942.803 Disallowing costs after incurrence.

(a) Contracting officer receipt of vouchers. Vouchers and invoices submitted to DOE shall be

submitted to the contracting officer or designee for review and approval for payment. If the

examination of a voucher or invoice raises a question regarding the allowability of a cost submitted

therein, the contracting officer, shall:

(1) Hold informal discussion with the contractor as appropriate.

(2) Issue a notice (letter, memo, etc.) to the contractor advising of cost disallowed or to be

disallowed and advising the contractor that it may:

(i) Submit a written claim as to why the cost should be reimbursed - if in disagreement with the

disallowance.

(ii) File a claim under the disputes clause, which will be processed in accordance with disputes

procedures in the event disagreements cannot be settled.

(3) Process the voucher or invoice for payment and advise the finance office to deduct the disallowed

cost when scheduling the voucher for payment.

(c) Auditor reports and other sources of questioned costs.

(1) From time to time reports are received from professional auditors that may question the

allowability of an incurred cost. Such reports are received as the result of auditors, in their

independent role under OMB Circular A-73 or their own charters, scheduling and conducting

financial or compliance audits of government contracts or as the result of an independent request

for auditor service.

(2) When auditor reports or other notifications question cost or consider them unallowable, the

contracting officer shall follow up such reports and resolve all such cost issues promptly by

determining, through discussions with the contractor and/or auditor within six months of the audit

report date, or date of receipt if a non-Federal audit. One of the following courses of action shall be

pursued:

(i) Accept and implement audit recommendations as submitted.

(ii) Accept the principle of the audit recommendation but reject the cost questioned amount.

(iii) Reject audit findings and recommendations.

(3) When implementing the accepted course of action, the contracting officer shall -

(i) Hold discussions with the auditor and contractor as appropriate.

(ii) Issue a notice in writing advising the contractor of the government's intent to disallow the cost

questioned, if the contracting officer agrees with the auditor concerning the questioned costs.

(iii) Negotiate a mutual settlement of questioned costs if they are agreed with in principle but there

is a difference of opinion as to a proper amount.

(iv) Negotiate a mutual settlement of questioned costs if the auditor recommendations are
acceptable to the contracting officer but the contractor does not accept the finding or disallowance.

(v) Issue a final decision of the contracting officer disallowing the questionable cost where

differences cannot be resolved, advising of the contractor's right to appeal the decision, and advising

the procedure to be followed if it is decided to make such an appeal.

(vi) Initiate immediate recoupment actions for all disallowed cost owed the government by:

(A) Requesting the contractor to provide a credit adjustment (offset) against amounts billed the

government on the next or future invoice(s) if such shall be submitted under a contract for which the

disallowed cost applies.

(B) Deducting (offset) the disallowed cost from the next or future invoice(s) submitted under the

contract; if the contractor provides no adjustment under the contract for which the disallowed cost

applies; provided such reduction is deemed appropriate.

(C) Advising the contractor that a refund shall be directly payable to the government in situations

where there are insufficient payments owed by the government to effect recovery via (A) or (B)

above or an offset is otherwise inappropriate.

(vii) Promptly notify the appropriate finance office of refunds directly payable to the government to

ensure proper billing and follow-up action for collection.

Parent topic: Subpart 942.8 - Disallowance of Costs