Defense Federal Acquisition Regulation Supplement
{Part 242}--Contract Administration
TABLE OF CONTENTS
SUBPART 242.1--INTERAGENCY CONTRACT ADMINISTRATION AND AUDIT SERVICES
242.101 Policy.
242.102 Procedures.
SUBPART 242.2--ASSIGNMENT OF CONTRACT ADMINISTRATION
242.200 Scope of subpart.
242.203 Retention of contract administration.
242.204 Supporting contract administration.
242.205 Designation of the paying office.
SUBPART 242.3--CONTRACT ADMINISTRATION OFFICE FUNCTIONS
242.301 General.
242.302 Contract administration functions.
SUBPART 242.4--CORRESPONDENCE AND VISITS
242.402 Visits to contractors' facilities.
SUBPART 242.5--POSTAWARD ORIENTATION
242.503 Postaward conferences.
242.503-2 Postaward conference procedure.
242.503-3 Postaward conference report.
242.570 Contract clause.
SUBPART 242.6--CORPORATE ADMINISTRATIVE CONTRACTING OFFICER
242.602 Assignment and location.
SUBPART 242.7--INDIRECT COST RATES
242.704 Billing rates.
242.705 Final indirect cost rates.
242.705-1 Contracting officer determination procedure.
242.705-2 Auditor determination procedure.
242.705-3 Educational institutions
242.770 Reserved.
242.771 Independent research and development/bid and proposal.
242.771-1 Scope of subpart.
242.771-2 Policy.
242.771-3 Responsibilities.
SUBPART 242.8--DISALLOWANCE OF COSTS
242.801 Notice of intent to disallow costs.
242.803 Disallowing costs after incurrence.
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TABLE OF CONTENTS (Continued)
SUBPART 242.11--PRODUCTION SURVEILLANCE AND REPORTING
242.1104 Surveillance requirements.
242.1105 Assignment of criticality designator.
242.1106 Reporting requirements.
242.1107 Contract clause.
242.1107-70 Additional clauses.
SUBPART 242.12--NOVATION AND CHANGE-OF-NAME AGREEMENTS
242.1202 Responsibility for executing agreements.
242.1203 Processing agreements.
242.1204 Agreement to recognize a successor in interest (novation agreement).
SUBPART 242.14--TRAFFIC AND TRANSPORTATION MANAGEMENT
242.1401 General.
242.1402 Volume movements within the continental United States
242.1403 Shipping documents covering f.o.b. origin shipments.
242.1404 Shipments by parcel post or other classes of mail.
242.1404-1 Parcel post eligible shipments.
242.1404-2 Contract clauses.
242.1404-2-70 Additional clauses.
242.1405 Discrepancies incident to shipment of supplies.
242.1470 Demurrage and detention charges.
SUBPART 242.15--CONTRACTOR PERFORMANCE INFORMATION
242.1503 Procedures.
SUBPART 242.70--MONITORING CONTRACTOR COSTS
242.7000 Scope.
242.7001 Policy.
242.7002 Responsibilities.
242.7002-1 Departments and agencies.
242.7002-2 Contract administration offices.
242.7002-3 Audit and other organizations.
242.7003 Annual cost monitoring plan.
242.7003-1 Description.
242.7003-2 Selecting the activities.
242.7003-3 Tailoring the plan.
242.7003-4 Contents of the plan.
242.7003-5 Plan approval.
242.7004 Reviews.
SUBPART 242.71--VOLUNTARY REFUNDS
242.7100 General.
242.7101 Solicited refunds.
242.7102 Disposition of voluntary refunds.
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TABLE OF CONTENTS (Continued)
SUBPART 242.72--CONTRACTOR MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM
242.7200 Scope of subpart.
242.7201 Definitions.
242.7202 Policy.
242.7203 MMAS disclosure, demonstration, and maintenance requirements.
242.7204 Responsibilities.
242.7205 Review procedures.
242.7206 Contract clause.
SUBPART 242.73--CONTRACTOR INSURANCE/PENSION REVIEW
242.7300 Scope of subpart.
242.7301 General.
242.7302 Requirements.
242.7303 Responsibilities.
SUBPART 242.74--TECHNICAL REPRESENTATION AT CONTRACTOR FACILITIES
242.7400 General.
242.7401 Procedures.
SUBPART 242.75--CONTRACTOR ACCOUNTING SYSTEMS AND RELATED CONTROLS
242.7500 Scope of subpart.
242.7501 Definition.
242.7502 Policy.
242.7503 Procedures.
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PART 242 CONTRACT ADMINISTRATION
SUBPART 242.1--INTERAGENCY CONTRACT ADMINISTRATION AND
{242.101} Policy.
(a)Foreign governments and international organizations may request contract administration services on their direct purchases from U.S. producers. Direct purchase is the purchase of defense supplies in the United States through commercial channels for use by the foreign government or international organization.
(d)(i)DoD requires reimbursement, at a rate set by the Assistant Secretary of Defense (Comptroller), from non-DoD organizations, except for--
(A)Quality assurance and audit services provided under a no-charge reciprocal agreement;
(B)Services performed under subcontracts awarded by the Small Business Administration under FAR Subpart 19.8; and
(C)Quality assurance and pricing services performed for the Supply and Services Canada.
(ii)Departments and agencies may request an exception from the reimbursement policy in paragraph (d)(i) of this section from the Assistant Secretary of Defense (Comptroller). A request must show that an exception is in the best interest of the Government.
(iii)Departments and agencies must pay for services performed by non-DoD activities, foreign governments, or international organizations, unless otherwise provided by reciprocal agreements.
{242.102} Procedures.
(b)(i)Supply and Services Canada (SSC) is permitted to submit its requests for contract administration services directly to the cognizant contract administration office.
(ii)Other foreign governments (including Canadian government organizations other than SSC) and international organizations send their requests for contract administration services to the DoD Central Control Point (CCP) at the Defense Contract Management Area Operations (DCMAO), New York, NY. Contract administration offices provide services only upon request from the CCP. The CCP shall--
(A)Determine whether the request is from a friendly foreign government or an international agency in which the United States is a participant;
(B)Determine whether the services are consistent with the DoD mutual security program policies (the Assistant Secretary of Defense (International Security Affairs) is the source of information for questions as to the eligibility of foreign governments to receive services);
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(C)Ensure that the reimbursement arrangements are consistent with 242.101(d);
(D)Coordinate with appropriate contract administration offices to determine whether DoD can provide the services;
(E)Notify the requestor that the request is accepted, or provide reasons why it cannot be accepted;
(F)Distribute the acquisition documents and related materials to contract administration offices; and
(G)Receive statements of costs incurred by contract administration offices for reimbursable services and forward them for billing to the Security Assistance Accounting Center.
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SUBPART 242.2--ASSIGNMENT OF CONTRACT ADMINISTRATION
{242.200} Scope of subpart.
This subpart does not address the contract administration role of a contracting officer's representative (see 201.602).
{242.203} Retention of contract administration.
