FAR 42.802—Contract clause.
Plain-English Summary
FAR 42.802 is a clause-insertion rule that tells contracting officers when to include FAR 52.242-1, Notice of Intent to Disallow Costs, in solicitations and contracts. It applies when the contemplated contract type is a cost-reimbursement contract, a fixed-price incentive contract, or a contract that provides for price redetermination. The purpose is to give the Government a formal mechanism to notify the contractor before disallowing questioned costs, which supports due process, transparency, and orderly administration of contract costs. In practice, this section matters because it ensures the disallowance notice clause is present at the outset in contract types where cost allowability and pricing adjustments can later become issues. For contractors, it signals that claimed costs may be challenged and that they should maintain strong accounting, documentation, and internal controls. For contracting officers, it is a mandatory solicitation-and-contract drafting requirement, not a discretionary one, whenever the listed contract types are contemplated.
Key Rules
Insert the notice clause
The contracting officer must include FAR 52.242-1, Notice of Intent to Disallow Costs, in both the solicitation and the resulting contract. This is a mandatory clause-insertion requirement, not an optional provision.
Applies to specific contract types
The clause is required when the contemplated contract is a cost-reimbursement contract, a fixed-price incentive contract, or a contract providing for price redetermination. If one of these contract types is being considered, the clause must be included.
Focus on cost disallowance
The clause is intended to address situations where the Government may disallow costs claimed by the contractor. Its inclusion helps establish the process for notifying the contractor before costs are disallowed.
Use at the solicitation stage
The rule requires insertion in solicitations as well as contracts, so the requirement must be addressed before award. This ensures offerors are on notice of the clause and its consequences during competition and proposal preparation.
Responsibilities
Contracting Officer
Determine whether the contemplated contract type is cost-reimbursement, fixed-price incentive, or price-redetermination, and insert FAR 52.242-1 in the solicitation and contract whenever it is.
Contractor
Review the clause when present, understand that claimed costs may be subject to notice and disallowance, and maintain adequate records and support for cost claims.
Agency
Ensure acquisition planning, templates, and contract-writing procedures support mandatory inclusion of the clause in the covered contract types.
Practical Implications
This is a drafting checkpoint: if the contract type falls within the rule, the clause must be included before award.
Contractors should expect heightened scrutiny of claimed costs and should keep documentation that supports allowability, allocability, and reasonableness.
A common pitfall is overlooking the clause in solicitations, which can create administrative errors and later disputes over cost disallowance procedures.
Contracting officers should verify the clause is included in both the solicitation and the final contract, especially when using templates or automated clause libraries.
Because the rule is tied to contract type, acquisition teams should confirm the intended pricing arrangement early in planning to avoid missing the requirement.
Official Regulatory Text
The contracting officer shall insert the clause at 52.242-1 , Notice of Intent to Disallow Costs, in solicitations and contracts when a cost-reimbursement contract, a fixed-price incentive contract, or a contract providing for price redetermination is contemplated.