FAR 42.1—Subpart 42.1

Contract audit responsibilities.

FAR 42.101 explains who performs contract audit work and what that audit function is supposed to cover. It addresses three core audit responsibilities: providing information and advice on the acceptability of incurred and estimated costs, reviewing the financial and accounting aspects of a contractor’s cost control systems, and performing other analyses and reviews that require access to financial and accounting records supporting proposed and incurred costs. It also identifies the normal Government audit cognizance rule for most contractors, which is DCAA, while recognizing that another agency may sometimes take cognizance if the agencies agree on the most efficient and economical approach. Finally, it carves out educational institutions and nonprofit organizations, whose audit cognizance is determined under the OMB Uniform Guidance at 2 CFR part 200, subpart F. In practice, this section matters because it tells contracting personnel and contractors where audit questions go, who has authority to review cost data, and which audit framework applies depending on the type of contractor.

Assignment of contract audit services.

FAR 42.102 explains how contract audit services are assigned and requested within the federal procurement system. It covers two main topics: first, when and how contracting officers may request audit services directly from the responsible audit agency listed in the Directory of Federal Contract Audit Offices; and second, when that audit agency may decline a request because it lacks adequate resources. The section also identifies what a proper audit request should contain, including a suspense date and any information the contracting officer needs from the auditor. In practice, this provision is about routing audit work efficiently, avoiding unnecessary delays, and making sure audit support is requested through the correct channel under agency procedures or interagency agreements. It also protects the process by requiring written declinations when an audit agency cannot take on the work, creating a clear record for follow-up and reassignment.

Contract audit services directory.

FAR 42.103 is a short administrative provision about the government’s contract audit services directory. It explains that the Defense Contract Audit Agency (DCAA) maintains and distributes the Directory of Federal Contract Audit Offices, which identifies the cognizant audit office for contractors and shows which contractors fall under each office’s audit cognizance. The section also requires that any changes to audit cognizance be reported to DCAA so the directory stays current. In addition, it tells agencies how to obtain the directory or information about cognizant audit offices by contacting DCAA at the listed address. In practice, this section matters because audit cognizance determines which audit office handles a contractor’s incurred cost, proposal, and other audit support work, so accurate directory information helps contracting officers, auditors, and contractors route requests correctly and avoid delays or miscommunication.

General.

FAR 42.1101 explains what production surveillance is and why the Government uses it during contract administration. This section covers the purpose of surveillance, the kinds of contractor information and activities the Government reviews, and the two main focus areas: the contractor’s performance plans, schedules, controls, and industrial processes, and the contractor’s actual performance under those plans and processes. In practice, it tells contracting personnel that surveillance is not just a paperwork exercise; it is an active monitoring function used to measure progress, spot emerging problems, and identify factors that could delay contract performance. For contractors, it means the Government may examine how work is planned and controlled as well as how work is actually being performed. The section is brief, but it establishes the foundation for more detailed surveillance actions under contract administration, especially on production-type efforts where schedule, process discipline, and throughput matter.

Applicability.

FAR 42.1102 explains the scope of Subpart 42.11, which addresses contract administration matters related to contractor performance and surveillance for supplies and services. The section states that this subpart applies to all contracts for supplies or services except construction contracts and Federal Supply Schedule (FSS) contracts, so it tells contracting personnel which acquisitions are covered and which are excluded. It also points readers to FAR Part 37, especially Subpart 37.6, because service contract surveillance has its own oversight framework that must be used alongside or instead of the general administration rules in this subpart. In practice, this section matters because it prevents agencies from applying the wrong administration procedures to construction or schedule contracts and helps ensure service contracts are monitored under the correct policy structure. It is a threshold applicability rule: before using the requirements in Subpart 42.11, the contracting office must confirm the contract type and whether a separate surveillance regime applies.

Policy.

FAR 42.1103 states the basic policy for contract performance surveillance and administration. It covers three core topics: the contractor’s responsibility for timely contract performance, the Government’s authority and duty to maintain surveillance of contractor performance as needed to protect the Government’s interests, and the contracting officer’s role in deciding how much surveillance is appropriate when the contracting office retains administration of the contract. In practice, this section establishes that the contractor remains accountable for meeting schedule and performance requirements, while the Government does not passively wait for problems to appear. Instead, the Government may monitor performance to the extent necessary to manage risk, identify issues early, and protect schedule, cost, and mission objectives. The section is important because it sets the policy foundation for contract administration oversight without prescribing a rigid one-size-fits-all monitoring method. It also clarifies that surveillance intensity is a judgment call tied to the needs of the specific contract and the administering contracting officer’s discretion.

