This analysis covers FAR Subpart 42.3, which defines the roles and specific duties of the Contract Administration Office (CAO).
Overview
Subpart 42.3 establishes the functional framework for contract administration, detailing the specific tasks normally delegated by a Procuring Contracting Officer (PCO) to an Administrative Contracting Officer (ACO). It distinguishes between "normal" functions, functions requiring specific authorization, and those retained by the procuring office to ensure clear lines of authority during the contract lifecycle.
Key Rules
- Default Delegation: Under 42.302(a), there are 71 standard functions that are normally delegated to the CAO. While a PCO can choose to retain most of these, they generally must delegate specific technical financial functions (listed below) to the cognizant Federal agency.
- Mandatory CAO Functions: The PCO typically cannot retain functions related to:
- Negotiating Forward Pricing Rate Agreements (FPRAs).
- Establishing final indirect cost rates and billing rates.
- Determining Cost Accounting Standards (CAS) adequacy and compliance.
- Determining the adequacy of the contractor's accounting system.
- Specific Authorization Required: Functions under 42.302(b) (such as negotiating change orders or deobligating excess funds) can only be performed by the CAO if the procuring office provides express written authorization.
- Residual Authority: Any function not explicitly listed in 42.302(a) or (b) remains the responsibility of the procuring contracting office.
- Regulatory Hierarchy: CAOs must perform their duties based on FAR Chapter 1, specific contract terms, and the servicing agency’s regulations (unless an interagency agreement dictates otherwise).
Responsibilities
Administrative Contracting Officer (ACO) / CAO
- Financial Oversight: Reviews compensation structures, insurance plans, and indirect cost rates; approves progress payments; and monitors for cost overruns.
- Compliance & Audit: Determines the adequacy of the contractor’s accounting system and CAS disclosure statements.
- Contractual Maintenance: Performs property administration, conducts post-award orientations, processes novation agreements, and handles administrative closeouts.
- Surveillance: Performs engineering and production surveillance to ensure the contractor meets delivery schedules and technical requirements.
Procuring Contracting Officer (PCO)
- Delegation Management: Formally assigns contracts to the CAO and decides which "optional" functions (under 42.302(b)) to delegate.
- Final Authority: Retains all functions not specifically delegated and remains the primary point of contact for contract awards and major modifications not authorized for ACO execution.
The Contractor
- Transparency: Must notify the ACO of anticipated cost overruns/underruns.
- System Maintenance: Required to maintain an adequate accounting system and internal control systems throughout the performance period.
Practical Implications
- Separation of Duties: In real-world scenarios, this subpart prevents the "buying" office from being overwhelmed by day-to-day management. For example, while a PCO in Washington D.C. might award a massive satellite contract, a DCMA (Defense Contract Management Agency) ACO at the contractor's factory in California handles the actual inspection of parts and approval of monthly invoices.
- Financial Reliability: Because the CAO is tasked with auditing the contractor's accounting system (42.302(a)(12)), the government ensures that the data used for future negotiations is valid. If an ACO finds an accounting system "inadequate," it can lead to the suspension of progress payments.
- Administrative Efficiency: The "Administrative Changes" rule (42.302(a)(59)) allows the ACO to fix typos or change addresses without a formal, bilateral modification, keeping the contract record accurate with minimal bureaucracy.
- Conflict Resolution: The ACO serves as the first line of ADR (Alternative Dispute Resolution), attempting to resolve controversies before they escalate to formal claims under the Disputes clause.