(a)(i)DoD activities shall not retain any contract for administration that requires performance of any contract administration function at or near contractor facilities, except contracts for--
(A) The National Security Agency;
(B) Research and development with universities;
(C) Flight training;
(D) Consultant support services;
(E) Mapping, charting, and geodesy services;
(F) Base, post, camp, and station purchases;
(G)Operation or maintenance of, or installation of equipment at radar or communication network sites;
(H) Communications services;
(I)Installation, operation, and maintenance of space-track sensors and relays;
(J) Dependents Medicare program contracts;
(K) Stevedoring contracts;
(L)Construction and maintenance of military and civil public works, including harbors, docks, port facilities, military housing, development of recreational facilities, water resources, flood control, and public utilities;
(M) Architect-engineer services;
(N)Airlift and sealift services (Military Airlift Command and Military Sealift Command may perform contract administration services at contractor locations involved solely in performance of airlift or sealift contracts);
(O) Subsistence supplies;
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(P)Ballistic missile sites (contract administration offices may perform supporting administration of these contracts at missile activation sites during the installation, test, and checkout of the missiles and associated equipment;
(Q)Operation and maintenance of, or installation of equipment at, military test ranges, facilities, and installations; and
(R)Purchase orders issued via written telecommunications (See FAR 13.506).
(ii)Contract administration functions for base, post, camp, and station contracts on a military installation are normally the responsibility of the installation or tenant commander. However, the Defense Contract Management Command (DCMC) shall, upon request of the military department, and subject to prior agreement, perform contract administration services on a military installation.
(iii)DCMC shall provide preaward survey assistance for post, camp, and station work performed on a military installation. The contracting office and the DCMC preaward survey monitor should jointly determine the scope of the survey and individual responsibilities.
(iv)To avoid duplication, contracting offices shall not locate their personnel at contractor facilities, except--
(A)In support of contracts retained for administration in accordance with paragraph (a)(i) of this section; or
(B) As permitted under Subpart 242.74.
{242.204} Supporting contract administration.
(a)In special circumstances, a contract administration office may request support from a component not listed in the DoD Directory of Contract Administration Services Components (DLAH 4105.4). An example is where the contractor's work site is on a military base and a base organization is asked to provide support. Before formally sending the request, coordinate with the office concerned to ensure that resources are available for, and capable of, providing the support.
(b)When requesting support on a subcontract which includes foreign military sale (FMS) requirements, the contract administration office shall--
(i)Mark "FMS Requirement" on the face of the documents;
(ii)For each FMS case involved, provide the FMS case identifier, associated item quantities, DoD prime contract number, and prime contract line/subline item number.
{242.205} Designation of the paying office.
(1)For contracts assigned to the Defense Contract Management Command (DCMC), designate as the paying office--
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(i)The cognizant Defense Finance and Accounting Service (DFAS) payment office as specified in the DoD Directory of Contract Administration Services Components (DLAH 4105.4), for contracts funded with DoD funds;
(ii)The department or agency payment office if authorized by defense financial management regulations or if the contract is funded with non-DoD funds.
(iii)Multiple paying offices under paragraphs (1)(i) and (ii) of this section--if the contract is funded with both DoD and non-DoD funds.
(2)For contracts not assigned to DCMC, select a paying office or offices under department/agency procedures.
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SUBPART 242.3--CONTRACT ADMINISTRATION OFFICE FUNCTIONS
{242.301} General.
Contract administration services performed outside the United States should be performed in accordance with FAR 42.301 unless there are no policies and procedures covering a given situation. In this case, coordinate proposed actions with the appropriate U.S. country teams or commanders of unified and specified commands.
{242.302} Contract administration functions.
(a)(4) Also, review and evaluate--
(A) Contractor estimating systems (see FAR 15.811); and
(B)Contractor material management and accounting systems under Subpart 242.72.
(7) See 242.7503 for ACO responsibilities with regard to receipt of an audit report identifying significant accounting system or related internal control deficiencies.
(8) Monitor contractor costs under Subpart 242.70.
(9) For additional contract administration functions related to IR&D/B&P projects performed by major contractors, see 242.771-3(a).
(19)Also negotiate and issue contract modifications reducing contract prices in connection with the provisions of paragraph (b) of the clause at FAR 52.225-10, Duty-Free Entry, and paragraph (c) of the clause at 252.225-7009, Duty-Free Entry--Qualifying Country End Products and Supplies.
(33)Also perform industrial readiness and mobilization production planning field surveys and negotiate schedules.
(39)See 223.370 for safety requirements on contracts for ammunition and explosives.
(41)In contracts with cost schedule control systems requirements (see 234.005-70)--
(A)Perform postaward surveillance of contractor progress in demonstrating that its cost schedule control systems meet the cost schedule control systems criteria;
(B)Provide assistance in the review and acceptance of the contractor's cost schedule control systems; and
(C)After acceptance of the systems, perform surveillance to monitor their continuing acceptable operation.
(67)Also support program offices and buying activities in precontractual efforts leading to a solicitation or award.
(b)(S-70)Issue, negotiate and execute orders under basic ordering agreements for overhaul, maintenance and repair.
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SUBPART 242.4--CORRESPONDENCE AND VISITS
{242.402} Visits to contractors' facilities.
(a)If a visit to a contractor facility will require access to classified information, the visitors must give the contractor advance written notice (DoD 5220.22-R, Industrial Security Regulation).
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SUBPART 242.5--POSTAWARD ORIENTATION
{242.503} Postaward conferences.
{242.503-2} Postaward conference procedure.
Use the conference program outlined on the DD Form 1484, Post-Award Conference Record, in conducting the conference.
{242.503-3} Postaward conference report.
The DD Form 1484, Post-Award Conference Record, may be used for this report.
{242.570} Contract clause.
Use the clause at 252.242-7000, Postaward Conference, in solicitations and contracts.
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SUBPART 242.6--CORPORATE ADMINISTRATIVE CONTRACTING OFFICER
{242.602} Assignment and location.
(c)(2)If the agencies cannot agree, refer the matter to the Director of Defense Procurement.
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SUBPART 242.7--INDIRECT COST RATES
{242.704} Billing rates.
(c)The administrative contracting officer or auditor shall periodically review billing rates for continued applicability. Billing rates should be established on a year-to-year basis.
{242.705} Final indirect cost rates.
{242.705-1} Contracting officer determination procedure.
(a) Applicability and responsibility.
(1)The corporate administrative contracting officer (CACO) and individual administrative contracting officers (ACO) shall jointly decide whether negotiations will be conducted on a coordinated or centralized basis. When they are conducted on a coordinated basis, individual ACOs are responsible for coordinating with the CACO to ensure consistency of cost determinations.
(b) Procedures.
(1)Require DoD contractors to submit a copy of their final indirect cost rate proposals to the contract auditor.
{242.705-2} Auditor determination procedure.
(b) Procedures.
(2)(ii)The contractor and the auditor shall sign the agreement.
(iv)When agreement cannot be reached with the contractor, the auditor will issue a DCAA Form 1, Notice of Contract Costs Suspended and/or Disapproved, in addition to the advisory report to the administrative contracting officer. The DCAA Form 1 details the items of exception and advises the contractor that requests for reconsideration should be submitted in writing to the administrative contracting officer.
{242.705-3} Educational Institutions.