Surveillance requirements.

FAR 42.1104 explains how the contract administration office decides how much production surveillance to perform and how that surveillance must be carried out. It covers the basis for setting surveillance intensity, including the contracting officer’s assigned criticality of the supplies or services and several practical factors such as reporting requirements, schedule, the contractor’s production plan, past performance, relevant experience, financial capability, and any supplemental written instructions from the contracting office. It also states that contracts at or below the simplified acquisition threshold normally should not require production surveillance, which helps keep oversight proportional to risk and contract size. The section further requires contract administration offices to make maximum use of reliable contractor production control or data management systems, rather than duplicating work unnecessarily. Finally, it warns surveillance personnel to avoid actions that conflict with contract requirements or could be interpreted as waivers, changes, or other contract modifications, because improper oversight conduct can create disputes and unintended legal consequences in federal contracting.

Assignment of criticality designator.

FAR 42.1105 tells contracting officers how to assign a criticality designator to each contract when identifying the contract administration office. The section establishes three designators—A, B, and C—and ties each one to a specific level of urgency or supply importance. Designator A is reserved for critical contracts, including DX-rated contracts, contracts awarded under the unusual and compelling urgency authority at 6.302-2, and contracts for major systems. Designator B applies to contracts that are not A but are needed to keep a Government or contractor production or repair line running, avoid out-of-stock conditions, or satisfy user needs for nonstock items. Designator C is the default category for all other contracts. In practice, this designation helps the Government prioritize contract administration attention and resources, especially where performance delays could affect mission-critical programs, production continuity, or urgent operational needs.

Reporting requirements.

FAR 42.1106 explains when and how the Government may require contractor reporting on contract performance status, and how those reports are to be reviewed and acted on. It covers production progress reports, the rule that reporting must be limited to information essential to Government needs, and the requirement to use contractor management-system data whenever possible. It also assigns the contract administration office responsibility for reviewing and verifying report accuracy, either through continuous surveillance of the contractor’s report-preparation system or by reviewing each report individually. Finally, it authorizes the contract administration office to notify the contracting officer—and the inventory manager, if one is designated—of any actual or potential delay in performance, and it specifies that such notice must be written, timely, and include a definite recommendation when action is appropriate. In practice, this section is about making performance reporting useful, not burdensome, and ensuring the Government can detect schedule risk early enough to respond.

Contract clause.

FAR 42.1107 tells contracting officers when to include the Production Progress Reports clause at 52.242-2 in solicitations and contracts, and what additional instructions must accompany that clause. It covers three main topics: the trigger for using production progress reporting, the exceptions for construction contracts and Federal Supply Schedule contracts, and the requirement to put specific reporting instructions in the Schedule when the clause is used. In practice, this section is about making sure the Government gets timely, usable visibility into contractor production status when that visibility is needed to manage performance, schedule risk, and delivery expectations. It also prevents unnecessary or inappropriate use of the clause where production reporting does not fit the contract type. For contractors, this section matters because it can create recurring reporting obligations that must be planned for, staffed, and integrated into production management processes. For contracting officers, it is a drafting and administration requirement: if reporting is needed, the clause must be included and the instructions must be clear enough to tell the contractor exactly what to report, when, and in what format.

Scope of subpart.

FAR 42.1200 is the scope statement for FAR Subpart 42.12, and it tells you exactly what this subpart is about: recognizing a successor in interest when contractor assets are transferred, recognizing a contractor’s change of name, and having the responsible contracting officer execute novation agreements and change-of-name agreements. In practice, this section matters when a contractor sells, merges, reorganizes, or otherwise transfers the business assets tied to a federal contract, because the Government must decide whether the new entity can step into the old contractor’s place. It also matters when a contractor simply changes its legal name, since the Government needs a formal process to keep contract records accurate without treating the event as a transfer of obligations. The section does not itself set out the detailed procedures; instead, it establishes the subject matter and signals that the rest of Subpart 42.12 governs how these changes are documented and approved. For contractors and contracting officers, the practical significance is that business changes affecting contract performance, payment, responsibility, and legal identity must be handled through the proper FAR process rather than informally or by assumption.

[Reserved]

Responsibility for executing agreements.

