[Federal Register Volume 70, Number 45 (Wednesday, March 9, 2005)]
[Rules and Regulations]
[Pages 11743-11761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4093]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 30 and 52
[FAC 2005-01; FAR Case 1999-025; Item VI]
RIN 9000-AI70
Federal Acquisition Regulation; Cost Accounting Standards
Administration
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) by revising language
pertaining to the Cost Accounting Standards Administration, and the
related FAR contract clause, Administration of Cost Accounting
Standards. In addition, a new contract clause is added, Proposal
Disclosure--Cost Accounting Practice Changes. The rule describes the
process for determining and resolving the cost-impact on contracts and
subcontracts when a contractor makes a compliant change to a cost
accounting practice or follows a noncompliant practice. To assist in
understanding the changes between the current FAR rule and this final
FAR rule, a matrix that summarizes the major changes is provided in
Section C, Supplementary Information, below.
DATES: Effective Date: April 8, 2005.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755
for information pertaining to status or publication schedules. For
clarification of content, contact Mr. Richard C. Loeb, Acting Director,
Office of Acquisition Policy, at (202) 208-3810. Please cite FAC 2005-
01, FAR case 1999-025.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 65 FR 20854, April 18, 2000, with a request for comments by
June 19, 2000. Nine respondents submitted public comments. Additional
comments were also provided by the public at a series of public
meetings held on August 2, September 26, and October 17, 2000. As a
result of the comments received, the Councils made significant changes
to the proposed FAR rule and published a second proposed FAR rule in
the Federal Register at 68 FR 40104, July 3, 2003, with a request for
comments by September 2, 2003. An additional public meeting was held on
August 5, 2003.
Nine respondents submitted comments in response to the second
proposed FAR rule. A discussion of these public comments are provided
below. The Councils considered all comments and concluded that the
proposed rule should be converted to a final rule, with changes to the
proposed rule. Differences between the second proposed rule and final
rule are discussed in Section B, Comments 8, 9, 12, 21, 26, 27, 28, 29,
35 and Other Changes, below.
B. Public Comments
Public Meeting
1. Comment: Four respondents recommended holding a public working
group session to address the concerns and recommendations contained in
the public comments submitted in response to the proposed rule.
[[Page 11744]]
Councils' response: Nonconcur. With the removal of the calculation
of increased cost in the aggregate from the final rule (see comment
26), the Councils do not believe there are any issues that warrant
holding another public meeting.
Complex and Prescriptive
2. Comment: Five respondents asserted that the proposed rule is
overly prescriptive. One respondent stated that the proposed rule is
unnecessarily complicated and does not address the major reasons that
the current process does not work. Two respondents asserted the
proposed rule is so detailed and prescriptive that CFAOs will be unable
to exercise good business judgment and consider the unique aspects of
each contractor's business environment in settling issues. Another
respondent stated that the highly prescriptive nature of this
regulation will impede the expeditious and fair resolution of CAS
issues. The respondent stated that CFAOs will interpret the proposed
rule as significantly decreasing the flexibility regularly exercised
under the current regulation. Yet another respondent asserted that the
detailed requirements for a GDM are too prescriptive. This respondent
stated that, in many cases, very high-level GDM's are all that is
needed to determine if an impact is going to be immaterial, while in
other cases, a GDM with more detail may be necessary. They stated that
the GDM's require more flexibility than is provided for in the proposed
amendment.
Councils' response: Nonconcur. The Councils do not believe that the
general content of the rule is overly prescriptive. The Councils
believe that the CFAO and the contractor have significant flexibility
in the proposed process, including the ability to determine materiality
at any time during the process, the ability to submit a GDM in whatever
format that is acceptable to the CFAO, and the ability to negotiate the
cost-impact by adjusting a single contract, multiple contracts, or some
other suitable method. However, the Councils concur with some of the
specific recommendations made in the public comments regarding
revisions to the proposed language. To the extent the respondents have
provided specific comments regarding the prescriptive nature of the
rule, the Councils have addressed those comments and made recommended
revisions as deemed appropriate.
Define ``Cost Accumulation''
3. Comment: One respondent recommended defining the term ``cost
accumulation'' in FAR Part 31.001, Definitions, and clarifying the
expression ``noncompliances that involve accumulating costs.''
Councils' response: Nonconcur. The Councils do not agree that there
is confusion as to the intent of the term. The Councils believe the
term ``cost accumulation'' is self-evident and clearly understood. In
addition, since the CAS Board defines ``accumulating costs'' in 48 CFR
9904.401-30(a)(1), there is no need to add clarifying language
regarding the expression ``noncompliances that involve accumulating
costs.''
