Overview
This section mandates the inclusion of FAR clause 52.242-1, Notice of Intent to Disallow Costs, in specific types of contracts where the government bears significant cost risk or where pricing is not fixed.
Key Rules
- Mandatory Prescription: The Contracting Officer is required to insert clause 52.242-1 into both solicitations and awarded contracts under specific conditions.
- Applicable Contract Types: The requirement applies to:
- Cost-reimbursement contracts.
- Fixed-price incentive contracts.
- Contracts featuring price redetermination provisions.
Practical Implications
- Due Process for Contractors: This ensures that contractors receive formal notification and a chance to respond before the government officially disallows specific costs.
- Risk Management: By mandating this clause in flexible-pricing arrangements, the government establishes a standardized procedure for addressing cost disputes and protecting taxpayer funds during contract performance.