FAR 42.1202 tells the Government how to decide which contracting officer is responsible for processing and executing novation agreements and change-of-name agreements when a contractor’s business changes hands or its legal name changes. The section covers three decision paths: first, when affected contracts are already assigned to an administrative contracting officer (ACO); second, when no affected contracts are assigned to an ACO; and third, when there are multiple transferors involved in the same transaction. It also introduces the key concept of the “largest unsettled dollar balance,” meaning the combined unbilled amount plus billed-but-unpaid amount, as the fallback measure for choosing the responsible contracting officer. In practice, this rule is about administrative control and efficiency: it ensures one Government official is clearly accountable for reviewing the transaction, coordinating the required documentation, and executing the agreement. For contractors, it matters because the wrong point of contact can delay novation or name-change processing, which can affect payment, contract administration, and continuity of performance. For agencies, it helps avoid duplicate reviews and conflicting decisions across multiple contracts or organizational units.

Processing agreements.

FAR 42.1203 explains how the Government processes requests to recognize a successor in interest to a contract, including novation agreements and change-of-name agreements. It covers who must submit the request, what information the contracting officer must gather, how affected offices are notified, the 30-day comment and objection period, and how the Government decides whether recognition is in its interest. It also addresses the relationship between novation and other remedies for asset transfers, the need to identify separate liability-assumption agreements, legal review by Government counsel, and the post-execution distribution and contract-file documentation requirements. In practice, this section is the procedural roadmap for ensuring that a contract transfer or corporate name change is properly documented, legally sufficient, and communicated across all affected contracting and administration offices. It matters because an improper or incomplete novation process can create disputes over who is responsible for performance, payment, liabilities, and contract administration.

Applicability of novation agreements.

FAR 42.1204 explains when the Government may recognize a new company as the successor in interest to an existing contract through a novation agreement, and when it may not. It ties the rule to the statutory prohibition on transferring Government contracts, then describes the limited situations where a transfer of assets can support novation, such as a sale of all assets, transfer of the assets used to perform the contract, merger, corporate consolidation, or incorporation of a proprietorship or partnership. The section also distinguishes novation from a mere stock purchase, where the legal contracting party does not change and novation is usually unnecessary, though ownership-change issues may still need a separate agreement. It addresses what happens if the Government declines to recognize the transfer, including the original contractor’s continuing liability and possible default termination. The rule also requires the contracting officer to evaluate organizational conflicts of interest and consider a waiver if needed, and it sets out the contractor’s submission package, supporting documents, possible document modifications, required novation terms, and the standard format for corporate transfers involving all assets. In practice, this section is the roadmap for handling corporate transactions that affect federal contracts and for protecting the Government’s interests while preserving contract continuity when appropriate.

Agreement to recognize contractor’s change of name.

FAR 42.1205 addresses the formal process for recognizing a contractor’s change of name when the change affects only the contractor’s name and does not alter the Government’s or contractor’s rights and obligations. It explains when the parties must execute a Change-of-Name Agreement, what the contractor must submit to the responsible contracting officer, and what supporting documentation must accompany the request, including the state-authenticated name-change instrument, legal counsel’s opinion, and a list of unsettled contracts and purchase orders. The section also provides a suggested agreement format that agencies may adapt, including the factual recitals, the operative clause substituting the new name for the old name across affected contracts, and a corporate certificate/signature block. In practice, this section exists to ensure the Government can continue administering existing contracts under the contractor’s new legal name without creating ambiguity about identity, enforceability, payment, or contractual obligations. It is a housekeeping but important legal step: it preserves continuity in contract records, prevents payment or novation problems, and gives the contracting officer a documented basis to update contract files and contract instruments. The section is limited to name changes only; if the transaction changes the legal entity or affects rights and obligations, a different mechanism such as novation may be required.

General.

FAR 42.1301 is the general statement for the contract administration subpart that deals with Government-caused interruptions during performance. It explains that, during contract performance, the Government may need to order a suspension of work or a work stoppage, and that the subpart supplies clauses to address those situations. It also identifies a separate clause for settling contractor claims arising from unordered Government-caused delays when the contract does not otherwise cover the delay. In practical terms, this section tells contracting officers and contractors where to look for the contract clauses and remedies that govern performance interruptions, delay costs, and related claims. Its purpose is to ensure that disruptions are handled under the proper contractual mechanism rather than ad hoc, and to reduce disputes over whether a delay is compensable and how it should be resolved.

Suspension of work.

FAR 42.1302 addresses the government’s authority to suspend work on construction and architect-engineer contracts and the contractor’s remedy when that suspension goes beyond a reasonable period. In practical terms, it covers three core topics: who may order the suspension, the fact that the suspension must be for a reasonable period of time, and the contractor’s right to submit a written claim if the suspension is unreasonable. It is a narrow but important rule because work stoppages can quickly drive up labor, equipment, subcontract, and overhead costs, especially on site-dependent construction and design services. The section also makes clear that the contractor’s recovery is limited to increased costs of performance and specifically excludes profit. This provision helps balance the government’s need to pause work for programmatic or site-related reasons with the contractor’s need for compensation when the government-caused delay becomes excessive.

