FAR 42.003—Cognizant Federal agency.
Plain-English Summary
FAR 42.003 explains how the Government determines the "cognizant Federal agency" for a contractor and how that designation is maintained or transferred over time. It covers two different contractor groups: most contractors, for whom cognizance normally goes to the agency with the largest dollar amount of negotiated contracts including options, and educational institutions and nonprofit organizations, for which cognizance for indirect costs is assigned under the OMB Uniform Guidance at 2 CFR part 200, including the specific appendices that govern those entities. The section also addresses continuity of administration by stating that once an agency assumes cognizance, it should generally keep that role for at least five years. After that period, if another agency has the largest dollar amount of negotiated contracts including options, the agencies must coordinate and decide which one will take cognizance. The rule also allows an earlier transfer when circumstances justify it and the affected agencies agree. In practice, this designation matters because it affects which agency leads certain indirect cost, audit, and administrative oversight functions, so contractors and agencies need to track contract volume, entity type, and interagency coordination carefully.
Key Rules
Largest contract volume controls
For most contractors, the cognizant Federal agency is normally the agency with the largest dollar amount of negotiated contracts, including options. The rule uses contract value as the default basis for assigning administrative responsibility.
Special rules for institutions and nonprofits
Educational institutions and nonprofit organizations are not assigned cognizance under the general contractor rule. Their cognizant Federal agency for indirect costs is determined under the OMB Uniform Guidance at 2 CFR part 200, using the applicable appendices for each entity type.
Five-year continuity period
Once an agency becomes cognizant, it should generally remain so for at least five years. This promotes continuity and reduces administrative disruption for both the Government and the contractor.
Post-five-year reassessment
At the end of the five-year period, if another agency now has the largest dollar amount of negotiated contracts including options, the agencies must coordinate and decide which agency will assume cognizance. The designation is not automatic and requires interagency agreement.
Early transfer allowed by agreement
Cognizance may transfer before the five-year period ends if circumstances warrant it and the affected agencies agree. This provides flexibility when workload, contract mix, or other administrative factors make a change appropriate.
Responsibilities
Contracting Officer
Identify the contractor’s cognizant Federal agency using the applicable rule set, track changes in contract volume or entity status, and coordinate with other agencies when cognizance may need to be established or transferred.
Cognizant Federal Agency
Perform the lead administrative role for the contractor under its cognizance, maintain that role for the expected continuity period, and coordinate with other affected agencies when reassignment is being considered.
Other Federal Agencies with Contracts
Monitor their contract relationship with the contractor, compare contract dollar amounts when cognizance is in question, and participate in coordination and agreement if another agency may assume cognizance.
Educational Institutions and Nonprofit Organizations
Apply the cognizance rules in the OMB Uniform Guidance rather than the general FAR contractor rule, and use the designated cognizant agency for indirect cost matters.
Contractor
Maintain awareness of which agency is cognizant, provide accurate contract and organizational information when needed, and support agency coordination by supplying data relevant to contract value and entity status.
Practical Implications
This section is mainly about administrative control, not contract award authority, so parties should not confuse cognizance with who awarded the contract or who is the largest customer in a general business sense.
The biggest practical issue is keeping contract-dollar data current; if agencies rely on outdated totals, the wrong agency may be treated as cognizant.
For universities and nonprofits, the FAR rule points users to the Uniform Guidance, so applying the general contractor rule to those entities is a common mistake.
The five-year continuity expectation helps avoid frequent handoffs, but it is not absolute; agencies can agree to transfer earlier when workload or circumstances justify it.
When cognizance may change, agencies should coordinate early to avoid gaps or duplication in indirect cost administration and related oversight activities.
Official Regulatory Text
(a) For contractors other than educational institutions and nonprofit organizations, the cognizant Federal agency normally will be the agency with the largest dollar amount of negotiated contracts, including options. For educational institutions (defined as institutions of higher education in the OMB Uniform Guidance at 2 CFR part 200 , subpart A, and 20 U .S.C. 1001) and nonprofit organizations (as defined in the OMB Uniform Guidance at 2 CFR part 200 ), the cognizant Federal agency for indirect costs is established according to the OMB Uniform Guidance at 2 CFR part 200 , appendices III and IV, respectively. (b) Once a Federal agency assumes cognizance for a contractor, it should remain cognizant for at least 5 years to ensure continuity and ease of administration. If, at the end of the 5-year period, another agency has the largest dollar amount of negotiated contracts, including options, the two agencies shall coordinate and determine which will assume cognizance. However, if circumstances warrant it and the affected agencies agree, cognizance may transfer prior to the expiration of the 5-year period.