treasury pursuant to Pub. L. 92-41 (85 Stat. 97).

(e) If the Contracting Officer determines that a cost submitted by the Contractor in its proposal includes a cost previously determined to be unallowable for that Contractor, then the Contractor will be assessed a penalty in an amount equal to two times the amount of the disallowed cost allocated to this contract.

(f) Determinations under paragraphs (d) and (e) of this clause are final decisions within the meaning of 41 U.S.C. chapter 71, Contract Disputes.

(g) Pursuant to the criteria in FAR 42.709-5, the Contracting Officer may waive the penalties in paragraph (d) or (e) of this clause.

(h) Payment by the Contractor of any penalty assessed under this clause does not constitute repayment to the Government of any unallowable cost which has been paid by the Government to the Contractor.

(End of clause)

NONE

Commercial items ✖ Subcontractor ✖ FFP ✖ Use in in all solicitations and contracts except fixed-price contracts without cost incentives or any firm-fixed-price contract for the purchase of commercial items.

52.209-10 Prohibition on Contracting with Inverted Domestic Corporations.

52.214-27 Price Reduction for Defective Certified Cost or Pricing Data—Modifications—Sealed Bidding.

52.215-10 Price Reduction for Defective Certified Cost or Pricing Data.

52.215-11 Price Reduction for Defective Certified Cost or Pricing Data—Modifications.

52.216-24 Limitation of Government Liability.

52.222-12 Contract Termination—Debarment.

52.222-17 Nondisplacement of Qualified Workers.

52.222-50 Combating Trafficking in Persons.

52.222-55 Minimum Wages Under Executive Order 13658.

52.228-1 Bid Guarantee.

52.228-8 Liability and Insurance—Leased Motor Vehicles.

52.232-27 Prompt Payment for Construction Contracts.

52.236-23 Responsibility of the Architect-Engineer Contractor.

52.246-16 Responsibility for Supplies.

52.246-18 Warranty of Supplies of a Complex Nature.

52.246-19 Warranty of Systems and Equipment under Performance Specifications or Design Criteria.

52.246-21 Warranty of Construction.

52.247-21 Contractor Liability for Personal Injury and/or Property Damage.

52.247-22 Contractor Liability for Loss of and/or Damage to Freight other than Household Goods.

52.247-23 Contractor Liability for Loss of and/or Damage to Household Goods.

52.247-58 Loading, Blocking, and Bracing of Freight Car Shipments.

252.227-7019 Validation of Asserted Restrictions--Computer Software.

252.227-7037 Validation of Restrictive Markings on Technical Data.

252.239-7013 Obligation of the Government.

252.247-7007 Liability and Insurance.

252.247-7014 Demurrage.

252.247-7016 Contractor Liability for Loss or Damage.

1852.245-71 Installation-accountable Government Property.

1852.227-88 Government-furnished computer software and related technical data.

1852.228-70 Aircraft Ground and Flight Risk.

1852.228-71 Aircraft Flight Risks.

1852.228-76 Cross-Waiver of Liability for International Space Station Activities.

1852.228-78 Cross-Waiver of Liability for Science or Space Exploration Activities Unrelated to the International Space Station.

1852.228-80 Insurance — Immunity From Tort Liability.

1852.228-81 Insurance — Partial Immunity From Tort Liability.

1852.228-82 Insurance — Total Immunity From Tort Liability.

1852.236-73 Hurricane Plan.

1852.245-72 Liability for Government property furnished for repair or other services.

3052.209-71 Reserve Officer Training Corps and military recruiting on campus.

3052.217-93 Subcontracts (USCG).

3052.217-95 Liability and insurance (USCG).

3052.217-97 Discharge of liens (USCG).

3052.217-99 Department of Labor Safety and Health Regulations for ship repairing (USCG).

3052.217-100 Guarantee (USCG).

3052.222-70 Strikes or picketing affecting timely completion of the contract work.

3052.222-71 Strikes or picketing affecting access to a DHS facility.

5352.223-9001 Health and Safety on Government Installations

5152.225-5900 Arming Requirements and Procedures for Personal Security Services Contractors and Requests for Personal Protection

5152.225-5903 Compliance with Laws and Regulations

5152.228-5900 Government Liability for Non-Tactical Vehicles

5152.225-5902 Fitness for Duty and Medical/Dental Care Limitations

5152.225-5915 CONTRACTOR ACCOUNTABILITY AND PERSONNEL RECOVERY

552.211-76 Charges for Packaging , Packing, and Marking.

552.211-89 Non-Manufactured Wood Packaging Material for Export.

552.236-82 Subcontracts.

552.238-75 Price Reductions.

652.236-70 Accident Prevention.

1452.215-70 Release of Claims.

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