(b) Predetermined final indirect cost rates.
(4)(i)Predetermined indirect cost rate proposals may cover a period of two to four years when the cognizant Contracting Officer determines that the educational institution's cost experience and other pertinent facts available are sufficient to enable the parties to reach an informed judgement on the probable levels of indirect costs and allocation base costs for the applicable future accounting periods. Predetermined rates covering two to four year periods are expected to be the norm in those situations.
(6)Predetermined indirect cost rates may be established to cover up to four years.
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{242.771} Independent research and development/bid and proposal.
{242.771-1} Scope of subpart.
This section implements Section 802 of the National Defense Authorization Act for Fiscal Years 1992 and 1993 (Pub. L. 102-190) and is effective for IR&D/B&P costs incurred by a major contractor during fiscal years of that contractor that begin on or after October 1, 1992.
{242.771-2} Policy.
Defense contractors are encouraged to engage in IR&D/B&P activities of potential interest to DoD, including activities cited in 231.205-18(c)(2)(i)(2).
{242.771-3} Responsibilities.
(a)The cognizant administrative contracting officer (ACO) or corporate ACO shall--
(1)Determine, with input from the field pricing team, whether IR&D/B&P projects performed by major contractors (see FAR 31.205-18(a)) are of potential interest to DoD.
(2)Notify the contractor promptly of any IR&D/B&P activities which are not of potential interest to DoD.
(b)The Defense Contract Management Command of the Defense Logistics Agency or the Military Department responsible for performing contract administration functions is responsible for--
(1)Implementing the requirements of Section 802 of Pub. L. 102-190 as set forth in 231.205-18(c)(2) and FAR 31.205-18.
(2)Submitting an annual report to the Director of Defense Procurement (USD(A&T)DP) setting forth required statistical information relating to the DoD-wide IR&D/B&P program. The Report Control Symbol is DD-ACQ(A)1139.
(c)The Director, Defense Research and Engineering (USD(A&T)DDR&E), is responsible for establishing a regular method for communication--
(1)From DoD to contractors, of timely and comprehensive information regarding planned or expected DoD future needs; and
(2)From contractors to DoD, of brief technical descriptions of contractor IR&D projects.
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SUBPART 242.8--DISALLOWANCE OF COSTS
{242.801} Notice of intent to disallow costs.
(e)A corporate administrative contracting officer need not obtain the approval of the individual administrative contracting officers to disallow items of corporate expense.
{242.803} Disallowing costs after incurrence.
(a) Contracting officer receipt of vouchers.
Contracting officer receipt of vouchers is applicable only for cost-reimbursement contracts with the Canadian Commercial Corporation. See 225.870-5(b) for invoice procedures.
(b) Auditor receipt of voucher.
(i) The contract auditor is the authorized representative of the contracting officer for--
(A) Receiving vouchers from contractors;
(B)Approving interim vouchers for provisional payment (this includes approving the fee portion of vouchers in accordance with the contract schedule and administrative contracting officer instructions) and sending them to the disbursing office;
(C)Authorizing direct submission of interim vouchers for provisional payment to the disbursing office for contractors with approved billing systems;
(D)Reviewing completion/final vouchers and sending them to the administrative contracting officer; and
(E)Issuing DCAA Forms 1, Notice of Contract Costs Suspended and/or Disapproved, to deduct costs where allowability is questionable.
(ii) The administrative contracting officer--
(A)Approves all completion/final vouchers and sends them to the disbursing officer; and
(B)May issue or direct the issuance of DCAA Form 1 on any cost when there is reason to believe it should be suspended or disallowed.
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SUBPART 242.10--NEGOTIATING ADVANCE AGREEMENTS FOR
INDEPENDENT RESEARCH AND DEVELOPMENT/BID AND PROPOSAL COSTS
{242.1005} Lead negotiating agency responsibilities.
(a)The DoD IR&D Technical Evaluation Group is responsible for providing contractors the appropriate guidance for submission of technical information to support IR&D proposals.
(b)The DoD IR&D Technical Evaluation Group will provide the contracting officer with the required technical evaluation, including an opinion concerning the potential interest of the proposed IR&D projects to DoD.
(c)The determination shall address the 231.205-18(c)(1)(iii)(2) requirement that the proposed IR&D/B&P projects must be of potential interest to DoD.
{242.1006} Conducting negotiations.
(a)(5)Ensure that the requirements of 231.205-18(c)(1)(iii)(2) are met.
(b)Contracting officers shall encourage contractors to engage in the IR&D/B&P activities cited in 231.205-18(c)(1)(iii)(2).
{242.1007} Content of advance agreements.
(e) The agreement shall specifically note that--
(i) A review was performed of the proposed IR&D/B&P projects for potential interest to DoD; and
(ii)A determination was made that the Government's allocable share of the negotiated ceiling met the requirement for potential interest to DoD the time of negotiation.
(f)(2)Allowable IR&D/B&P costs are limited to those incurred projects that are of potential interest to DoD.
{242.1008} Administrative appeals.
Department/agency appeals hearing groups shall have three members--acquisition, technical, and legal. The acquisition member shall be the chairperson. Determinations of the appeals hearing groups are final decisions.
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SUBPART 242.11--PRODUCTION SURVEILLANCE AND REPORTING
{242.1104} Surveillance requirements.
(a)(i)As a minimum, contracts will receive pre-delivery telephonic surveillance.
(ii)Contracts in the following categories will receive pre-delivery on-site surveillance:
(A)Contracts assigned criticality designator A (see FAR 42.1105).
(B)Contracts specifically identified for special surveillance by the contracting officer.
(C)Any contract where telephonic surveillance reveals actual or anticipated delinquency unless the contract administration office, in coordination with the contracting officer, decides that on-site surveillance in not warranted.
{242.1105} Assignment of criticality designator.
(1) Contracting officers shall--
(i) Assign criticality designator A to items with a priority 01, 02, 03, or 06 (if emergency supply of clothing) under DoDD 4410.6, Uniform Materiel Movement and Issue Priority System; and
(ii)Ordinarily assign criticality designator C to unilateral purchase orders.
(2)Only the contracting officer shall change the assigned designator.
{242.1106} Reporting requirements.
(a) See also--
(i) DoD 5000.2-R, Mandatory Procedures for Major Defense Acquisition Programs (MDAPs) and Major Automated Information System (MAIS) Acquisition Programs; and
(ii)For cost/schedule control system requirements on major systems acquisitions, 234.005-70.
(b)(i)Within four working days after receipt of the contractor's report, the contract administration office (CAO) shall provide the report and any required comments to the contracting officer and, unless otherwise specified in the contract, the inventory control manager.
(ii)If the contractor's report indicates that the contract is on schedule and the CAO agrees, the CAO does not need to add further comments. In all other cases, the CAO shall add comments and recommend a course of action.
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(c)(i) CAOs may report using--
(A)DD Form 375-2, Delay in Delivery (Flash Notice);
(B) DD Form 375, Production Progress Report;
(C) MILSCAP Revised Delivery Forecast (RDF) system; or
(D) Message, letters, or facsimile.
(ii)The contracting office shall acknowledge receipt of the CAO report.