Stop-work orders.

FAR 42.1303 explains when and how the Government may use a stop-work order in negotiated fixed-price or cost-reimbursement supply, research and development, and service contracts. It covers the situations where a temporary work suspension may be appropriate, the approval required before issuance, and the rule that stop-work orders are not a substitute for a termination notice once termination has been decided. The section also describes what a stop-work order should contain, the contracting officer’s duty to promptly discuss and potentially revise the order with the contractor, and the Government’s obligation to take follow-on action before the order expires. In practice, this provision gives the Government a controlled way to pause performance while it decides whether to terminate, cancel the pause, or extend it by agreement. For contractors, it is a cost, schedule, and subcontract management trigger that requires immediate attention to avoid unnecessary expense and preserve rights. For contracting officers, it is a procedural safeguard that requires higher-level approval, clear instructions, and timely resolution.

Government delay of work.

FAR 42.1304 explains how the Government Delay of Work clause at 52.242-17 is used when contractor work is delayed or interrupted by the contracting officer’s acts or failures to act. It covers four main topics: when the clause applies as an administrative settlement mechanism for contractor claims, when it does not apply because another contract clause already provides an equitable adjustment remedy, the fact that the clause does not itself authorize the contracting officer to order a suspension or delay of work, the contracting officer’s duty to act promptly if an unordered delay is known, and the file documentation that must be retained for any resulting adjustment. In practice, this section is about preserving a contractor’s remedy for government-caused delay while preventing misuse of the clause as a tool to direct work stoppages. It also reinforces prompt mitigation by the Government and careful contract-file support for any negotiated settlement. For contractors, it signals that delay claims must be tied to the clause’s scope and that other clauses may control instead. For contracting officers, it is a reminder to respond quickly to unplanned delays and to document negotiations and supporting data thoroughly.

Contract clauses.

FAR 42.1305 tells contracting officers which work-interruption clauses must or may be included in solicitations and contracts, depending on the contract type and the kind of acquisition. It covers three specific clauses: 52.242-14, Suspension of Work; 52.242-15, Stop-Work Order; and 52.242-17, Government Delay of Work. The section distinguishes between fixed-price construction and architect-engineer contracts, negotiated supply/service/research and development acquisitions, cost-reimbursement contracts, and fixed-price supply contracts for noncommercial versus commercial or modified-commercial products. In practice, this section matters because these clauses allocate risk and establish the government’s and contractor’s rights and remedies when work is suspended, stopped, or delayed by the government. Contracting officers must select the correct clause and, in one case, the correct alternate, because the wrong clause can leave a contract without the intended remedy structure or create inconsistent rights. Contractors should understand these clauses because they affect schedule relief, equitable adjustments, and how quickly they must respond to government direction during interruptions.

Scope of subpart.

FAR 42.1500 defines the scope of Subpart 42.15, which governs how the Government records and maintains contractor performance information. In practical terms, this section tells contracting personnel that the subpart is about policies and responsibilities for collecting, documenting, and preserving past performance data used in source selections and other acquisition decisions. It also draws an important boundary: the subpart does not cover agency procedures for determining award fees or incentive fees under award-fee and incentive-fee contracts, which are addressed under FAR Subpart 16.4. Even so, the section links the two concepts by stating that fee determinations should reflect contractor performance and that past performance evaluations should closely parallel and be consistent with fee determinations. This matters because agencies must manage performance records in a way that is fair, accurate, and useful for future acquisition decisions, while also avoiding inconsistency between performance evaluations and fee outcomes.

General.

FAR 42.1501 explains what “past performance information” is, why it matters, and how agencies are expected to manage it. It identifies the types of contractor performance that may be considered in future source selections, including conformance to requirements and workmanship, cost control, schedule adherence, administrative performance, reasonable and cooperative behavior, customer satisfaction, compliance with small business subcontracting plans, required reporting into government databases, integrity and business ethics, and overall business-like concern for the customer’s interests. The section also ties past performance to the broader evaluation framework in FAR 42.1502 and makes clear that agencies must monitor their compliance with past performance evaluation requirements. In practice, this means contractors should treat performance records as a major competitive factor, because ratings and narratives can influence future award decisions. It also means contracting activities must collect, report, and maintain timely, quality performance data through CPARS, which is identified here as the official source for past performance information.

Policy.

