C.  Adequacy Determination and Roles

The final rule includes amendments to FAR 42.705-1(b) and 42.705-2(b) in response to comments in this category.

Comment: One respondent recommends that the granting of an extension to the contractor for submitting its indirect cost rate proposal by the contracting officer be made in writing at FAR 42.705-1(b)(1)(i).

Response: The language at FAR 42.705-1(b)(1)(ii) is revised accordingly.

Comments: Five respondents question whether it is appropriate for DCAA to have sole responsibility to determine the adequacy of indirect cost rate proposals. One respondent believes a determination from the auditor exceeds the auditor's authority under law.

Three respondents state that any final determination regarding adequacy should be the responsibility of the contracting officer. One respondent states that the contracting officer/auditor relationship that is provided for in the audit process should be followed.

Response: The term "determination" in this case was not intended to shift the authority to make determinations from the contracting officer to the auditor; rather, the intent was for the auditor to offer advice to the contracting officer regarding adequacy of the proposal. The language in 42.705-1(b)(1)(iii), 42.705-1(b)(2), and 42.705-2(b) has been revised to remove the term "determination" and to clarify that the auditor reviews the proposal for adequacy and provides the findings of inadequacy to the contracting officer and contractor.

Comment: One respondent states that the proposed rule creates a review process within which there is little latitude for a contracting officer to resolve administrative disagreements between auditors and contractors.

Response: The rule does not diminish the latitude or the authority that contracting officers have to resolve any and all matters arising under the contract with respect to an indirect cost rate proposal. The current FAR already allows flexibility for the content based on the situation, e.g., complexity and size of the contractor.

Comment: One respondent states that the proposed changes at FAR 42.705-1(b)(1)(iv) and FAR 52.216-7(d) contradict FAR 42.705-1(b)(1)(i), which requires the parties to work together to make the proposal, audit, and negotiation process as efficient as possible. The proposed default choice requiring data in FAR 52.216-7(d)(2)(iii) will result in contractors trying to provide unrelated data to avoid an auditor's automatic "checklist" determination of inadequate proposals. Such rigid requirements will lead to an increase in disagreements about the adequacy of final indirect cost rate proposals.

Response: The process of reviewing the proposal for adequacy, performing the audit, and conducting negotiations has not changed. Also, no new requirement is imposed on contractors by this rule. The list of data (schedules) now included in FAR 52.216-7(d) requires the same information previously cited in FAR 42.705-1(b).