{242.1107} Contract clause.
(b)When using the clause at FAR 52.242-2, include the following instructions in the contract schedule--
(i)Frequency and timing of reporting (normally five working days after each reporting period);
(ii)Contract line items, exhibits, or exhibit line items requiring reports;
(iii)Offices (with addressees/codes) where reports should be sent (always include the contracting office and contract administration office); and
(iv) The following requirements for report content--
(A) The problem, actual or potential, and its cause;
(B) Items and quantities affected;
(C) When the delinquency started or will start;
(D) Actions taken to overcome the delinquency;
(E) Estimated recovery date; and/or
(F) Proposed schedule revision.
{242.1107-70} Additional clauses.
When cost/schedule status reporting (C/SSR) is required on acquisitions for other than major systems (i.e., the Contract Data Requirements List includes DI-MGMT-81467), use in solicitations and resulting contracts the clause at 252.242-7005, Cost/Schedule Status Report.
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{242.1107} Contract clause.
(b)When using the clause at FAR 52.242-2, include the following instructions in the contract schedule--
(i)Frequency and timing of reporting (normally five working days after each reporting period);
(ii)Contract line items, exhibits, or exhibit line items requiring reports;
(iii)Offices (with addresses/codes) where reports should be sent (always include the contracting office and contract administration office); and
(iv)The following requirements for report content--
(A)The problems, actual or potential, and its cause;
(B)Items and quantities affected;
(C)When the delinquency started or will start;
(D)Actions taken to overcome the delinquency;
(E)Estimated recovery data; and/or
(F)Proposed schedule revision.
{242.1107-70} Additional clauses.
When cost/schedule status reporting (C/SSR) is required on acquisitions for other than major systems (i.e., the Contract Data Requirements List includes DI-F-6010A), use in solicitations and resulting contracts the clause at 252.242-7005, Cost/Schedule Status Report. Cost/Schedule status reporting normally is not imposed on contracts of less than $10 million.
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SUBPART 242.12--NOVATION AND CHANGE-OF-NAME AGREEMENTS
{242.1202} Responsibility for executing agreements.
The contracting officer responsible for processing and executing novation and change-of-name agreements shall ensure agreements are executed promptly.
{242.1203} Processing agreements.
(b)(1)For contracts awarded by the military departments, provide notices to the following addressees instead of individual contracting or contract administration offices--
Army HQ, U.S. Army Material Command
ATTN: AMCCC-P
5001 Eisenhower Avenue
Alexandria, VA 22333-0001
Navy Office of the Assistant Secretary of the Navy (RDA)
Procurement Policy
Washington, DC 20350-1000
Air Force HQ Air Force Materiel Command
ATTN: AFMC/PKM
4375 Chidlaw Road, Suite 6
Wright Patterson AFB, OH 45433-5006
National National Aeronautics and Space Administration
Aeronautics Assistant Administrator for Procurement
and Space ATTN: HP
Administration Washington, DC 20546
(2)(A)Lists for notices of a successor in interest should include the information at FAR 42.1204(c)(2).
(B)Lists for notices of a name change should include the information at FAR 42.1205(a)(3).
(C)On notices sent to the addressees in paragraph (b)(1) of this section, include a consolidated list for all subordinate contracting offices of the addressee.
(d)(i)Before making any substantial alterations or additions to the novation agreement format at FAR 42.1204(e), coordinate with those addressees in paragraph (b)(1) of this section that have contracts with the contractor. Resolve any objections before executing the agreement.
(ii)If the National Aeronautics and Space Administration (NASA) wants a separate agreement with the contractor, continue to process the agreement only for DoD.
(e) Also, make distribution to--
(i)The addressees in paragraph (b)(1) of this section--two copies; and
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(ii)The appropriate Military Traffic Management Command (MTMC) area command for agreements affecting contracts and basic agreements for storage and related services for personal property of military and civilian personnel--two copies--
Commander Commander
Eastern Area Western Area
Military Traffic Management Military Traffic Command Management Command ATTN: MTE-LO Oakland Army Base
Bayonne, NJ 07002 ATTN: MTW-LO
Oakland, CA 94626
(f)(4) Additional distribution instructions--
(A)Send two copies to the address in paragraph (b)(1) of this section. The list of contracts may be confined to those issued by that department.
(B)Do not send copies to NASA or the MTMC commands in paragraph (e)(ii). They will issue their own modifications.
{242.1204} Agreement to recognize a successor in interest (novation agreement).
(e)When a novation agreement is required and the transferee intends to incur restructuring costs as defined at 231.205-70, the cognizant contracting officer shall include the following provision as paragraph (b)(7) of the novation agreement instead of the paragraph (b)(7) provided in the sample format at FAR 42.1204(e):
"(7)(i) Except as set forth in subparagraph (7)(ii) below, the Transferor and the Transferee agree that the Government is not obligated to pay or reimburse either of them for, or otherwise give effect to, any costs, taxes, or other expenses, or any related increases, directly or indirectly arising out of or resulting from the transfer or this Agreement, other than those that the Government in the absence of this transfer or Agreement would have been obligated to pay or reimburse under the terms of the contracts.
(ii) The Government recognizes that restructuring by the Transferee incidental to the acquisition/merger may be in the best interests of the Government. Restructuring costs that are allowable under Part 31 of the Federal Acquisition Regulation (FAR) or Part 231 of the Defense Federal Acquisition Regulation Supplement (DFARS) may be reimbursed under flexibility-priced novated contracts, provided the Transferee demonstrates that the restructuring will reduce overall costs to the Department of Defense (DoD) (and to the National Aeronautics and Space Administration (NASA), where there is a mix of DoD and NASA contracts), and the requirements included in DFARS 231.205-70 are met. Restructuring costs shall not be allowed on novated contractsunless there is an audit of the restructuring proposal; a determination by the contracting officer
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of overall reduced costs to DoD/NASA; and an Advance Agreement setting forth a cumulative cost ceiling for restructuring projects and the period to which such costs shall be assigned."
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SUBPART 242.14--TRAFFIC AND TRANSPORTATION MANAGEMENT
{242.1401} General.
(b)(12)Chapter 39 of the Defense Traffic Management Regulation (DTMR) (AR 55-355, NAVSUPINST 4600.70, AFM 75-2, MCO P4600 14A, DLAR 4500.3) contains methods for tracing and expediting shipments.
{242.1402} Volume movements within the continental United States.
(a)(2) In reporting planned and actual volume movements--
(A) The contracting officer--
(1)Provides production schedules and planned destinations to the servicing transportation office as soon as the information is available to permit the transportation office to determine if volume movements will occur. If a volume movement appears likely, the transportation office reports a planned volume movement under Chapters 12 and 13 of the DTMR.
(2)Sends a copy of the volume movement report to the contract administration office.
(B)The contract administration office submits a volume movement report when--
(1)Significant changes are made to the movement requirements; or
(2) The contracting office did not submit a report.
(C)Include the destination country, foreign forwarder, and, if known, port of embarkation on volume movement reports for foreign military sale shipments.
{242.1403} Shipping documents covering f.o.b. origin shipments.