Adequacy Determination--Cost-Impact System
4. Comment: One respondent recommended that the proposed rule be
revised to ``require the CFAO to make a determination, in conjunction
with DCAA, regarding a contractor's cost-impact system and their
ability to submit cost-impact proposals. If a contractor has the
ability to identify increased or decreased cost accumulations for each
affected CAS-covered contract and subcontract and can properly
summarize the increased or decreased cost by contract type and
Government agency, the CFAO should be required to utilize that
contractors system.''
Councils' response: Nonconcur. The Councils are unaware of any
criteria that have been established as the basis for a CFAO's
determination of adequacy of a contractor's cost-impact system, unlike
other systems upon which the Government makes determinations of
adequacy, such as accounting or billing systems. The Councils also
believe that such criteria are unnecessary. The effort necessary to
establish and continuously review cost-impact systems would not be cost
beneficial to the Government or the contractor. The proposed rule
provides the contractor with the flexibility to submit a GDM and/or DCI
proposal in any format that is acceptable to the CFAO. To the extent a
contractor has a process that produces GDM and/or DCI proposals that
are acceptable to the CFAO, the contractor will continue to be able to
use that process under the proposed rule.
CFAO Acting for Non-DoD Agencies
5. Comment: One respondent stated that the CFAO responsibilities
set forth in the proposed rule will not work at contractors who have
CAS-covered contracts and subcontracts with many Government agencies.
The respondent further stated that agencies outside of DoD have refused
to accept final incurred expense rates that have been audited by DCAA
and approved by its ACO and, therefore, it is inconceivable that
agencies such as DOE or USAID will allow a CFAO to execute a bilateral
modification to one of its contracts.
Councils' response: Nonconcur. The Councils have not changed the
requirements under FAR 30.601, Responsibilities. CAS administration for
all contracts and subcontracts in a business unit must be performed by
a single agency. The proposed rule merely uses the term ``Cognizant
Federal Agency Official (CFAO)'' instead of ``cognizant ACO.'' This
does not change the responsibilities of the cognizant Federal agency.
Under FAR 42.202(d), delegation of functions pertaining to cost
accounting standards cannot be rescinded by any contracting agency.
Furthermore, FAR 42.703 sets forth that a single agency shall be
responsible for establishing final indirect cost rates for each
business unit. These rates shall be binding on all agencies and their
contracting offices, unless otherwise specifically prohibited by
statute. An agency shall not perform an audit of indirect cost rates
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 any other department or agency of the Federal
Government.
Materiality Determination--Guidelines
6. Comment: One respondent recommended that the FAR Council provide
guidelines for what constitutes adequate documentation in making a
determination of materiality.
Councils' response: Nonconcur. The Councils believe that any
attempt to add guidelines for what constitutes adequate documentation
would be overly prescriptive, could result in submittal of unnecessary
documentation, would reduce the flexibility needed to resolve cost-
impacts in a timely manner, and could potentially lead to disputes. The
Councils' position is consistent with the requirements at FAR 1.704,
Determination and Findings (D&F). As noted at 30.601, Responsibilities,
the CFAO is required to make all CAS-related required D&Fs for all CAS-
covered contracts and subcontracts. FAR 1.704 requires that each D&F
include necessary supporting documentation to clearly and convincingly
justify the specific determination made. However, since each case must
be evaluated based on its particular facts and circumstances, FAR 1.704
does not provide guidelines for what constitutes necessary supporting
documentation. Similarly, since each cost-impact must be evaluated
based on
[[Page 11745]]
the particular facts and circumstances, the Councils do not believe it
is necessary to provide guidelines for what constitutes adequate
documentation.
Immateriality Determination--Prior to GDM
7. Comment: One respondent expressed concern with the wording of
the proposed rule which allows for a determination of materiality
before submittal of the GDM. The respondent asked how the CFAO can make
such a determination and what data would have to be provided to the
CFAO for this determination.
Councils' response: The Councils believe there will be instances in
which a determination of materiality can be made (based on the criteria
at 48 CFR 9903.305) without submittal of a GDM. The data required to
make such a determination would be identified by the CFAO on a case-by-
case basis, depending on the particular facts and circumstances
involved. The Councils note that language at 30.602(b)(1) provides the
CFAO with such flexibility, something that other respondents have
emphasized is needed in the cost-impact process. The Councils also note
that this language was endorsed by another respondent who stated that
they ``* * * support the Council's efforts to clarify the process for
determining and resolving cost-impacts and believes there are favorable
aspects of the proposed amendment. For example, the proposed cost-
impact process begins without having to prepare a general dollar
magnitude (GDM) proposal. In addition, the Cognizant Federal Agency
Official (CFAO) has the ability to make materiality determinations at
any time during the process.''
Immateriality Determination--Documentation
8. Comment: One respondent recommended that whenever the CFAO
determines the cost-impact is immaterial, the CFAO should be required
to document the criteria used in making that determination.
