Overview
This section prescribes the policies and procedures for establishing final indirect cost rates, outlining the specific roles of contracting officers and auditors in negotiating and settling these rates across various organizational types, including commercial firms, educational institutions, and state/local governments. It serves as the mechanism for reconciling estimated billing rates with actual allowable costs to facilitate the formal closeout of cost-reimbursement contracts.
Key Rules
- Determination Methods: Final rates are established through either a Contracting Officer (CO) determination (typically for large/multidivisional corporations) or an Auditor determination (for less complex business units).
- Submission Deadlines: Contractors must submit an adequate final indirect cost rate proposal within six months after the end of each fiscal year.
- Completion Vouchers: Once rates are settled for all years of a physically complete contract, the contractor must submit a completion invoice or voucher within 120 days.
- Adequacy Requirement: The auditor must review the contractor's proposal for adequacy; if it is inadequate and the contractor cannot resolve the issues, the matter is elevated to the CO.
- Unilateral Power: If a contractor fails to submit a final completion voucher timely, the CO has the authority to unilaterally determine the amount due and issue a final decision under the disputes clause.
- Predetermined Rates: For educational institutions, predetermined final rates may be used for research and development contracts if costs are stable, typically for a period of up to four years.
- Interagency Reciprocity: Rates negotiated by a cognizant Federal agency for state/local governments or educational institutions must be accepted by all other Federal agencies.
Practical Implications
- Risk of Cost Loss: Contractors who miss the 120-day window for completion vouchers risk having the CO unilaterally determine their final payment, which may exclude costs the contractor believed were reimbursable.
- Administrative Coordination: Because the process requires input from the Government negotiating team (CO, auditor, and technical personnel), contractors must maintain rigorous documentation and be prepared to justify questioned costs during the audit phase to avoid lengthy disputes during negotiation.