Part 42 - Contract Administration and Audit Services (2023)

(a) The contracting officer normally delegates the following contract administration functions to a CAO. The contracting officer may retain any of these functions, except those in paragraphs (a)(5), (a)(9), (a)(11) and (a)(12) of this section, unless the cognizant Federal agency (see 2.101) has designated the contracting officer to perform these functions.

(1) Review the contractor’s compensation structure.

(2) Review the contractor’s insurance plans.

(3) Conduct post-award orientation conferences.

(4) Review and evaluate contractors’ proposals under subpart 15.4 and, when negotiation will be accomplished by the contracting officer, furnish comments and recommendations to that officer.

(5) Negotiate forward pricing rate agreements (see 15.407-3).

(6) Negotiate advance agreements applicable to treatment of costs under contracts currently assigned for administration (see 31.109).

(7) Determine the allowability of costs suspended or disapproved as required (see subpart 42.8), direct the suspension or disapproval of costs when there is reason to believe they should be suspended or disapproved, and approve final vouchers.

(8) Issue Notices of Intent to Disallow or not Recognize Costs (see subpart 42.8).

(9) Establish final indirect cost rates and billing rates for those contractors meeting the criteria for contracting officer determination in subpart 42.7.

(10) Attempt to resolve issues in controversy, using ADR procedures when appropriate (see subpart 33.2); prepare findings of fact and issue decisions under the Disputes clause on matters in which the administrative contracting officer (ACO) has the authority to take definitive action.

(11) In connection with Cost Accounting Standards (see 30.601 and 48 CFR chapter 99)-

(i) Determine the adequacy of the contractor’s disclosure statements;

(ii) Determine whether disclosure statements are in compliance with Cost Accounting Standards and part 31;

(iii) Determine the contractor’s compliance with Cost Accounting Standards and disclosure statements, if applicable; and

(iv) Negotiate price adjustments and execute supplemental agreements under the Cost Accounting Standards clauses at 52.230-2, 52.230-3, 52.230-4, 52.230-5, and 52.230-6.

(12) Determine the adequacy of the contractor’s accounting system. The contractor’s accounting system should be adequate during the entire period of contract performance. The adequacy of the contractor’s accounting system and its associated internal control system, as well as contractor compliance with the Cost Accounting Standards (CAS), affect the quality and validity of the contractor data upon which the Government must rely for its management oversight of the contractor and contract performance.

(13) Review and approve or disapprove the contractor’s requests for payments under the progress payments or performance-based payments clauses.

(14) Make payments on assigned contracts when prescribed in agency acquisition regulations.

(Video) Government Contacting - FAR Part 42 - Contract Administration and Audit Services - Win Federal Contr

(15) Manage special bank accounts.

(16) Ensure timely notification by the contractor of any anticipated overrun or underrun of the estimated cost under cost-reimbursement contracts.

(17) Monitor the contractor’s financial condition and advise the contracting officer when it jeopardizes contract performance.

(18) Analyze quarterly limitation on payments statements and take action in accordance with subpart 32.6 to recover overpayments from the contractor.

(19) Issue tax exemption forms.

(20) Ensure processing and execution of duty-free entry certificates.

(21) For classified contracts, administer those portions of the applicable industrial security program delegated to the CAO (see subpart 4.4).

(22) Issue work requests under maintenance, overhaul, and modification contracts.

(23) Negotiate prices and execute supplemental agreements for spare parts and other items selected through provisioning procedures when prescribed by agency acquisition regulations.

(24) Negotiate and execute contractual documents for settlement of partial and complete contract terminations for convenience, except as otherwise prescribed by part 49.

(25) Negotiate and execute contractual documents settling cancellation charges under multiyear contracts.

(26) Process and execute novation and change of name agreements under subpart 42.12.

(27) Perform property administration (see part 45).

(28) Perform necessary screening, redistribution, and disposal of contractor inventory.

(29) Issue contract modifications requiring the contractor to provide packing, crating, and handling services on excess Government property. When the ACO determines it to be in the Government’s interests, the services may be secured from a contractor other than the contractor in possession of the property.