Councils' response: Concur. The Councils believe a requirement for
the CFAO to document the immateriality determination is appropriate and
has included the requirement at FAR 30.602(c)(2).
Clarify ``Assertion''
9. Comment: One respondent recommended modifying or removing the
term ``assertion'' in the statement at contract clause FAR 52.230-6(b)
that reads ``a description of any cost accounting practice change to
the Disclosure Statement and any assertion that the cost-impact of the
change is immaterial.'' In addition, the respondent recommended that
any statement by the contractor regarding whether the cost-impact of
the change is immaterial should be in writing.
Councils' response: Concur. To avoid potential confusion, the
Councils agree that paragraph (b) of the contract clause at FAR 52.230-
6 be revised to require submission of a written statement that the
cost-impact is immaterial. In addition, the term ``written statement''
replaces the term ``assertion'' at FAR 30.603-1(c)(2)(ii), 30.603-
2(c)(1)(ii), and 30.605(b)(2)(ii)(B).
Time Restrictions for Contractor
10. Comment: One respondent recommended that the Council reinstate
existing specific time limits for the contractor to provide information
regarding accounting changes and noncompliances in all paragraphs where
the phrase ``by a specified date'' is used.
Councils' response: Nonconcur. The respondent's references to the
CFAO affixing ``a specified time limit'' for contractors to submit a
GDM (FAR 30.604(b)(1)(i)), revised GDM (FAR 30.604(f)(1)), or DCI (FAR
30.604(f)(2)) does not provide flexibility to the CFAO to specify a
date that is commensurate with the complexity of the issue(s).
Ultimately, the total time allotted a contractor is addressed by FAR
30.604(i), Remedies, which may be disputed by the contractor.
Time Restrictions for Government
11. Comment: Two respondents stated that the proposed rule does not
address one of the major problems associated with the resolution of
cost-impact proposals related to noncompliances and accounting changes.
One respondent stated that the problem is the fact that the Government
has no time restrictions for performing its responsibilities. The
respondent recommended that the proposed rule require all actions
related to these issues be performed within specific time frames. In
addition, the respondent recommended that reasonable response times be
established for Government personnel.
Councils' response: Nonconcur. The Councils believe a specific time
requirement for CFAO action could increase disputes concerning the
adequacy of contractor submissions since the time periods cannot
reasonably start until an adequate submission is received. The Councils
are not aware of, and the respondents did not provide, a remedy for
Government failure to comply with a recommended time requirement.
DCI in Lieu of GDM
12. Comment: Two respondents stated that the submittal of a GDM
requires extra analysis and is less precise than a detailed cost
proposal. The respondents asserted that the databases and cost-impact
calculation systems used by CAS-covered contractors can provide a DCI
that is much more precise than the calculations required by a GDM.
Councils' response: Partially concur. The GDM proposal does not
require extra analysis. Proposed FAR 30.604(d) and 30.605(d) allow the
CFAO and contractor flexibility in the submittal of a GDM. For some
contractors, the databases and cost-impact calculation systems they use
allow for the computation of DCIs with relative ease. In such cases, it
is anticipated that a contractor would submit the cost-impact
calculation generated by its system as the GDM. However, the final rule
has been revised at FAR 30.604(d)(3) and 30.605(d)(3) to clarify that
the contractor may submit a DCI in lieu of a GDM proposal. The Councils
believe that allowing, but not requiring, the submittal of a GDM gives
contractors flexibility to submit proposals as complex and precise as
they choose, up to and including the submittal of a full DCI.
Cost-Impact Approximations
13. Comment: Two respondents stated that the use of approximations
of prices and cost accumulations are not necessary. Both respondents
stated that it is easy and more cost effective to calculate DCI
proposals. One respondent also stated that it does not see why a
contractor should be required to calculate the increased cost in the
aggregate one way for a GDM proposal and another way for the cost-
impact calculation.
Councils' response: Nonconcur. For some contractors, the databases
and cost-impact calculation systems they use allow for the computation
of detailed cost-impacts with relative ease. For other contractors,
this is not necessarily the case. The Councils believe that allowing
the submittal of a GDM that provides a reasonable approximation of the
total increase in cost accumulations, gives contractors flexibility to
submit proposals as complex and precise as they choose, up to and
including the submittal of a full DCI. However, since some contractors
may choose to go directly to the DCI, the final rule has been revised
to specifically state that the contractor may
[[Page 11746]]
submit a DCI in lieu of a GDM proposal (see comment 12).
Representative Sample and Projections
14. Comment: Two respondents stated that the use of a
representative sample and the projection of that sample to determine
the total increase or decrease in cost accumulations are problematic.
Both respondents stated that they have had difficulties over the years
in reaching agreement with the Government on what constitutes a
representative sample.