(a)(i)Procedures for the contractor to obtain Government bills of lading are in the clause at 252.242-7003, Application for U.S. Government Shipping Documentation/Instructions.
(ii)The term commercial bills of lading includes the use of any commercial form or procedure. Appendix J of the DTMR lists carriers and carrier associations that provide transportation within the continental United States under commercial forms and procedures.
{242.1404} Shipments by parcel post or other classes of mail.
{242.1404-1} Parcel post eligible shipments.
(b)(1) See DoD 4525.8-M, DoD Official Mail Manual.
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{242.1404-2} Contract clauses.
When using FAR 52.213-1, Fast Payment Procedures, do not use FAR clauses 52.242-10, F.o.b. Origin--Government Bills of Lading or Prepaid Postage, or 52.242-11, F.o.b. Origin--Government Bills of Lading or Indicia Mail.
{242.1404-2-70} Additional clauses.
(a)Use the clause at 252.242-7002, Submission of Commercial Freight Bills for Audit, when the Government will reimburse contractor transportation costs under a cost reimbursement contract.
(b)Use the clause at 252.242-7003, Application for U.S. Government Shipping Documentation/Instructions, when using the clause at FAR 52.242-10, F.o.b. Origin--Government Bills of Lading or Prepaid Postage, or FAR 52.242-11, F.o.b. Origin--Government Bills of Lading or Indicia Mail.
{242.1405} Discrepancies incident to shipment of supplies.
(a)See also Chapter 41 of the Defense Traffic Management Regulation (DTMR) for discrepancy procedures.
{242.1470} Demurrage and detention charges.
(a)Procedures for payment or collection of demurrage or detention charges are contained in Chapter 38 of the DTMR.
(b)Carrier demurrage rules usually allow for a "free time" for loading or unloading cars or for any other purpose, and impose charges for cars held beyond this period. If a contractor detains railroad cars beyond the "free time," the contractor has to pay the carrier's published tariff charges for demurrage.
(c)Detention results when a shipper or consignee holds motor carrier equipment beyond a reasonable period for loading, unloading, forwarding directions, or any other reason. Detention rules and charges are not uniform; they are published in individual carrier or agency tenders.
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SUBPART 242.15--CONTRACTOR PERFORMANCE INFORMATION
{242.1503} Procedures.
Evaluations should consider any notifications submitted under paragraph (g) of the caluse at 252.219-7003, Small, Small Disadvantaged and Women-owned Small Business Subcontracting Plan (DoD Contracts).
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SUBPART 242.70--MONITORING CONTRACTOR COSTS
{242.7000} Scope.
This subpart provides guidelines for--
(a)Monitoring the policies, procedures, and practices used by contractors to control direct and indirect costs related to Government business; and
(b)Eliminating duplication in Government monitoring of contractors' costs.
{242.7001} Policy.
Effective management of contract costs is essential to the efficient and economical performance of Government contracts. Contractors are responsible for managing and controlling their direct and indirect costs; however, DoD must systematically monitor the management of contractors' costs to ensure these responsibilities are met.
{242.7002-1} Departments and agencies.
(a)Departments and agencies should conduct a formal program of Government monitoring of contractor policies, procedures, and practices for controlling costs (cost monitoring) at--
(1) All major contractor locations when--
(i)Sales to the Government during the contractor's next fiscal year are expected to exceed $100 million on other than firm fixed-price and fixed-price with escalation contracts;
(ii)The contract administration office determines the cost benefits to be derived from monitoring the individual contractors with less than $100 million in other than firm fixed-price and fixed-price with escalation contracts would be warranted; or
(iii)The Government's share of indirect costs for these sales is at least 50 percent of the total indirect costs.
(2)Other critical locations with significant Government business where specifically directed by the head of the contracting activity.
(b)Departments and agencies are responsible for designating the cost monitoring sites and discontinuing them when the criteria are no longer met.
{242.7002-2} Contract administration offices.
(a)Contract administration offices (CAOs) which are designated as cost monitoring sites are responsible for assigning a cost monitoring specialist (CMS) to conduct the program. The CMS may be the administrative contracting officer or any other CAO employee whose normal function relates to evaluation of contractor performance.
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(b) The administrative contracting officer is responsible for--
(1) Forwarding cost monitoring review reports to the contractor;
(2) Considering review results in contract negotiations;
(3)Ensuring the contractor implements corrective action recommended in the cost monitoring review reports; and
(4)Resolving disputes with the contractor regarding cost monitoring review findings, conclusions, or recommendations.
(c)The cost monitoring coordinator is responsible for managing the cost monitoring effort within the CAO and coordinating planned effort with the contract auditor. This includes--
(1)Preparing and maintaining an annual written cost monitoring plan for reviewing contractor operations (see 242.7003);
(2)Maintaining an inventory of CAO, Defense Contract Audit Agency, and other Government reports on significant issues relating to monitoring costs;
(3)Performing in-depth functional reviews of contractor activities, including assisting Government personnel in obtaining access to pertinent contractor policies, procedures, and related data;
(4)Advising the administrative contracting officer (ACO) and CAO management of corrective action recommended to improve inefficient or uneconomical contractor conditions, policies, or practices, including preparing, for the ACO's consideration when appropriate, a Notice of Intent to Disallow or Not Recognize Costs;
(5)Continuously tracking the status of recommendations made to the contractor concerning cost performance stemming from all Government reports;
(6)Keeping the contracting officer, program manager, contract auditor, and other responsible officials informed of issues affecting economical contract performance; and
(7)Maintaining current organizational charts of the operations identifiable to the contractor's functional centers of its cost control functions.
{242.7002-3} Audit and other organizations.
(a)The contract auditor is responsible for assisting the CMS by performing the portion of cost monitoring reviews and related analyses which requires access to the contractor's financial and accounting records supporting proposed cost or pricing data. (This does not preclude the program manager, contracting officer, ACO, cost monitoring coordinator, or other representatives from reviewing contractor records and data necessary to the performance of their duties.)
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(b)Audit organizations, program offices, contracting activities, and any other organizations within DoD with responsibility for reviewing contractor operations for the purpose of monitoring contractor policies, procedures, and practices to control costs, shall submit to the cost monitoring coordinator--
(1)An annual schedule of planned and tentative visits, oversight reviews, and audits to be performed at cost monitoring locations (see 242.7003); and
(2)Revisions to scheduled visits or audit plans, within 30 days of issuance.
{242.7003} Annual cost monitoring plan.
{242.7003-1} Description.
The annual cost monitoring plan is a schedule for reviewing contractor activities that have the greatest potential for generating erroneous charges to Government contracts.
{242.7003-2} Selecting the activities.
(a)The cost monitoring specialist (CMS), assisted by the contract auditor, ultimately selects the activities for the plan. To ensure that all Government interests are considered in the selection, the CMS should invite contract administration office (CAO), Defense Contract Audit Agency (DCAA), and other interested Government representatives to a meeting before the beginning of each Government fiscal year to identify areas to be reviewed during the coming year.
