FAR 42.709-4 — Assessing the penalty
Regulatory text. Not legal advice.
Unless a waiver is granted pursuant to FAR 42.709-6, the cognizant contracting officer shall—
(a)
(a) Assess the penalty in [FAR 42.709-2](1), when the submitted cost is expressly unallowable under a cost principle in the FAR or an executive agency supplement that defines the allowability of specific selected costs; or
(b)
(b) Assess the penalty in [FAR 42.709-2](2), when the submitted cost was determined to be unallowable for that contractor prior to submission of the proposal. Prior determinations of unallowability may be evidenced by—
(1) A DCAA Form 1, Notice of Contract Costs Suspended and/or Disapproved (see 48 DFARS 242.705-2), or any similar notice which the contractor elected not to appeal and was not withdrawn by the cognizant Government agency;
(2) A contracting officer final decision which was not appealed;
(3) A prior executive agency Board of Contract Appeals or court decision involving the contractor, which upheld the cost disallowance; or
(4) A determination or agreement of unallowability under FAR 31.201-6.
(c)
(c) Issue a final decision (see FAR 33.211) which includes a demand for payment of any penalty assessed under paragraph (a) or (b) of this section. The letter shall state that the determination is a final decision under the Disputes clause of the contract. (Demanding payment of the penalty is separate from demanding repayment of any paid portion of the disallowed cost.)
Citation history: [60 FR 42658, Aug. 16, 1995. Redesignated and amended at 86 FR 44255, Aug. 11, 2021]
Source: eCFR • Pulled 2026-04-16