42.709-2 General.
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(a) The following penalties apply to contracts covered by this section:
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(1) If the indirect cost is expressly unallowable under a cost principle in the FAR, or an executive agency supplement to the FAR, that defines the allowability of specific selected costs, the penalty is equal to-
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(i) The amount of the disallowed costs allocated to contracts that are subject to this section for which an indirect cost proposal has been submitted; plus
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(ii) Interest on the paid portion, if any, of the disallowance.
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(2) If the indirect cost was determined to be unallowable for that contractor before proposal submission, the penalty is two times the amount in paragraph (a)(1)(i) of this section.
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(b) These penalties are in addition to other administrative, civil, and criminal penalties provided by law.
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(c) It is not necessary for unallowable costs to have been paid to the contractor in order to assess a penalty.