(b)The selection team should consider the following data in the selection process--
(1)Contractor forecasts for the coming year supporting direct and indirect costs by functional centers of its cost control system and the results of the latest survey performed of such systems (DCAA responsibility);
(2)Organizational charts for the contractor's entire operation (CAO responsibility);
(3)Outline of the contractor's accounting system showing the flow of costs by function (DCAA responsibility);
(4)Determination of Government participation in the dollars attributable to the operations and cost accounts under consideration (DCAA responsibility);
(5)List of recent reviews and audits performed by CAO, DCAA, and other Government representatives that would affect the selection; list should show outstanding weakness and deficiencies in the contractor's operations (CAO responsibility);
(6)Evidence of under and over staffing (CAO-DCAA responsibility);
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(7)Significant departures from established contractor productivity standards (CAO responsibility);
(8)Major financial variances from forecasts in prior years (DCAA responsibility);
(9)Evidences of idle or under-used capacity (CAO-DCAA responsibility); and
(10)Any visits or audit plans scheduled by other Government organizations and identified to the CMC (CAO responsibility).
{242.7003-3} Tailoring the plan.
The cost monitoring specialist should tailor the plan to review contractor activity, considering--
(a) The extent of competition in awarded contracts;
(b) The contractor's operating methods;
(c) The nature of the work;
(d) Acquisition cycle stage;
(e) Business and industry practices;
(f) Types of contracts involved;
(g) Degree of technical and financial risk;
(h) Ratio of Government/commercial work; and
(i)Extent that performance efficiencies have been previously demonstrated.
{242.7003-4} Contents of the plan.
(a) The plan should--
(1)Provide coverage for each significant activity of the contractor over a period of two to three years;
(2)Be updated to reflect changed conditions as the year progresses; and
(3)Be consistent with any schedule and resource limitations of participating organizations.
(b)The plan must identify the organizations having the primary responsibility for performing the reviews--
(1)The contract administration office (CAO) reviews, and signs reports on, the technical aspects of contractor activities requiring minimal or no access to contractor financial and accounting records;
(2)DCAA reviews, and signs reports on, the financial and accounting aspects of contractor operations requiring minimal or no technical consideration; and
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(3)The cost monitoring specialist and DCAA jointly review, and jointly sign reports on, activities requiring significant CAO and DCAA expertise.
(c)The plan should include reviews required by the contracting officer and DFARS. Reviews will be performed by the assigned organization in paragraph (b) of this subsection, except when DFARS makes a specific organizational assignment. For example, Subpart 244.3 makes the CAO responsible for leading contractor purchasing system reviews and 215.811 makes the DCAA auditor responsible for leading estimating system reviews.
{242.7003-5} Plan approval.
The heads of the local contract administration and Defense Contract Audit Agency offices approve the annual cost monitoring plan.
{242.7004} Reviews.
(a) Perform reviews as scheduled in accordance with the plan.
(b)Hold interim meetings with the contractor as necessary to clarify information. Hold an exit conference at the conclusion of reviews.
(c)Prepare reports at the conclusion of reviews. Reports on joint reviews shall represent the mutually agreed upon findings, conclusion, and recommendations of the Defense Contract Audit Agency auditor and the contract administration office. Forward all reports through the administrative contracting officer to the contractor.
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SUBPART 242.71--VOLUNTARY REFUNDS
{242.7100} General.
(a)A voluntary refund is a payment or credit (adjustment under one or more contracts or subcontracts) to the Government from a contractor or subcontractor which is not required by any contractual or other legal obligation.
(b)A voluntary refund may be solicited (requested by the Government) or unsolicited.
(1)Generally, request voluntary refunds only after determining that no contractual remedy is readily available to recover the amount sought.
(2)Acceptance of unsolicited refunds does not prejudice remedies otherwise available to the Government.
(c)Before soliciting a voluntary refund or accepting an unsolicited one, the contracting officer should have legal counsel review the contract and related data to--
(1)Confirm that there are no readily available contractual remedies; and
(2)Advise whether the proposed action would jeopardize or impair the Government's rights.
{242.7101} Solicited refunds.
(a) Request voluntary refunds only when--
(1)The contracting officer concludes that the contractor overcharged under a contract, or inadequately compensated the Government for the use of Government-owned property, or inadequately compensated the Government in the disposition of contractor inventory; and
(2)Retention of the amount in question by the contractor or subcontractor would be contrary to good conscience and equity.
(b)Do not solicit voluntary refunds without approval of the head of the contracting activity, or as provided in department/agency regulations.
(c)Voluntary refunds may be requested during or after contract performance.
{242.7102} Disposition of voluntary refunds.
A contract modification, rather than a check, is the preferred means of effecting a solicited or unsolicited refund transacted before final payment.
(a)For modifications, adjust the price for the refund and credit the refund to the applicable appropriation cited in the contract.
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(b) For checks--
(1) Advise the contractor to--
(i)Make the check payable to the agency which awarded the contract;
(ii)Forward the check to the contracting officer or when the contract is assigned to another office for administration, to that office; and
(iii) Include a letter with the check--
(A) Identifying it as a voluntary refund;
(B) Giving the contract number involved; and
(C)Where possible, giving the appropriation and account number to be credited.
(2)Forward the check to the office responsible for control of funds.
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SUBPART 242.72--CONTRACTOR MATERIAL MANAGEMENT AND
{242.7200} Scope of subpart.
This subpart provides policies, procedures, and standards for use in the evaluation of a contractor's material management and accounting system (MMAS)
{242.7201} Definitions.
"Material management and accounting system" and "valid time-phased requirements" are defined in the clause at 252.242-7004, Material Management and Accounting System.
{242.7202} Policy.
DoD policy is for all contractors to have an MMAS that--
(a) Reasonably forecasts material requirements;
(b)Ensures the costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements;
(c)Maintains a consistent, equitable, and unbiased logic for costing of material transactions; and
(d)Conforms to the standards at 252.242-7004(f) when the contractor has cost-reimbursement or fixed-price contracts exceeding the simplified acquisition threshold, with progress or other contract financing provisions, except when all of the contracts and subcontracts are awarded under the set-aside or Section 8(a) procedures of FAR Part 19.
{242.7203} MMAS disclosure, demonstration, and maintenance requirements.
(a)A large business contractor is subject to MMAS disclosure, demonstration, and maintenance if in its preceding fiscal year the contractor received DoD prime contracts or subcontracts (including modifications) totaling--
(1)$70 million or more; or
(2)$30 million or more (but less than $70 million), and the contracting officer determines it to be in the best interests of the Government (e.g., contractor disclosure, demonstration, or other activities indicate significant MMAS problems exist).
(b)After the administrative contracting officer determines the contractor's MMAS is adequate (see 242.7204(b)), written disclosure will not be required for the next MMAS review unless the contractor's policies, procedures, or practices have changed in the interim period(s). Similarly, once the contractor demonstrates that its MMAS contains no significant deficiencies, demonstration requirements for subsequent reviews may be satisfied if internal audits are reasonably current and contain sufficient transaction tests to demonstrate MMAS compliance with each standard.
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{242.7204} Responsibilities.
