Code of Federal Regulations Title 48. Federal Acquisition Regulations System 48.42.709-6 Waiver of the penalty

(1) It has established policies and personnel training and an internal control and review system that provide assurance that unallowable costs subject to penalties are precluded from being included in the contractor's final indirect cost rate proposals (e.g., the types of controls required for satisfactory participation in the Department of Defense sponsored self-governance programs, specific accounting controls over indirect costs, compliance tests which demonstrate that the controls are effective, and Government audits which have not disclosed recurring instances of expressly unallowable costs);  and

(2) The unallowable costs subject to the penalty were inadvertently incorporated into the proposal;  i.e., their inclusion resulted from an unintentional error, notwithstanding the exercise of due care.