FAR Part 42: Contract Administration Explained

FAR Part 42 is the part of the Federal Acquisition Regulation that governs contract administration and contract audit services. Its scope paragraph (42.000) says it prescribes “policies and procedures for assigning and performing contract administration and contract audit services.” For a research office, the part matters most when a federal contract (not a grant) is in play, and when the question is which agency negotiates indirect cost rates for a university or nonprofit. That second question is answered differently for educational institutions and nonprofits than for commercial contractors, which is where most citation mistakes start. As described on the official acquisition.gov page on 2026-10-29.

What FAR Part 42 covers and who runs it

Part 42 sorts out who does what after a federal contract is awarded: audit services, administration services, postaward meetings, indirect cost rates, disallowance of costs, novations, stop-work orders and contractor performance evaluations. The current text on acquisition.gov lists these subparts:

Subpart	Title
42.1	Contract Audit Services
42.2	Contract Administration Services
42.3	Contract Administration Office Functions
42.4	Correspondence and Visits
42.5	Postaward Orientation
42.6	Corporate Administrative Contracting Officer
42.7	Indirect Cost Rates
42.8	Disallowance of Costs
42.9	Bankruptcy
42.11	Production Surveillance and Reporting
42.12	Novation and Change-of-Name Agreements
42.13	Suspension of Work, Stop-Work Orders, and Government Delay of Work
42.15	Contractor Performance Information
42.16	Small Business Contract Administration
42.17	Forward Pricing Rate Agreements

Subparts 42.10 and 42.14 are reserved. In practice three actors appear. The contracting officer at the buying office holds the contract. A contract administration office (CAO) performs delegated functions. For contractors other than educational institutions and nonprofit organizations, the Defense Contract Audit Agency (DCAA) is, in the words of 42.101(b), “the responsible Government audit agency.”

Eligibility: who Part 42 applies to, including universities and nonprofits

Part 42 applies to federal procurement contracts, so it does not govern a grant or cooperative agreement. The research-administration wrinkle is cognizance. Under 42.003 in the current text, the cognizant Federal agency is normally the agency with “the largest dollar amount of negotiated contracts,” and educational institutions and nonprofit organizations are excluded from that default. For those two groups, cognizance sits elsewhere. The current text of 42.003 sends their indirect-cost cognizance to 2 CFR part 200, appendices III and IV. The FAR overhaul text of Part 42 (checked 2026-10-29) points to 2 CFR part 200 for educational institutions and nonprofits at 42.002(a) and 42.101(b), and says the cognizant agency “should remain” in place for at least 5 years (42.002(b)). See the CASRAI entry on the cognizant federal agency and the guide to the negotiated indirect cost rate agreement (NICRA) for how that plays out on the grants side.

What it funds or requires

Part 42 does not fund anything. It assigns work. Under 42.302 the contracting officer normally delegates a list of functions to a CAO, including cost accounting standards compliance, accounting-system adequacy and progress payments, and novation and change-of-name agreements (42.302(a)(26)). Per 42.201, the CAO performs the 42.302(a) functions unless the contracting office withholds them; the 42.302(b) functions happen only when specifically authorized. Anything not delegated stays with the contracting office. Related compliance topics are covered in the CASRAI guide to Cost Accounting Standards for universities.

On indirect costs, subpart 42.7 distinguishes final rates from billing rates, and 42.701(1) describes a billing rate as “Established temporarily for interim reimbursement of incurred indirect costs.”

Application or compliance steps

Confirm which text you are citing. The current FAR (acquisition.gov/far/part-42) and the FAR overhaul text number some sections differently; cite one and say which.
Identify the delegation. Read the contract for what the contracting officer delegated to the CAO under 42.302, and what was withheld.
Attend the postaward orientation. Subpart 42.5 says it “aids both Government and contractor personnel” in reaching a shared understanding of requirements. It does not replace the contractor’s understanding at the time of the offer.
Bill on interim rates, settle on final rates. See subpart 42.7. In the overhaul text, 42.505-3(a)(1) says postdetermined final indirect cost rates must be used to settle indirect costs on cost-reimbursement contracts with educational institutions unless predetermined rates are authorized, and 42.505-3(b)(6) limits predetermined rates to not more than four years.
Respond to the performance evaluation. See the CPARS section below.