(a) The contracting officer shall--
(1)Through use of the clause at 252.242-7004, Material Management and Accounting System, apply the disclosure, demonstration, and maintenance requirements to large business contractors meeting the criteria in 242.7203(a);
(2)Consider whether to apply the disclosure, demonstration, and maintenance requirements to other large business contractors under 242.7203(a)(2) after concurrence from, or at the request of, the administrative contracting officer; and
(3)Not apply the disclosure, demonstration, and maintenance requirements to small businesses, educational institutions, or nonprofit organizations.
(b)For contractors subject to the disclosure, demonstration, and maintenance requirements, the administrative contracting officer (ACO) determines the adequacy of the contractor's MMAS and pursues correction of deficiencies.
(c) The contract auditor shall--
(1) Assist the ACO in evaluating the contractor's MMAS;
(2)Assess the significance of contractor deficiencies and provide the ACO an estimate of the resulting adverse material impact to the Government; and
(3)Assist the ACO in evaluating the contractor's correction of deficiencies.
{242.7205} Review procedures.
(a) System Evaluation.
Cognizant contract administration and audit activities shall jointly establish and manage programs for evaluating the MMAS systems of contractors subject to disclosure, demonstration, and maintenance requirements and annually establish a schedule of contractors to be reviewed. They shall--
(1) Conduct reviews as a team effort.
(i) The administrative contracting officer--
(A) Appoints a team leader; and
(B)Ensures that the team includes appropriate functional specialists (i.e., industrial specialists, engineer, property administrator, auditor, etc.).
(ii) The team leader--
(A)Advises the ACO and contractor of findings during the review and at the exit conference.
(B)Makes every effort to resolve differences regarding questions of fact during the review.
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(2)Tailor reviews to take full advantage of the day-to-day work done by both organizations.
(3) Prepare a review report.
(4)Conduct a review every three years. The ACO, with advice from the auditor, may lengthen or shorten the three year period based on a risk assessment of the contractor's past experience and current vulnerability.
(b) Disposition of evaluation team findings.
The team leader shall document the evaluation team findings and recommendations in a report to the ACO. If there are significant MMAS deficiencies, the report must provide an estimate of the adverse impact on the Government resulting from those deficiencies.
(1) Initial notification to the contractor.
The ACO shall immediately provide a copy of the report to the contractor upon receipt from the team leader.
(i)The ACO shall notify the contractor in a timely manner if there are no deficiencies.
(ii)If there are deficiencies, the ACO shall request the contractor to provide a written response within 30 days from the date of initial notification.
(iii)If the contractor agrees with the report, the contractor has 60 days to correct any identified deficiencies or submit a corrective action plan showing milestones and actions to eliminate the deficiencies.
(iv)If the contractor disagrees, request rationale in the written response.
(2) Evaluation of the contractor's response.
The administrative contracting officer, in consultation with the auditor, evaluates the contractor's response and determines whether--
(i) The MMAS contains deficiencies which need correction;
(ii)The deficiencies are significant enough to result in the reduction or suspension of progress payments or of payments under public vouchers; and
(iii)Proposed corrective actions (if the contractor submitted them) are adequate to correct the deficiencies.
(3) Reduction or Suspension of payments.
(i)When the administrative contracting officer (ACO) determines that there is a significant MMAS deficiency, the ACO shall reduce progress payment claims by an appropriate percentage based on affected costs (in accordance with FAR 32.503-6) and/or suspend questionable costs on public vouchers in accordance with FAR 42.803). The reductions or suspensions shall remain in effect until the ACO determines that--
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(A) The deficiencies are corrected; or
(B) The amount of the impact is immaterial.
(ii)The maximum payment adjustment is the adverse material impact to the Government as specified in the team's report. The ACO should use the maximum adjustment when the contractor did not submit a corrective action plan with its response, or the plan is unacceptable. In other cases, the ACO should consider the quality of the contractor's self-assessment, demonstration, and corrective action plan in determining the appropriate percentage.
(iii)As the contractor implements its accepted corrective action plan, the ACO should reinstate a portion of withheld amounts commensurate with the contractor's progress in making corrections. However, the ACO shall not fully reinstate withheld amounts until the contractor corrects the deficiency, or until the impact of the deficiency becomes immaterial.
(4)Notification of administrative contracting officer determination.
(i)The administrative contracting officer (ACO) shall notify the contractor in writing (copy to auditor and functional specialists) of--
(A) Deficiencies needing correction;
(B)Acceptability of the contractor's corrective action plan (if one was submitted) or the need for a corrective action plan; and
(C)Any decision to reduce or suspend progress payments or public vouchers because of significant deficiencies.
(ii)The Government does not approve or disapprove the contractor's MMAS system. ACO notifications should avoid any such implications.
(iii)From the time the ACO determines that there is a significant material management and accounting system deficiency until the time the deficiency is corrected, all field pricing reports for that contractor shall contain a recommendation relating to proposed cost or pricing data adjustments necessary to protect the Government's interests.
(iv)The ACO should consider the effect of significant MMAS deficiencies in reviews of the contractor's estimating system (215.811).
(5)Monitoring contractor's corrective action.
The administrative contracting officer (ACO) and auditor shall monitor the contractor's progress in correcting deficiencies. If the contractor fails to make adequate progress, the ACO shall take further action. Actions for consideration may include--
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(i) Elevate the issue to higher level management;
(ii) Further reduce or suspend progress payments;
(iii)Notify the contractor of the inadequacy of the contractor's cost estimating system and/or cost accounting system.
(iv)Take appropriate contractual action, i.e., disallow charges as unreasonable; and
(v)Issue cautions to contracting activities regarding the award of future contracts.
{242.7206} Contract clause.
Use the clause at 252.242-7004, Material Management and Accounting System, in all solicitations and contracts exceeding the simplified acquisition threshold that are not for the acquisition of commercial items and--
(a)Are not awarded under the set-aside or Section 8(a) procedures of FAR Part 19; and
(b) Are either--
(1) Cost-reimbursement contracts; or
(2)Fixed-price contracts with progress payments or other Government financing.
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SUBPART 242.73--CONTRACTOR INSURANCE/PENSION REVIEW
{242.7300} Scope of subpart.
This subpart provides the requirements for conducting a Contractor Insurance/Pension Review (CIPR).
{242.7301} General.
(a)The administrative contracting officer (ACO) is responsible for determining the reasonableness of insurance/pension costs in Government contracts. Insurance/pension specialists assist ACOs in making these determinations by conducting CIPRs. A CIPR is an in-depth evaluation of a contractor's--
(1) Insurance program;
(2) Pension plan;
(3) Other deferred compensation plans; and
(4) Related policies, procedures, practices, and costs.
(b)As the DoD Executive Agency, the Defense Logistics Agency performs CIPRs at all contractor locations meeting criteria in 242.7302.
(c)Insurance/pension specialists are located at the Defense Contract Management Districts in Los Angeles and Chicago and at the Defense Contract Management Area Operations in New York.
(d)The CIPR should be the only formal review of a contractor's insurance/pension program except for periodic tests of the system performed by contract administration and DCAA, or any special reviews initiated by the administrative contracting officer. If any organization believes that additional reviews of the contractor's insurance/pension program should be performed, that request should be conveyed to the ACO. The ACO should perform the review as part of an ACO-initiated special review, of if possible, as part of the CIPR if one is scheduled to be conducted in the near future.