(30) When contractors request Government property-

(i) Evaluate the contractor’s requests for Government property and for changes to existing Government property and provide appropriate recommendations to the contracting officer;

(ii) Ensure required screening of Government property before acquisition by the contractor;

(iii) Evaluate the use of Government property on a non-interference basis in accordance with the clause at 52.245-9, Use and Charges;

(Video) Government Contracting - DFARS Part 242 - Contract Administration - Win Federal Contracts

(iv) Ensure payment by the contractor of any rental due; and

(v) Modify contracts to reflect the addition of Government-furnished property and ensure appropriate consideration.

(31) Perform production support, surveillance, and status reporting, including timely reporting of potential and actual slippages in contract delivery schedules.

(32) Perform preaward surveys (see subpart 9.1).

(33) Advise and assist contractors regarding their priorities and allocations responsibilities and assist contracting offices in processing requests for special assistance and for priority ratings for privately owned capital equipment.

(34) Monitor contractor industrial labor relations matters under the contract; apprise the contracting officer and, if designated by the agency, the cognizant labor relations advisor, of actual or potential labor disputes; and coordinate the removal of urgently required material from the strikebound contractor’s plant upon instruction from, and authorization of, the contracting officer.

(35) Perform traffic management services, including issuance and control of Government bills of lading and other transportation documents.

(36) Review the adequacy of the contractor’s traffic operations.

(37) Review and evaluate preservation, packaging, and packing.

(38) Ensure contractor compliance with contractual quality assurance requirements (see part 46).

(39) Ensure contractor compliance with contractual safety requirements.

(40) Perform engineering surveillance to assess compliance with contractual terms for schedule, cost, and technical performance in the areas of design, development, and production.

(41) Evaluate for adequacy and perform surveillance of contractor engineering efforts and management systems that relate to design, development, production, engineering changes, subcontractors, tests, management of engineering resources, reliability and maintainability, data control systems, configuration management, and independent research and development.

(42) Review and evaluate for technical adequacy the contractor’s logistics support, maintenance, and modification programs.

(43) Report to the contracting office any inadequacies noted in specifications.

(44) Perform engineering analyses of contractor cost proposals.

(45) Review and analyze contractor-proposed engineering and design studies and submit comments and recommendations to the contracting office, as required.

(46) Review engineering change proposals for proper classification, and when required, for need, technical adequacy of design, producibility, and impact on quality, reliability, schedule, and cost; submit comments to the contracting office.

(47) Assist in evaluating and make recommendations for acceptance or rejection of waivers and deviations.

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(48) Evaluate and monitor the contractor’s procedures for complying with procedures regarding restrictive markings on data.

(49) Monitor the contractor’s value engineering program.

(50) Review, approve or disapprove, and maintain surveillance of the contractor’s purchasing system (see part 44).

(51) Consent to the placement of subcontracts.

(52) Review, evaluate, and approve plant or division-wide small, small disadvantaged, women-owned, veteran-owned, HUBZone, and service-disabled veteran-owned small business master subcontracting plans.

(53) Obtain the contractor’s currently approved company- or division-wide plans for small, small disadvantaged, women-owned, veteran-owned, HUBZone, and service-disabled veteran-owned small business subcontracting for its commercial products, or, if there is no currently approved plan, assist the contracting officer in evaluating the plans for those products.

(54) Assist the contracting officer, upon request, in evaluating an offeror’s proposed small, small disadvantaged women-owned, veteran-owned, HUBZone, and service-disabled veteran-owned small business subcontracting plans, including documentation of compliance with similar plans under prior contracts.

(55) By periodic surveillance, ensure the contractor’s compliance with small, small disadvantaged, women-owned, veteran-owned, HUBZone, and service-disabled veteran-owned small business subcontracting plans and any labor surplus area contractual requirements; maintain documentation of the contractor’s performance under and compliance with these plans and requirements; and provide advice and assistance to the firms involved, as appropriate.

(56) Maintain surveillance of flight operations.

(57) Assign and perform supporting contract administration.

(58) Ensure timely submission of required reports.

(59) Issue administrative changes, correcting errors or omissions in typing, contractor address, facility or activity code, remittance address, computations which do not require additional contract funds, and other such changes (see 43.101).

(60) Cause release of shipments from contractor’s plants according to the shipping instructions. When applicable, the order of assigned priority shall be followed; shipments within the same priority shall be determined by date of the instruction.

(61) Obtain contractor proposals for any contract price adjustments resulting from amended shipping instructions. Review all amended shipping instructions on a periodic, consolidated basis to ensure that adjustments are timely made. Except when the ACO has settlement authority, the ACO shall forward the proposal to the contracting officer for contract modification. The ACO shall not delay shipments pending completion and formalization of negotiations of revised shipping instructions.

(62) Negotiate and/or execute supplemental agreements, as required, making changes in packaging subcontractors or contract shipping points.

(63) Cancel unilateral purchase orders when notified of nonacceptance by the contractor. The CAO shall notify the contracting officer when the purchase order is canceled.

(64) Negotiate and execute one-time supplemental agreements providing for the extension of contract delivery schedules up to 90 days on contracts with an assigned Criticality Designator of C (see 42.1105). Notification that the contract delivery schedule is being extended shall be provided to the contracting office. Subsequent extensions on any individual contract shall be authorized only upon concurrence of the contracting office.

(65) Accomplish administrative closeout procedures (see 4.804-5).

(66) Determine that the contractor has a drug-free workplace program and drug-free awareness program (see subpart 23.5).

(Video) Government Contracting - FAR Part 4 - Administrative Matters - Win Federal Contracts

(67) Support the program, product, and project offices regarding program reviews, program status, program performance and actual or anticipated program problems.

(68) Monitor the contractor’s environmental practices for adverse impact on contract performance or contract cost, and for compliance with environmental requirements specified in the contract. ACO responsibilities include-

(i) Requesting environmental technical assistance, if needed;

(ii) Monitoring contractor compliance with specifications or other contractual requirements requiring the delivery or use of environmentally preferable products, energy-efficient products, products containing recovered materials, and biobased products. This must occur as part of the quality assurance procedures set forth in part 46; and

(iii) As required in the contract, ensuring that the contractor complies with the reporting requirements relating to recovered material content utilized in contract performance (see subpart 23.4).

(69) Administer commercial financing provisions and monitor contractor security to ensure its continued adequacy to cover outstanding payments, when on-site review is required.

(70) Deobligate excess funds after final price determination.

(71) Ensure that the contractor has implemented the requirements of 52.203-13, Contractor Code of Business Ethics and Conduct.

(b) The CAO shall perform the following functions only when and to the extent specifically authorized by the contracting office:

(1) Negotiate or negotiate and execute supplemental agreements incorporating contractor proposals resulting from change orders issued under the Changes clause. Before completing negotiations, coordinate any delivery schedule change with the contracting office.

(2) Negotiate prices and execute priced exhibits for unpriced orders issued by the contracting officer under basic ordering agreements.

(3) Negotiate or negotiate and execute supplemental agreements changing contract delivery schedules.

(4) Negotiate or negotiate and execute supplemental agreements providing for the deobligation of unexpended dollar balances considered excess to known contract requirements.

(5) Issue amended shipping instructions and, when necessary, negotiate and execute supplemental agreements incorporating contractor proposals resulting from these instructions.

(6) Negotiate changes to interim billing prices.

(7) Negotiate and definitize adjustments to contract prices resulting from exercise of an economic price adjustment clause (see subpart 16.2).

(8) Issue change orders and negotiate and execute resulting supplemental agreements under contracts for ship construction, conversion, and repair.

(9) Execute supplemental agreements on firm-fixed-price supply contracts to reduce required line item quantities and deobligate excess funds when notified by the contractor of an inconsequential delivery shortage, and it is determined that such action is in the best interests of the Government, notwithstanding the default provisions of the contract. Such action will be taken only upon the written request of the contractor and, in no event, shall the total downward contract price adjustment resulting from an inconsequential delivery shortage exceed $250.00 or 5 percent of the contract price, whichever is less.

(10) Execute supplemental agreements to permit a change in place of inspection at origin specified in firm-fixed-price supply contracts awarded to nonmanufacturers, as deemed necessary to protect the Government’s interests.

(Video) Contract Administration - Information Requests

(11) Prepare evaluations of contractor performance in accordance with subpart 42.15.

(c) Any additional contract administration functions not listed in 42.302(a) and (b), or not otherwise delegated, remain the responsibility of the contracting office.

FAQs

What is the primary goal of contract administration? ›

The primary objective of the contract administration project is to establish best practices that agencies can use to improve contract administration to assure responsiveness to customers and best value to taxpayers.

What are the two types of contract modifications? ›

There are two types of contract modifications: unilateral and bilateral. Unilateral modifications are signed only by a contracting officer and are generally used to make administrative changes, issue change orders, make changes authorized by clauses other than the Changes clause, and issue termination notices.

What is contract administration process? ›

In short, contract administration involves the planning, negotiation, execution and performance of any contact with customers or vendors. The preparation and implementation of contracts has great potential for aligning mutually agreeable contracts that lead to positive business outcomes.

What is a bilateral modification used for? ›

A bilateral modification is typically used to: Negotiate equitable adjustments when a change order occurs. Definitize letter contracts. Reflect other types of modifications.

How can I be a good contract administrator? ›

A Contract Administrator needs to be able to work well under pressure and to balance competing demands. For this reason, you need to have the ability to think quickly, problem solve, and make decisions that are well-informed and follow a logical trajectory.

What is contract management in simple words? ›

Contract management is the process of managing contract creation, execution, and analysis to maximize operational and financial performance at an organization, all while reducing financial risk. Organizations encounter an ever-increasing amount of pressure to reduce costs and improve company performance.

Can a contract be changed by one party? ›

The party who presents the contract is usually the party that can unilaterally modify it. Unilateral modifications are usually made by large companies working with individual consumers. These consumers are unlikely to be involved in a legal negotiation with a large company for their service.

Can you modify an expired contract? ›

Once an agreement has expired, you can't revive it. In legal terms, it no longer exists. What you can do, however, is create a new document with a new term. If both parties agree to it, the start of the new term can be backdated so that there is no period of time in which they are not covered by the contract.

Can contractor change price after contract signed? ›

Considerations When a Vendor's Prices Go Up

Generally speaking, neither you nor the vendor has the right to unilaterally change the agreed-upon terms. But some contracts are crafted in anticipation of future changes in the size and scope of projects, with the flexibility for price adjustments.

What are the benefits of contract administration? ›

What are the benefits of contract administration?
  • It makes sure both parties understand their responsibilities to one another. ...
  • It facilitates communication between both parties. ...
  • It makes sure contracts meet official requirements. ...
  • It protects both entities.
11 Oct 2021

What are the contract administration activities? ›

It includes contract monitoring, which is observing and reporting on the contractor's performance. Contract administration also includes managing changes to contracts, maintaining contract-related documents, addressing claims and disputes, and closeout activities.

What is the difference between contract management and contract administration? ›

To state it as simply as possible, contract administration is the work done before a contract is signed into effect and contract management covers everything done after signing to ensure that deliverables and deadlines are adhered to as outlined in the agreement.

How do you determine if a modification is within scope? ›

to be determined by examining whether the alteration is within the scope of the competition which was originally conducted. Ordinarily, a modification falls within the scope of the procurement provided that it is of a nature which potential offerors would have reasonably anticipated under the changes clause.

What are common causes of a constructive change? ›

Constructive changes most often arise where there is a dispute regarding contract interpretation, defective plans and specifications, acceleration or suspension of work, interference or failure to cooperate with the contractor, misrepresentation or nondisclosure of superior knowledge or technical information, over ...

What is the basic formula for an equitable adjustment? ›

”The basic formula for an equitable adjustment is is an estimate of the difference between (1) what it would have reasonably cost to perform the work as originally performed and (2) what it will reasonably cost to perform the work as changed”.

What skills does a contract administrator need? ›

How to become a Contract Administrator
  • Excellent attention to detail, with the ability to find inconsistencies and errors.
  • Teamwork and the ability to work with a variety of people at all levels.
  • Language comprehension and reading skills.
  • Oral and written communication skills.
  • Ability to execute and negotiate contracts.