Contractor performance information (CPARS)

Subpart 42.15 is the part contractors notice first. Under 42.1503 as described on the official page on 2026-10-29:

Evaluations rate technical quality, cost control (not for firm-fixed-price), schedule/timeliness, management/business relations, small business subcontracting and other factors.
The rating scale has five levels: exceptional, very good, satisfactory, marginal, unsatisfactory (42.1503(b)(4)).
The contractor gets up to 14 calendar days from notification to comment, and a review level above the contracting officer is available (42.1503(d)).
Evaluations are submitted electronically in CPARS (42.1503(f)).
FAPIIS-reportable events, such as a final termination for default or a defective cost or pricing data determination, are reported within 3 calendar days (42.1503(h)(1)). See the CASRAI guide to FAPIIS and suspension and debarment integrity checks.

Typical timeline phases

Part 42 does not set a calendar; the sequence below follows the order of the subparts. Dates and durations depend on the contract.

Phase	What happens	Where in Part 42
After award	Contracting officer delegates functions to a CAO	42.2, 42.3
Early in performance	Postaward orientation	42.5
During performance	Billing at interim rates; audit services	42.1, 42.7
Ongoing	Stop-work orders or Government delay, if they occur	42.13
Evaluation	Performance rated; 14-day contractor comment window	42.15
Rate settlement	Final indirect cost rates settle interim billings	42.7

Common mistakes

Applying the largest-dollar cognizance test to a university. The current 42.003 test is stated for contractors other than educational institutions and nonprofits.
Mixing current and overhaul section numbers. See the crosswalk below.
Treating the postaward orientation as the place to learn the requirements. Subpart 42.5 says it complements, not replaces, understanding at offer time.
Missing the 14-day comment window on a CPARS evaluation.
Assuming predetermined indirect rates run indefinitely. The overhaul text caps them at not more than four years.

Current text versus overhaul text

Topic	Current FAR (acquisition.gov/far/part-42)	FAR overhaul text
Cognizant agency definition	42.003	42.002
Indirect cost rates	Subpart 42.7	Subpart 42.5
Contractor performance information	Subpart 42.15	Subpart 42.11
Subpart range	42.1 through 42.17	Table of contents lists 42.1 through 42.13

Both pages were checked on 2026-10-29. The overhaul page shows no status or effective date, so confirm which text governs your solicitation before citing it.

Related programs and regulations

Topic	CASRAI page
FAR Part 31 versus 2 CFR 200 cost rules	FAR Part 31 vs 2 CFR 200
FAR Part 45	FAR Part 45
FAR 31.205 cost allowability	FAR 31.205
Indirect cost rate agreements	NICRA
Incurred cost submissions	Incurred cost submission

FAQ

What does FAR Part 42 cover?

Contract administration and contract audit services: who performs them, what is delegated, and how indirect cost rates, cost disallowance, novations, stop-work orders and contractor performance information are handled.

Does FAR Part 42 apply to grants?

No. It governs federal procurement contracts. Grants are governed by 2 CFR part 200, which the overhaul text of Part 42 points to for cognizance over educational institutions and nonprofits.

Who audits a contractor under Part 42?

For contractors other than educational institutions and nonprofit organizations, DCAA is the responsible Government audit agency (42.101(b)). Educational institutions and nonprofits are handled under 2 CFR part 200.

Which agency is cognizant for a university?

Not the agency with the largest dollar amount of negotiated contracts. The current 42.003 excludes educational institutions and nonprofit organizations from that default and points to 2 CFR part 200, appendices III and IV; see the CASRAI entry on the cognizant federal agency.