FAR 42.1502 establishes the Government’s policy for collecting and recording contractor past performance information, primarily through CPARS, so source selection officials and program personnel have a consistent record to use in future acquisitions. It covers when past performance evaluations must be prepared, including the general rule of annual and completion-time evaluations, the types of contracts and orders that require evaluations, and special rules for orders under multiple-agency contracts and single-agency task- and delivery-order contracts. It also sets specific mandatory evaluation thresholds for construction and architect-engineer contracts, including default terminations, and explains that evaluations generally apply to the entity, division, or unit that actually performed the work. The section further requires evaluation of small business subcontracting performance and unjustified reduced or untimely payments to small business subcontractors when the subcontracting plan clause applies, while identifying situations that are not treated as unjustified. Finally, it excludes contracts awarded under subpart 8.7 from performance evaluation and requires agencies to promptly report other contractor information under FAR 42.1503(h). In practice, this section matters because it drives what performance data gets entered into CPARS, when it must be done, and what issues will affect a contractor’s future competitiveness for federal work.

Procedures.

FAR 42.1503 explains how agencies must prepare, review, share, and record contractor past performance evaluations. It covers assignment of responsibility and management accountability, agency procedures for collecting input from technical, contracting, program, quality assurance, and end users, and the roles of contracting officers and other officials in preparing interim and final evaluations. It also sets the content standards for evaluations, including a plain-language description of the contract, objective facts, tailored narratives, and required evaluation factors such as technical performance, cost control, schedule/timeliness, management or business relations, small business subcontracting, and other applicable issues like trafficking violations or suspension/debarment. The section further addresses special treatment for incentive-fee and award-fee contracts, contractor notice and the right to comment or rebut, higher-level review of disagreements, retention and source-selection use of evaluations, protection of the information as source selection information, and electronic submission through CPARS. In practice, this section is the backbone of the federal past performance system: it determines who writes the evaluation, what must be evaluated, how the contractor gets to respond, and how the information is preserved for future source selections and other acquisition decisions.

Contract clause.

FAR 42.1504 is a simple but important cross-reference rule about contract clauses tied to small business subcontracting. It requires contracting officers to insert the clause at 52.242-5, Payments to Small Business Subcontractors, in every solicitation and contract that includes the clause at 52.219-9, Small Business Subcontracting Plan. In practice, this means the payment-protection clause is mandatory whenever a contractor is required to have a subcontracting plan, so the Government can reinforce timely payment to small business subcontractors. The section does not create a standalone performance standard or reporting system by itself; instead, it tells the acquisition team when the clause must be included. Its practical significance is that it links subcontracting-plan requirements with payment obligations, helping support small business participation and reducing the risk that prime contractors delay or withhold payment from small business subs. For contractors, it means the subcontracting-plan requirement carries an additional contractual obligation related to paying small business subcontractors promptly and in accordance with the clause.

General.

FAR 42.1601 establishes a prompt-response expectation for contracting officers when they receive a written request from a small business concern about a contract administration matter. It requires the contracting officer to make every reasonable effort to respond in writing within 30 days, and if a full response cannot be provided in that time, to send a written notice within the 30-day period stating the specific date the response is expected. The section is limited to contract administration matters and does not apply to requests for a contracting officer’s final decision under the Contract Disputes Act (41 U.S.C. chapter 71). In practice, this rule is meant to improve communication, reduce delay, and give small businesses timely visibility into how their administrative concerns are being handled. It also creates a clear documentation requirement for contracting officers, so they cannot simply let a request sit unanswered without either responding or providing a firm expected response date. For contractors, it provides a procedural protection and a basis to expect timely written engagement on non-dispute administrative issues.

Procedures.

FAR 42.1701 explains the procedures for negotiating and maintaining forward pricing rate agreements (FPRAs) and, when an FPRA is not available, issuing forward pricing rate recommendations (FPRRs). It covers who may request an FPRA, how the administrative contracting officer (ACO) decides whether to establish one, and when the cognizant contract administration agency makes the final determination. The section also addresses the contractor’s forward pricing rate proposal, the requirement for accurate, complete, and current cost or pricing data, and the need to involve the cognizant contract auditor and affected contracting offices in developing the Government objective and negotiating the agreement. It further requires a price negotiation memorandum (PNM) and distribution of the FPRA and PNM to relevant parties, and it sets out the content of the FPRA itself, including expiration, application, data requirements, monitoring, cancellation rights, and notice of significant changes. Finally, it explains what happens when an FPRA becomes invalid, including the use of an FPRR or other support for rates, and allows continuous updates to the FPRA. In practice, this section is about creating a reliable, documented basis for future pricing so both the Government and contractor can negotiate proposals more efficiently and with less risk of using outdated or unsupported rates.