Federal Acquisition Regulation; Cost Accounting Standards Applicability and Thresholds

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 28, 30, 32, 42, 44, and 52

[FAC 90-23; FAR Case 93-27; Item XX]

RIN 9000-AG01

Federal Acquisition Regulation; Cost Accounting Standards

Applicability and Thresholds

AGENCIES: Department of Defense (DOD), General Services Administration

(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: This final FAR rule implements the final rule, issued by the

Cost Accounting Standards (CAS) Board, which was published in the

Federal Register at 58 FR 58798, November 4, 1993, and which revised

the CAS applicability criteria, thresholds, and procedures for

Government contractors. This document also amends the interim rule

published in the Federal Register at 57 FR 39586, August 31, 1992. This

regulatory action was not subject to Office of Management and Budget

review under Executive Order 12866, dated September 30, 1993.

EFFECTIVE DATE: February 27, 1994, except for amendments to the

following sections, which are effective November 4, 1993: 30.201-4

(b)(1) and (b)(2), 30.601(b), 52.230-1 ``Note'' statement, (c)(1) and

(c)(3), (c)(4) ``Caution'' statement, and 52.230-3.

FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson at (202) 501-3221 in

reference to this FAR case. For general information, contact the FAR

Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-

4755. Please cite FAC 90-23, FAR case 93-27.

SUPPLEMENTARY INFORMATION:

A. Background

On November 4, 1993, the Office of Federal Procurement Policy, Cost

Accounting Standards (CAS) Board, issued a final rule revising 48 CFR

Chapter 99 concerning the applicability criteria, thresholds, and

procedures for the application of the CAS to negotiated Government

contracts. The Board's final rule was effective upon publication in the

Federal Register at 58 FR 58798, November 4, 1993. The Board's action

adjusted the CAS applicability requirements and dollar thresholds to

levels reflecting experience with price inflation since the thresholds

were last promulgated by the previous Board on September 12, 1977. The

Board also changed the criteria for determining which Standards apply

at different threshold levels, the concept of what constitutes modified

coverage, and the criteria that trigger full CAS coverage.

This final rule revises FAR 30.201-4 and the clauses at 52.230-1,

and 52.230-3, as well as the FAR looseleaf edition of Appendix B, to

incorporate the CAS Board's final rule published in 48 CFR Chapter 99.

Major changes include establishing a $25 million threshold for full CAS

coverage, along with $1 million ``trigger contract'' mechanism;

revising modified CAS coverage by expanding it to include CAS 405,

Accounting for Unallowable Costs, and CAS 406, Cost Accounting

Standard--Cost Accounting Period; eliminating the alternative ``10

percent or more'' Government sales criterion for full coverage; and

broadening the CAS exemption criteria in instances where the agency has

waived the requirement for submission of certified cost or pricing

data. The FAR is also revised to incorporate revisions to disclosure

requirements for business segments which are otherwise subject to

modified CAS coverage but which are required to disclose their cost

accounting practices (normally a requirement only for full CAS

coverage) because they are affiliated with other business segments

which are subject to full CAS coverage. The CAS rules now provide that

the business segment has to file a disclosure statement only if, in its

most recently completed cost accounting period, that segment's CAS-

covered awards are 30 percent or more of total segment sales for the

period and total $10 million or more.

B. Regulatory Flexibility Act

The revisions in this final FAR rule will eliminate certain

requirements associated with the administration of the Cost Accounting

Standards. This rule does not have a significant economic impact on a

substantial number of small entities within the meaning of the

Regulatory Flexibility Act (5 U.S.C. 601, et seq.) because small

businesses are exempt from the application of the Cost Accounting

Standards. A Regulatory Flexibility Analysis has, therefore, not been

performed.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because this rule does

not impose any reporting or recordkeeping requirements which require

the approval of the Office of Management and Budget under 44 U.S.C.

3501, et seq.

D. Public Comments

Public comments on this final FAR rule are not solicited because

the policies and procedures contained in these amendments have already

been publicized in the Federal Register by the Office of Federal

Procurement Policy, Cost Accounting Standards Board's Notice of

Proposed Rulemaking, made available for public comment in the Federal

Register at 58 FR 18363, April 9, 1993. The FAR final rule simply

mirrors the final rule published by the CAS Board in the Federal

Register at 58 FR 58798, November 4, 1993.

List of Subjects in 48 CFR Parts 30 and 52

Government procurement.

Dated: December 7, 1994.

Albert A. Vicchiolla,

Director, Office of Federal Acquisition Policy.

Words of Issuance

Interim Rule Adopted As Final With Changes

For reasons set out in the preambles of FAR cases 92-18 and 93-27,

48 CFR Parts 28, 30, 32, 42, 44, and 52 are amended as set forth below.

1. The authority citation for 48 CFR parts 28, 30, 32, 42, 44 and

52 continues to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 28--BONDS AND INSURANCE

2. Section 28.301 is amended by revising paragraph (a)(1) as

follows:

28.301 Policy.

* * * * *

(a)(1) The Government requires any contractor subject to Cost

Accounting Standard (CAS) 416 (48 CFR 9004.416 (appendix B, FAR loose-

leaf edition)) to obtain insurance, by purchase or self-coverage, for

the perils to which the contractor is exposed, except when (i) the

Government, by providing in the contract in accordance with law, agrees

to indemnify the contractor under specified circumstances or (ii) the

contract specifically relieves the contractor of liability for loss of

or damage to Government property.

* * * * *

PART 30--COST ACCOUNTING STANDARDS ADMINISTRATION

3. Section 30.201-4 is amended in paragraph (b)(1) by removing

``$10 million'' and inserting ``$25 million'' in its place; and by

revising paragraphs (b)(2) and (d)(2) to read as follows:

30.201-4 Contract clauses.

* * * * *

(b) * * *

(2) The clause at 52.230-3 requires the contractor to comply with

48 CFR chapter 99 (Appendix B, FAR loose-leaf edition), subparts

9904.401, 9904.402, 9904.405, and 9904.406, to disclose (if it meets

certain requirements) actual cost accounting practices, and to follow

consistently its established cost accounting practices.

* * * * *

(d) * * *

(2) The clause at 52.230-5 specifies rules for administering CAS

requirements and procedures to be followed in cases of failure to

comply.

30.601 [Amended]

4. Section 30.601(b) is amended by removing the first use of the

word ``of'' and inserting ``after'' in its place.

30.602-1 [Amended]

5. Section 30.602-1(c)(1) is amended in the second sentence by

removing the word ``offices'' and inserting ``officers'' in its place.

6. Section 30.602-2(a)(4) is amended by adding a new sentence after

the first to read as follows:

30.602-2 Noncompliance with CAS requirements.

* * * * *

(4) * * * If the ACO determines that the contractor's practices are

in noncompliance, a written explanation shall be provided as to why the

ACO disagrees with the contractor's rationale.

* * * * *

7. Section 30.602-3(a) is revised to read as follows:

30.602-3 Voluntary changes.

(a) General. (1) The contractor may voluntarily change its

disclosed or established cost accounting practices.

(2) The contract price may be adjusted for voluntary changes.

However, increased costs resulting from a voluntary change may be

allowed only if the ACO determines that the change is desirable and not

detrimental to the interest of the Government.

* * * * *

PART 32--CONTRACT FINANCING

8. Section 32.503-7 is amended by revising the introductory

paragraph to read as follows:

32.503-7 Limitations on general and administrative expenses (G&A) for

progress payments.

If the contractor established an inventory suspense account under

Appendix A of Cost Accounting Standard (CAS) 410, Allocation of

Business Unit General and Administrative Expenses to Final Cost

Objectives (48 CFR 9904.410 (appendix B, FAR loose-leaf edition)), and

the account is $5 million or more, the following limitations shall

apply to progress payments:

* * * * *

PART 42--CONTRACT ADMINISTRATION

9. Section 42.203 paragraph (a) is revised to read as follows:

42.203 Retention of contract administration.

(a) Contracting offices shall retain for administration any

contract (1) not requiring the performance of contract administration

functions (see 42.302) at or near contractor facilities, or (2) for

which retention by the contracting office is prescribed by agency

acquisition regulations. However, 30.601(a) and (b) require that

retained contracts to which Cost Accounting Standards (CAS) apply be

assigned for CAS administration only. Instructions for marking and

distributing these contracts are provided in 4.201(c).

* * * * *

10. In section 42.302, the introductory text of paragraph (a)(11)

and paragraph (a)(11)(iv) are revised to read as follows:

42.302 Contract administration functions.

(a) * * *

(11) In connection with Cost Accounting Standards (see part 30 and

48 CFR chapter 99)--

* * * * *

(iv) Negotiate price adjustments and execute supplemental

agreements under the Cost Accounting Standards clauses at 52.230-2,

52.230-3, and 52.230-5.

* * * * *

PART 44--SUBCONTRACTING POLICIES AND PROCEDURES

11. and 12. Section 44.305-3 paragraph (a)(2) is revised to read as

follows:

44.305-3 Withholding or withdrawing approval.

(a) * * *

(2) Implementation of cost accounting standards (see 48 CFR chapter

99 (Appendix B, FAR loose-leaf edition);

* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

13. Section 52.230-1 is amended in the provision by:

(a) Revising the provision date to read ``(NOV 1993)'';

(b) Removing in the provision's Note the word ``four'' and

inserting ``three'' in its place, and by removing the Roman numeral

``IV'' and inserting ``III'' in its place;

(c) Revising paragraphs (c)(1) and (3);

(d) Removing in the CAUTION statement in paragraph (c)(4) ``$10

million'' and inserting ``$25 million'' in its place; and

(e) Removing part II and redesignating parts III and IV as II and

III, respectively, and revising the newly designated part II.

The revised text reads as follows:

52.230-1 Cost Accounting Standards Notices and Certification.

* * * * *

Cost Accounting Standards Notices and Certification (Nov 1993)

* * * * *

(c) Check the appropriate box below:

{time} (1) Certificate of Concurrent Submission of Disclosure

Statement. The offeror hereby certifies that, as a part of the

offer, copies of the Disclosure Statement have been submitted as

follows: (i) Original and one copy to the cognizant Administrative

Contracting Officer (ACO), and (ii) One copy to the cognizant

contract auditor.

(Disclosure must be on Form No. CASB DS-1. Forms may be obtained

from the cognizant ACO or from the loose-leaf version of the Federal

Acquisition Regulation.)

Date of Disclosure Statement-------------------------------------------

Name and Address of Cognizant ACO where filed--------------------------

The offeror further certifies that practices used in estimating

costs in pricing this proposal are consistent with the cost

accounting practices disclosed in the Disclosure Statement.

* * * * *

{time} (3) Certificate of Monetary Exemption. The offeror

hereby certifies that the offeror, together with all divisions,

subsidiaries, and affiliates under common control, did not receive

net awards of negotiated prime contracts and subcontracts subject to

CAS totaling more than $25 million (of which at least one award

exceeded $1 million) in the cost accounting period immediately

preceding the period in which this proposal was submitted. The

offeror further certifies that if such status changes before an

award resulting from this proposal, the offeror will advise the

Contracting Officer immediately.

* * * * *

II. Cost Accounting Standards--Eligibility for Modified Contract

Coverage

If the offeror is eligible to use the modified provisions of 48

CFR subpart 9903.201-2(b) and elects to do so, the offeror shall

indicate by checking the box below. Checking the box below shall

mean that the resultant contract is subject to the Disclosure and

Consistency of Cost Accounting Practices clause in lieu of the Cost

Accounting Standards clause.

{time} The offeror hereby claims an exemption from the Cost

Accounting Standards clause under the provisions of 48 CFR subpart

9903.201-2(b) and certifies that the offeror is eligible for use of

the Disclosure and Consistency of Cost Accounting Practices clause

because during the cost accounting period immediately preceding the

period in which this proposal was submitted, the offeror received

less than $25 million in awards of CAS-covered prime contracts and

subcontracts, or the offeror did not receive a single CAS-covered

award exceeding $1 million. The offeror further certifies that if

such status changes before an award resulting from this proposal,

the offeror will advise the Contracting Officer immediately.

CAUTION: An offeror may not claim the above eligibility for

modified contract coverage if this proposal is expected to result in

the award of a CAS-covered contract of $25 million or more or if,

during its current cost accounting period, the offeror has been

awarded a single CAS-covered prime contract or subcontract of $25

million or more.

* * * * *

14. Section 52.230-3 is amended in the clause by revising the

clause date to read ``(NOV 1993)''; and by revising paragraph (a)(1) to

read as follows:

52.230-3 Disclosure and Consistency of Cost Accounting Practices.

* * * * *

Disclosure and Consistency of Cost Accounting Practices (Nov 1993)

* * * * *

(a) * * *

(1) Comply with the requirements of 48 CFR subpart 9904.401,

Consistency in Estimating, Accumulating, and Reporting Costs; 48 CFR

subpart 9904.402, Consistency in Allocating Costs Incurred for the

Same Purpose; 48 CFR subpart 9904.405, Accounting for Unallowable

Costs; and 48 CFR subpart 9904.406, Cost Accounting Standard--Cost

Accounting Period, in effect on the date of award of this contract

as indicated in 48 CFR part 9904.

* * * * *

52.230-5 [Amended]

15. Section 52.230-5 is amended in the clause by revising the

clause date to read ``(DEC 1994)''; in the introductory paragraph by

removing ``(f)'' and inserting ``(g)'' in its place; in paragraph

(a)(1) by inserting after ``new'' the words ``or modified''; in

paragraph (b)(1) by removing the words ``each additional'' and

inserting ``the applicable'' in their place; in paragraph (d) by

removing the second reference to ``CAS''; and in paragraph (f) by

removing the word ``contractor's'' and inserting ``contract'' in its

place.

[FR Doc. 94-30649 Filed 12-27-94; 8:45 am]

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