41 U.S.C. § 4303 — Effect of submission of unallowable costs

Page 130 TITLE 41—PUBLIC CONTRACTS § 4302 HISTORICAL AND REVISION NOTES—CONTINUED Revised Section Source (U.S. Code) Source (Statutes at Large) 4301(4) ........ 41:256(m)(2). Editorial Notes AMENDMENTS 2018—Par. (2). Pub. L. 115–232 substituted ‘‘commer- cial products or commercial services’’ for ‘‘commercial items’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2018 AMENDMENT Amendment by Pub. L. 115–232 effective Jan. 1, 2020, subject to a savings provision, see section 836(h) of Pub. L. 115–232, set out as an Effective Date of 2018 Amend- ment; Savings Provision note under section 453b of Title 6, Domestic Security. § 4302. Adjustment of threshold amount of cov- ered contract Effective on October 1 of each year that is di- visible by 5, the amount set forth in section 4301(2) of this title shall be adjusted to the equivalent amount in constant fiscal year 1994 dollars. An adjusted amount that is not evenly divisible by $50,000 shall be rounded to the near- est multiple of $50,000. If an amount is evenly di- visible by $25,000 but is not evenly divisible by $50,000, the amount shall be rounded to the next higher multiple of $50,000. (Pub. L. 111–350, § 3, Jan. 4, 2011, 124 Stat. 3784.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4302 ............ 41:256(l)(2). June 30, 1949, ch. 288, title III, § 306(l)(2), as added Pub. L. 100–700, § 8(a)(1), Nov. 19, 1988, 102 Stat. 4634; Pub. L. 103–355, title II, § 2151, Oct. 13, 1994, 108 Stat. 3315. § 4303. Effect of submission of unallowable costs (a) INDIRECT COST THAT VIOLATES FEDERAL AC- QUISITION REGULATION COST PRINCIPLE.—An ex- ecutive agency shall require that a covered con- tract provide that if the contractor submits to the executive agency a proposal for settlement of indirect costs incurred by the contractor for any period after those costs have been accrued and if that proposal includes the submission of a cost that is unallowable because the cost vio- lates a cost principle in the Federal Acquisition Regulation or an executive agency supplement to the Federal Acquisition Regulation, the cost shall be disallowed. (b) PENALTY FOR VIOLATION OF COST PRIN- CIPLE.— (1) UNALLOWABLE COST IN PROPOSAL.—If the executive agency determines that a cost sub- mitted by a contractor in its proposal for set- tlement is expressly unallowable under a cost principle referred to in subsection (a) that de- fines the allowability of specific selected costs, the executive agency shall assess a pen- alty against the contractor in an amount equal to— (A) the amount of the disallowed cost allo- cated to covered contracts for which a pro- posal for settlement of indirect costs has been submitted; plus (B) interest (to be computed based on pro- visions in the Federal Acquisition Regula- tion) to compensate the Federal Government for the use of the amount which a contractor has been paid in excess of the amount to which the contractor was entitled. (2) COST DETERMINED TO BE UNALLOWABLE BE- FORE PROPOSAL SUBMITTED.—If the executive agency determines that a proposal for settle- ment of indirect costs submitted by a con- tractor includes a cost determined to be unal- lowable in the case of that contractor before the submission of that proposal, the executive agency shall assess a penalty against the con- tractor in an amount equal to 2 times the amount of the disallowed cost allocated to covered contracts for which a proposal for set- tlement of indirect costs has been submitted. (c) WAIVER OF PENALTY.—The Federal Acquisi- tion Regulation shall provide for a penalty under subsection (b) to be waived in the case of a contractor’s proposal for settlement of indi- rect costs when— (1) the contractor withdraws the proposal be- fore the formal initiation of an audit of the proposal by the Federal Government and re- submits a revised proposal; (2) the amount of unallowable costs subject to the penalty is insignificant; or (3) the contractor demonstrates, to the con- tracting officer’s satisfaction, that— (A) it has established appropriate policies and personnel training and an internal con- trol and review system that provide assur- ances that unallowable costs subject to pen- alties are precluded from being included in the contractor’s proposal for settlement of indirect costs; and (B) the unallowable costs subject to the penalty were inadvertently incorporated into the proposal. (d) APPLICABILITY OF CONTRACT DISPUTES PRO- CEDURE.—An action of an executive agency under subsection (a) or (b)— (1) shall be considered a final decision for the purposes of section 7103 of this title; and (2) is appealable in the manner provided in section 7104(a) of this title. (Pub. L. 111–350, § 3, Jan. 4, 2011, 124 Stat. 3784.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4303(a) ........ 41:256(a). June 30, 1949, ch. 288, title III, § 306(a)–(d), as added Pub. L. 100–700, § 8(a)(1), Nov. 19, 1988, 102 Stat. 4634; Pub. L. 103–355, title II, § 2151, Oct. 13, 1994, 108 Stat. 3309. 4303(b) ........ 41:256(b). 4303(c) ........ 41:256(c). 4303(d) ........ 41:256(d). In subsection (a), the words ‘‘(referred to in section 421(c)(1) of this title)’’ are omitted as unnecessary. § 4304. Specific costs not allowable (a) SPECIFIC COSTS.—The following costs are not allowable under a covered contract: