---
kind: "section"
citation: "48 C.F.R. § 42.703-2"
title: "48"
number: "42.703-2"
heading: "Certificate of indirect costs."
url: "https://uscodex.org/cfr/48/42.703-2"
---

# §42.703-2. Certificate of indirect costs.

- (a) **General.** In accordance with 10 U.S.C. [3747](/usc/10/3747.md) and [41](/usc/10/41.md) U.S.C. 4307, a proposal shall not be accepted and no agreement shall be made to establish final indirect cost rates unless the costs have been certified by the contractor.
- (b) **Waiver of certification.**
  - (1) The agency head, or designee, may waive the certification requirement when—
    - (i) It is determined to be in the interest of the United States; and
    - (ii) **The reasons for the determination are put in writing and made available to the public.**
  - (2) A waiver may be appropriate for a contract with—
    - (i) A foreign government or international organization, such as a subsidiary body of the North Atlantic Treaty Organization;
    - (ii) A State or local government subject to the OMB Uniform Guidance at [2 CFR part 200](/cfr/2/part200.md), [subpart E](/cfr/48/subpartE.md) and appendices V and VII;
    - (iii) An educational institution (defined as an institution of higher education in the OMB Uniform Guidance at [2 CFR part 200](/cfr/2/part200.md), subpart [A](/cfr/48/subpartA.md), and [20](/cfr/48/subpart20.md) U.S.C. 1001) subject to the OMB Uniform Guidance at [2 CFR part 200](/cfr/2/part200.md), [subpart E](/cfr/48/subpartE.md) and appendix III; and
    - (iv) A nonprofit organization (as defined in the OMB Uniform Guidance at [2 CFR part 200](/cfr/2/part200.md)) subject to the OMB Uniform Guidance at [2 CFR part 200](/cfr/2/part200.md), [subpart E](/cfr/48/subpartE.md) and appendix IV.
- (c) **Failure to certify.**
  - (1) If the contractor has not certified its proposal for final indirect cost rates and a waiver is not appropriate, the contracting officer may unilaterally establish the rates.
  - (2) **Rates established unilaterally should be—**
    - (i) Based on audited historical data or other available data as long as unallowable costs are excluded; and
    - (ii) Set low enough to ensure that unallowable costs will not be reimbursed.
- (d) **False certification.** The contracting officer should consult with legal counsel to determine appropriate action when a contractor's certificate of final indirect costs is thought to be false.
- (e) **Penalties for unallowable costs.** 10 U.S.C. [3743](/usc/10/3743.md) and [41](/usc/10/41.md) U.S.C. 4303 prescribe penalties for submission of unallowable costs in final indirect cost rate proposals (see 42.709 for penalties and contracting officer responsibilities).
- (f) **Contract clause.**
  - (1) Except as provided in [paragraph (f)(2)](#f-2) of this subsection, the clause at 52.242-4, Certification of Final Indirect Costs, shall be incorporated into all solicitations and contracts which provide for establishment of final indirect cost rates.
  - (2) The Department of Energy may provide an alternate clause in its agency supplement for its Management and Operating contracts.

## Notes

### Amendments

[60 FR 42664, Aug. 16, 1995, as amended at 62 FR 237, Jan. 2, 1997; 62 FR 10710, Mar. 10, 1997; 63 FR 9064, Feb. 23, 1998; 79 FR 24213, Apr. 29, 2014; 81 FR 45853, July 14, 2016; 87 FR 73900, Dec. 1, 2022]

### Authority

Authority: 41 U.S.C. 1121(b); 40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.

### Source

Source: 48 FR 42370, Sept. 19, 1983, unless otherwise noted.

### Amendments

[60 FR 42664, Aug. 16, 1995, as amended at 62 FR 237, Jan. 2, 1997; 62 FR 10710, Mar. 10, 1997; 63 FR 9064, Feb. 23, 1998; 79 FR 24213, Apr. 29, 2014; 81 FR 45853, July 14, 2016; 87 FR 73900, Dec. 1, 2022]