§4706 — Title 41 Public Contracts | U.S. Code

Summary

Allows the head of a federal agency to inspect a contractor’s plant and audit its records for five types of contracts: cost-reimbursement, incentive, time-and-materials, labor-hour, and price-redeterminable, and for similar subcontracts. Records means books, documents, accounting methods, and any data in any form (paper, computer, etc.). The agency can look at records tied to the contractor’s proposal, negotiations, pricing, or performance. The agency inspector general, or on request certain defense or GSA auditors, can issue subpoenas for those records, ask a federal court to enforce them if needed, and must report to two congressional committees the year after they use that subpoena power. The Comptroller General and staff can examine records for contracts awarded by methods other than sealed bidding, but this does not apply to some foreign contracts or to contracts at or below the simplified acquisition threshold. A contractor cannot be forced to create records it does not normally keep. An agency may accept another federal agency’s indirect-cost audit done within one year instead of doing a new audit. The right to audit ends 3 years after final payment on the contract. Utility service contracts at regular public rates and very small purchases are excluded. Contractors may keep or provide electronic copies instead of originals if their imaging system keeps files secure and reliable, has a good index, and the originals are kept at least one year after imaging.

Title 41, §4706

Public Contracts — Source: USLM XML via OLRC

(a)In this section, the term “records” includes books, documents, accounting procedures and practices, and other data, regardless of type and regardless of whether the items are in written form, in the form of computer data, or in any other form.

(b)(1)The head of an executive agency, acting through an authorized representative, may inspect the plant and audit the records of—

(A)a contractor performing a cost-reimbursement, incentive, time-and-materials, labor-hour, or price-redeterminable contract, or any combination of those contracts, the executive agency makes under this division; and

(B)a subcontractor performing a cost-reimbursement, incentive, time-and-materials, labor-hour, or price-redeterminable subcontract, or any combination of those subcontracts, under a contract referred to in subparagraph (A).

(2)The head of an executive agency, acting through an authorized representative, may, for the purpose of evaluating the accuracy, completeness, and currency of certified cost or pricing data required to be submitted pursuant to chapter 35 of this title with respect to a contract or subcontract, examine all records of the contractor or subcontractor related to—

(A)the proposal for the contract or subcontract;

(B)the discussions conducted on the proposal;

(C)pricing of the contract or subcontract; or

(D)performance of the contract or subcontract.

(c)(1)The Inspector General of an executive agency appointed under section 403 or 415 of title 5 or, on request of the head of an executive agency, the Director of the Defense Contract Audit Agency (or any successor agency) of the Department of Defense or the Inspector General of the General Services Administration may require by subpoena the production of records of a contractor, access to which is provided for that executive agency by subsection (b).

(2)A subpoena under paragraph (1), in the case of contumacy or refusal to obey, is enforceable by order of an appropriate United States district court.

(3)The authority provided by paragraph (1) may not be delegated.

(4)In the year following a year in which authority provided in paragraph (1) is exercised for an executive agency, the head of the executive agency shall submit to the Committee on Homeland Security and Governmental Affairs of the Senate and the Committee on Oversight and Government Reform of the House of Representatives a report on the exercise of the authority during the preceding year and the reasons why the authority was exercised in any instance.

(d)(1)Except as provided in paragraph (2), each contract awarded after using procedures other than sealed bid procedures shall provide that the Comptroller General and representatives of the Comptroller General may examine records of the contractor, or any of its subcontractors, that directly pertain to, and involve transactions relating to, the contract or subcontract and to interview any current employee regarding the transactions.

(2)Paragraph (1) does not apply to a contract or subcontract with a foreign contractor or foreign subcontractor if the executive agency concerned determines, with the concurrence of the Comptroller General or the designee of the Comptroller General, that applying paragraph (1) to the contract or subcontract would not be in the public interest. The concurrence of the Comptroller General or the designee is not required when—

(A)the contractor or subcontractor is—

(i)the government of a foreign country or an agency of that government; or

(ii)precluded by the laws of the country involved from making its records available for examination; and

(B)the executive agency determines, after taking into account the price and availability of the property and services from United States sources, that the public interest would be best served by not applying paragraph (1).

(3)Paragraph (1) does not require a contractor or subcontractor to create or maintain a record that the contractor or subcontractor does not maintain in the ordinary course of business or pursuant to another law.

(e)An executive agency may not perform an audit of indirect costs under a contract, subcontract, or modification before or after entering into the contract, subcontract, or modification when the contracting officer determines that the objectives of the audit can reasonably be met by accepting the results of an audit that was conducted by another department or agency of the Federal Government within one year preceding the date of the contracting officer’s determination.

(f)The authority of an executive agency under subsection (b) and the authority of the Comptroller General under subsection (d) shall expire 3 years after final payment under the contract or subcontract.

(g)This section does not apply to the following contracts:

(1)Contracts for utility services at rates not exceeding those established to apply uniformly to the public, plus any applicable reasonable connection charge.

(2)A contract or subcontract that is not greater than the simplified acquisition threshold.

(h)This section does not preclude a contractor from duplicating or storing original records in electronic form.

(i)An executive agency shall not require a contractor or subcontractor to provide original records in an audit carried out pursuant to this section if the contractor or subcontractor provides photographic or electronic images of the original records and meets the following requirements:

(1)The contractor or subcontractor has established procedures to ensure that the imaging process preserves the integrity, reliability, and security of the original records.

(2)The contractor or subcontractor maintains an effective indexing system to permit timely and convenient access to the imaged records.

(3)The contractor or subcontractor retains the original records for a minimum of one year after imaging to permit periodic validation of the imaging systems.

Notes & Related Subsidiaries

Historical and Revision Notes

Revised SectionSource (U.S. Code)Source (Statutes at Large) 4706(a)41:254d(i).June 30, 1949, ch. 288, title III, § 304C(a)(1), (b), (g)–(i), as added Pub. L. 103–355, title II, § 2251(a), Oct. 13, 1994, 108 Stat. 3318, 3320. 4706(b)(1)41:254d(a)(1). 4706(b)(2)41:254d(a)(2).June 30, 1949, ch. 288, title III, § 304C(a)(2), as added Pub. L. 103–355, title II, § 2251(a), Oct. 13, 1994, 108 Stat. 3318; Pub. L. 104–106, title XLIII, § 4321(e)(5), Feb. 10, 1996, 110 Stat. 675. 4706(c)41:254d(b). 4706(d)41:254d(c).June 30, 1949, ch. 288, title III, § 304C(c), as added Pub. L. 103–355, title II, § 2251(a), Oct. 13, 1994, 108 Stat. 3319; Pub. L. 110–417, title VIII, § 871(a), Oct. 14, 2008, 122 Stat.4555. 4706(e)41:254d(d).June 30, 1949, ch. 288, title III, § 304C(d), as added Pub. L. 103–355, title II, § 2251(a), Oct. 13, 1994, 108 Stat. 3319; Pub. L. 104–201, title VIII, § 808(b), Sept. 23, 1996, 110 Stat. 2607. 4706(f)41:254d(e). 4706(g)41:254d(f).June 30, 1949, ch. 288, title III, § 304C(f), as added and amended Pub. L. 103–355, title II, § 2251(a), title IV, § 4103(d), Oct. 13, 1994, 108 Stat. 3320, 3341. 4706(h)41:254d(g). 4706(i)41:254d(h). In subsection (c)(4), the words “Committee on Oversight and Government Reform” are substituted for “Committee on Government Operations” on authority of section 1(a)(6) of Public Law 104–14 (2 U.S.C. note prec. 21), Rule X(1)(h) of the Rules of the House of Representatives, adopted by House Resolution No. 5 (106th Congress, January 6, 1999), and Rule X(1)(m) of the Rules of the House of Representatives, adopted by House Resolution No. 6 (110th Congress, January 5, 2007). The words “Committee on Homeland Security and Governmental Affairs” are substituted for “Committee on Governmental Affairs” on authority of Senate Resolution No. 445 (108th Congress, October 9, 2004).

Editorial Notes

Amendments

2022—Subsec. (c)(1). Pub. L. 117–286 substituted “section 403 or 415 of title 5” for “section 3 or 8G of the Inspector General Act of 1978 (5 U.S.C. App.)”.

Statutory Notes and Related Subsidiaries

Change of Name

Committee on Oversight and Government Reform of House of Representatives changed to Committee on Oversight and Reform of House of Representatives by House Resolution No. 6, One Hundred Sixteenth Congress, Jan. 9, 2019. Committee on Oversight and Reform of House of Representatives changed to Committee on Oversight and Accountability of House of Representatives by House Resolution No. 5, One Hundred Eighteenth Congress, Jan. 9, 2023.

§4706 Examination of facilities and records of contractor