{242.7302} Requirements.
(a)A CIPR shall be conducted for each contractor whose qualifying sales to the Government exceed $40 million during the contractor's preceding fiscal year. Qualifying sales are sales for which certified cost and pricing data were required under 10 USC 2306, as implemented in far 15.804 (unless exempt in accordance with FAR 15.804-3), or which are cost-reinbursement type contracts, and modifications to such contracts and subcontracts.
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(b)A CIPR shall be conducted at least every two years for contractors who continue to meet the requirements. A more or less frequent cycle may be appropriate under certain circumstances, e.g., prior to a major contract award, in conjunction with in-depth overhead review, or subsequent to mergers or divestitures.
(c) Special reviews may be performed in the intervening period--
(1)To follow-up contractor implementation of recommendations and verify Government recovery of credits; or
(2)When information reveals a deficiency or major change in the contractor's insurance/pension program.
(d)Reviews of selected insurance and pension elements may be conducted for contractors not meeting the criteria in paragraph (a) of this section if significant problems have been identified.
{242.7303} Responsibilities.
(a) The administrative contracting officer is responsible for--
(1)Determining the need for a CIPR or special review under 242.7302;
(2)Requesting and scheduling the reviews with the appropriate Defense Logistics Agency activity;
(3)Notifying the contractor of the proposed date and purpose of the review, and obtaining any preliminary data needed by the insurance/pension specialist;
(4)Reviewing the CIPR report, advising the contractor of the results, and telling the contractor to submit any significant changes in insurance/pension plans for review and acceptance prior to making the change;
(5)Providing other interested contracting officers copies of documents related to the CIPR; and
(6) Ensuring adequate follow-up on all CIPR recommendations.
(b) The insurance/pension specialist is responsible for--
(1)Preparing and maintaining the schedule of CIPRs to be performed during the next 12 months and providing the military departments and Defense Contract Audit Agency a copy of the schedule;
(2) Heading the team that conducts the review;
(3) Maintaining complete documentation for CIPR reports;
(4)To the extent possible, resolving discrepancies between audit reports and CIPR draft reports prior to releasing the final CIPR report;
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(5) Preparing and distributing the final CIPR report;
(6)Providing the final audit report as an attachment to the CIPR report;
(7)Preparing a draft letter for the administrative contracting officer's use in notifying the contractor of CIPR results; and
(8)When requested, advising administrative contracting officers and other Government representatives concerning contractor insurance/pension matters.
(c) The Defense Contract Audit Agency auditor is responsible for--
(1) Participating as a member of the CIPR team;
(2)Submitting information and advice to the team based on analysis of the contractor's books, accounting records, and other related data; and
(3)Issuing an audit report to the insurance/pension specialist for incorporation into the final CIPR report.
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SUBPART 242.74--TECHNICAL REPRESENTATION AT CONTRACTOR FACILITIES
{242.7400} General.
(a)Contract administration offices (CAOs) are the designated representatives of DoD for the administration of contracts (see FAR 42.202 and 42.302). DoD activities shall use CAOs to perform contract administration service functions at or near contractor facilities (see 242.203(a)(i) and (v).
(b)Program managers may conclude that they need technical representation in contractor facilities to perform non-contract administration service (CAS) technical duties and to provide liaison, guidance, and assistance on systems and programs. In these cases, the program manager may assign technical representatives under the procedures in 242.7401.
(c)Program managers should carefully assess the number of technical representatives required to perform the non-CAS technical functions so as to keep the total assigned in-plant to the minimum necessary.
(d)A technical representative is a representative of a DoD program, project, or system office performing non-CAS technical duties at or near a contractor facility. A technical representative is not--
(1)A representative of a contract administration or contract audit component; or
(2) A contracting officer's representative (COR) (see 201.602).
{242.7401} Procedures.
(a)When the program, project, or system manager determines that a technical representative is required, the manager shall issue a letter of intent to the contract administration office commander listing the assignment location, starting and ending assignment dates, technical duties assigned, delegated authority, and support required from the contract administration office. Any issues regarding the assignment of a technical representative should be resolved promptly. However, final decision on the assignment remains with the program manager. Issues regarding the assignment of technical duties which cannot be resolved between the program office and the defense plant representative office will be escalated.
(b)The program, project, or system manager shall furnish the designated technical representative a letter of assignment of delegated technical duties, with copies to the contract administration office, the contracting officer, and contractor, at least 30 days before the assignment date (or termination date). Any changes to the requirements of the assignment letter will be made by a new letter of intent and processed in accordance with paragraph (a) of this section.
(c)The contract administration office normally provides the technical representative with office space, equipment, supplies, and part-time clerical support. The program, project, or system manager provides supervision, technical direction, administrativeservices
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(e.g., pay, travel, maintenance of personnel records), and, when required, full-time clerical support.
(d)The program manager or designee and the contract administration office, at the local level, shall negotiate a memorandum of agreement (MOA) delineating their functional administrative interrelationships, with annual updates as necessary. The agreements may be included in an existing MOA, if one exists, or as a separate MOA.
(e)The technical representative shall keep the contract administration office commander fully informed of matters discussed with the contractor. The contract administration office shall also keep the technical representative fully informed of contractor discussions which relate to technical matters within the purview of the technical representative's assigned duties.
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SUBPART 242.75--CONTRACTOR ACCOUNTING SYSTEMS AND RELATED CONTROLS
{242.7500} Scope of subpart.
This subpart provides policies and procedures applicable to contractor accounting systems and related internal controls.
{242.7501} Definition.
"Internal controls" means those policies and procedures established by contractor management to provide reasonable assurance that applicable laws and regulations are complied with and that actual and estimated costs are equitably allocated within the accounting system.
{242.7502} Policy.
Contractors receiving cost-reimbursement or incentive type contracts, or contracts which provide for progress payments based on costs or on a percentage or stage of completion, shall maintain an accounting system and related internal controls throughout contract performance which provide reasonable assurance that--
(a)Applicable laws and regulations are complied with;
(b)The accounting system and cost data are reliable;
(c)Risk of misallocations and mischarges are minimized; and
(d)Contract allocations and charges are consistent with invoice procedures.
{242.7503} Procedures.
(a)Upon receipt of an audit report identifying significant accounting system or related internal control deficiencies, the ACO will--
(1)Provide a copy of the report to the contractor and allow 30 days, or a reasonable extension, for the contractor to respond;
(2)If the contractor agrees with the report, the contractor has 60 days from the date of initial notification to correct any identified deficiencies or submit a corrective action plan showing milestones and actions to eliminate the deficiencies.
(3)If the contractor disagrees, the contractor should provide rationale in its written response.
(4)The ACO will consider whether it is appropriate to suspend a percentage of progress payments or reimbursement of costs proportionate to the estimated cost risk to the Government, considering audit reports or other relevant input, until the contractor submits a corrective action plan acceptable to the ACO and corrects the deficiencies. (See FAR 32.503-6 (a) and (b) and FAR 42.302(a)(7)).
DAC 91-7 242.75-1
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