How many hours do contract administrators work? ›

Contract administrators work in a variety of settings, including corporate offices, law firms, government agencies, and educational institutions. They typically work a standard 40-hour week, although they may occasionally work overtime to meet deadlines.

What are some of the most important qualities a contract administrator can have? ›

The overall requirements of a contract administrator generally include the following:
  • Attention to detail and the ability to spot errors and inconsistencies.
  • Excellent reading and language comprehension.
  • Ability to work with a team at all levels of an organization.
  • Effective ability to negotiate and execute contracts.
1 Feb 2022

Who is responsible for contract management? ›

Contract managers cover a variety of industries from government to technology to any company that has a large number of contracts. Regardless of organization type, one consistency is that contract managers are the primary individual responsible for the creation and management of all contracts those organizations use.

What are the four components of contract management? ›

Four components of contract planning and management
  • Contract management plan.
  • Supplier relationship management.
  • Transaction management.
  • Variation.
21 Dec 2021

What 4 basic principles should be considered in the formation of a contract? ›

A contract is formed when all of the following key elements are present: offer; acceptance; consideration (that is, money or money's worth); certainty of terms; and intention to create legal relations.

Can my contract be changed without my consent? ›

There may be clauses in your contract which gives your employer the right to make reasonable changes without your consent, for instance: A general 'variation clause' might allow your employer to make some changes to your terms. A 'flexibility clause' might allow your employer to change your hours.

Do I have to agree to a new contract? ›

Employees do not have to sign a new contract for changes to take effect. However, you should always put any agreed contract changes in writing, for example in a letter or email. This helps to make sure everyone is clear about what has been agreed so there is less chance of misunderstandings or disagreements.

What happens when a contract ends? ›

Termination: This term means that a contract between parties is being ended before the actual agreed-upon date stated in the contract. Sometimes, taking the Uniform Commercial Code (UCC) into account, termination can also refer to the legal ending of a contract without it being considered a breach.

What if a contract has no expiration date? ›

Legally, a date is not required; if there is an expected timeline but a listed date is not on the contract, it is not considered enforceable. If the contract is undated but is marked as "for consideration," it is still valid. "For consideration" shows that each party has something to offer the other.

Is expiry the same as termination? ›

"Expiration" is defined as "the coming to an end, termination". "Expiry" is also defined as the end or termination; however, the dictionaries go on to state that it is used especially to mean the termination of a time or period fixed by law, contract or agreement.

What can I do if a contractor asks for more money? ›

Ask the contractor to explain why the price rose so dramatically from the initial estimate. He will likely say something about unexpectedly high expensive labor and materials. Request an itemized invoice, explaining that you do not feel comfortable remitting any payment until you can further examine this issue.

Can you cancel a contract if the price increases? ›

A force majeure clause is a contractual provision found within a variety of standard commercial contracts including construction contracts. It essentially allows you to seek price adjustments or to terminate your contract if a specified event beyond your control occurs.

Can a contractor charge more than the quote? ›

An estimate is just an estimate, and it can be reasonable for the final cost to be anywhere from 5% to 20% above the estimate. That's why it's always important to stick to your budget and account for a bit of cushion before you begin any project.

What are the six elements of service level? ›

It will provide a mechanism for review and change to the service levels over the course of the contract.
...
The main elements of a good SLA.
  • Overall objectives. ...
  • Description of the Services. ...
  • Performance Standards. ...
  • Compensation/Service Credits. ...
  • Critical Failure.

What is the role of contract administrator in construction? ›

A contract administrator manages contracts made between building contractors, employers, and clients. Their responsibility is to administer construction contracts, whereby they may act as project managers, engineers, consultants and client representatives.

What is contract administration in procurement? ›

Contract Administration is the management of all actions that must be taken to assure compliance with the terms of the contract after award (according to National Institute for Governmental Purchasing, NIGP). The Procurement Services Department offers support in contract administration to fit your needs.

Can the client be the contract administrator? ›

The contract administrator may be the project architect, but could also be the lead consultant, the cost consultant, a specialist consultant, a client representative or employer's agent, the project manager or an engineer.

