48 CFR §42.709-1

1. (a)This section implements 10 U.S.C. 3743 and 41 U.S.C. 4303. It covers the assessment of penalties against contractors which include unallowable indirect costs in—
   1. (1)Final indirect cost rate proposals; or
   2. (2)The final statement of costs incurred or estimated to be incurred under a fixed-price incentive contract.
2. (b)This section applies to all contracts in excess of $1 million, except fixed-price contracts without cost incentives or any firm-fixed-price contracts for the purchase of commercial products or commercial services.