---
kind: "section"
citation: "48 C.F.R. § 42.709-2"
title: "48"
number: "42.709-2"
heading: "General."
url: "https://uscodex.org/cfr/48/42.709-2"
---

# §42.709-2. General.

- (a) **The following penalties apply to contracts covered by this section—**
  - (1) If the indirect cost is expressly unallowable under a cost principle in the FAR, or an executive agency supplement to the FAR, that defines the allowability of specific selected costs, the penalty is equal to—
    - (i) The amount of the disallowed costs allocated to contracts that are subject to this section for which an indirect cost proposal has been submitted; plus
    - (ii) **Interest on the paid portion, if any, of the disallowance.**
  - (2) If the indirect cost was determined to be unallowable for that contractor before proposal submission, the penalty is two times the amount in [paragraph (a)(1)(i)](#a-1-i) of this section.
- (b) These penalties are in addition to other administrative, civil, and criminal penalties provided by law.
- (c) It is not necessary for unallowable costs to have been paid to the contractor in order to assess a penalty.

## Notes

### Amendments

[60 FR 42658, Aug. 16, 1995. Redesignated at 86 FR 44255, Aug. 11, 2021]

### 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 42658, Aug. 16, 1995. Redesignated at 86 FR 44255, Aug. 11, 2021]