Which of the following is part of the responsibility of a contract administrator? ›

Contract administrators perform the following types of activities: Review plans, specifications and contracts to ensure the correct equipment, material and subcontractor services are ordered and/or purchased. Determine or negotiate contract terms and conditions, award supplier contracts or recommend contract awards.

What is the primary goal of contract administration? ›

The primary objective of the contract administration project is to establish best practices that agencies can use to improve contract administration to assure responsiveness to customers and best value to taxpayers.

What is the difference between contract administrator and project manager? ›

Project managers are responsible for collaborating with different departments on lots of different project-related tasks, whereas contract administrators only need to collaborate with other teams on the contents and outcome of a contract.

Is contract manager a manager? ›

A contract manager is an individual in a company responsible for the management and administration of contracts, as well as the process by which they are created and agreed.

What is the goal of contracting? ›

Creating Value

The need to enter into contracts with vendors, employees and even customers is the result of a business' desire to sell the best products and services. Creating value for the organization is a key objective of contract management.

What is contract administration in procurement? ›

Contract Administration is the management of all actions that must be taken to assure compliance with the terms of the contract after award (according to National Institute for Governmental Purchasing, NIGP). The Procurement Services Department offers support in contract administration to fit your needs.

What is contract administration in construction? ›

Contract administration refers to the task or function of ensuring that a construction contract (the contract between the client and the contractor) is executed in accordance with the terms of the contract.

What are the objectives of contract management in procurement? ›

However, the main objectives of Contract Management in Procurement are: To ensure product/service is sold at an agreed-upon price. To assess whether product/service conforms to specified quality standards. To ensure product/service is delivered timely, at the right place, and correct quantity.

Why is contract management so important? ›

Contract management enables you to streamline and automate your approach to managing existing contracts and creating new ones. It helps to control costs, oversee payments, and revenue, improve productivity, and reduce error.

What are the principles of contract management? ›

1. Contract Management Principles
  • 1.1 Make sure the contracts are understood by all those who will be involved in their management. ...
  • 1.2 Be clear about accountability, roles and responsibilities. ...
  • 1.3 Set up and use strong governance arrangements to manage risk and allow strategic oversight.
8 Feb 2021

What are the 7 elements of a contract? ›

For a contract to be valid and recognized by the common law, it must include certain elements— offer, acceptance, consideration, intention to create legal relations, authority and capacity, and certainty. Without these elements, a contract is not legally binding and may not be enforced by the courts.

What are the contract administration activities? ›

It includes contract monitoring, which is observing and reporting on the contractor's performance. Contract administration also includes managing changes to contracts, maintaining contract-related documents, addressing claims and disputes, and closeout activities.

Who is responsible for contract management? ›

Contract managers cover a variety of industries from government to technology to any company that has a large number of contracts. Regardless of organization type, one consistency is that contract managers are the primary individual responsible for the creation and management of all contracts those organizations use.

What skills does a contract administrator need? ›

How to become a Contract Administrator
  • Excellent attention to detail, with the ability to find inconsistencies and errors.
  • Teamwork and the ability to work with a variety of people at all levels.
  • Language comprehension and reading skills.
  • Oral and written communication skills.
  • Ability to execute and negotiate contracts.

Can a project manager be a contract administrator? ›

Under the NEC form of contract, the contract administrator is the project manager and the role therefore extends to proactively managing the project.

Can the contractor be the contract administrator? ›

The role of the contract administrator may be undertaken by a range of individuals, these include architects, engineers, building surveyors, quantity surveyors or any agent of the employer. In theory, the employer, contractor or a director or employee of either party can act as contract administrator.

What are the four components of contract management? ›

Four components of contract planning and management
  • Contract management plan.
  • Supplier relationship management.
  • Transaction management.
  • Variation.
21 Dec 2021

What is the difference between procurement and contract management? ›

Contracts and procurement are sourcing concentrate on direct products and solutions, while procurement focuses on indirect items and also services. In larger companies, these agreements are usually developed by a lawful team or contract monitoring team, bypassing the need for procurement.

Why contracts are an important part of procurement? ›

Procurement contracts legally bind buyers and sellers and protect them during the entire procurement process. These agreements can be fixed-price, cost-reimbursable, or time-and-materials contracts. A procurement contract management system offers unlimited benefits to your business.

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