Councils' response: Nonconcur. The Councils believe that for some
contractors, the projection of representative samples is a feasible
method for computing increases and decreases in cost accumulations for
the purposes of the submittal of a GDM (see FAR 30.604(e)(2)(i) and
30.605(d)(2)(i)). For contractors that find it problematic to come to
an agreement with the Government on what constitutes a representative
sample, there are alternative methods for computing increases and
decreases in cost accumulations in preparing for the submittal of a
GDM. In addition, the final rule has been revised to permit contractors
to submit a DCI in lieu of a GDM proposal (see comment 12).
Firm-Fixed-Price Contracts
15. Comment: Six respondents commented that firm-fixed-price (FFP)
contracts should not be included in cost-impacts for changes in cost
accounting practices. One respondent asserted that ``increased costs to
the Government only result from a change in contractor's cost
accounting practices when the actual costs paid by the Government are
more than they would have been had the contractor's practices not
changed.'' The respondent further asserted that FFP contracts are not
included in the cost-impact because the amount of costs a contractor
assigns to FFP contracts due to a change in cost accounting practices
has no effect on the amount ultimately paid by the Government.
Councils' response: Nonconcur. FFP contracts are properly included
in cost-impacts for changes in cost accounting practice in the subject
rule. 48 CFR 9903.306(a) does not differentiate among contract types in
its definition of increased costs to the Government. Further, 48 CFR
9903.306(b) measures increased costs for FFP contracts by ``the
difference between the contract price agreed to and the contract price
that would have been agreed to had the contractor proposed in
accordance with the cost accounting practices used during contract
performance.'' The final rule at FAR 30.604 is consistent with the
requirements at 48 CFR 9903.306(a) and (b).
Required Information
16. Comment: One respondent questioned whether the benefits to be
derived from the requirement at FAR 30.604(e)(3) to provide certain
information when a unilateral change is involved are worth the costs to
comply. The respondent's concern was based on its belief that FAR
30.606(c)(3) neither justifies why the information is needed nor
discusses how the information will be used.
Councils' response: Nonconcur. The information required by FAR
30.604(e)(3) (the increased or decreased costs by agency, and the
increased or decreased costs for fixed-price contracts and subcontracts
and flexibly-priced contracts and subcontracts) is required to
determine how any adjustments will be handled. Specifically, the
increase or decrease by agency is needed to assure that the contracts
to be adjusted and the amounts of those adjustments are fairly
allocated among the executive agencies. The breakout by firm-fixed
price and flexibly-priced contracts is needed since the terms
``increased costs'' and ``decreased costs'' mean different things when
applied to fixed-price versus flexibly-priced contracts.
GDM Versus DCI
17. Comment: One respondent commented that over the last decade,
``technology has advanced to the stage where a very accurate cost-
impact proposal covering all affected pricing actions, (by contract,
task, agency, contract type, etc.) is now practical. The speed and
power of personal computers, combined with advances in database
technology, now make it much easier to calculate precise cost-impacts
in a very short time.'' Thus, ``the debate over GDM versus DCI cost-
impacts may well become moot.''
Councils' response: Nonconcur. The Councils believe that retention
of the GDM as an option available to the CFAO promotes the streamlining
of the cost-impact process in many cases, such as those where the
contractor does not have a sophisticated cost-impact system as
envisioned by the respondent. The final rule at FAR 30.604(f)(1)
provides that the CFAO may use the GDM to resolve cost-impacts without
requiring the preparation of a DCI. The Councils believe that this
option will result in a significant savings of resources for both the
contractor and the Government.
Contradictory Rules
18. Comment: One respondent stated that proposed FAR 30.604(h)
seems to apply only to Detailed Cost-impact proposals (DCIs), but the
proposed language in the FAR clause at FAR 52.230-6(f) applies the
principle to both General Dollar Magnitude Proposals (GDMs) and DCIs.
The respondent's conclusion is that these two paragraphs of the
proposed rule are contradictory.
Councils' response: Nonconcur. FAR 30.604(e)(1), General dollar
magnitude proposal content, and FAR 30.604(g)(1), Detailed cost-impact
proposal, both require computation of the cost-impact in accordance
with 30.604(h), Calculating cost-impacts. Thus, the proposed rule is
not contradictory.
Cost-Impact Computations
19. Comment: One respondent stated that the required cost-impact
computations set forth in FAR 30.604(h) and 30.605(h) cause additional
administrative burden. These requirements preclude the respondent from
utilizing its Government approved cost-impact system.
Councils' response: Nonconcur. The proposed rule does not preclude
the respondent from using its cost-impact system, provided that the
system computes the cost-impact in accordance with FAR 30.604(h) and
30.605(h). It is noted that the Government does not ``approve'' cost-
impact systems.
Closed Contracts and Closed Years
20. Comment: Four respondents commented that the cost-impact
calculation should not include closed contracts or years with final
negotiated overhead rates.
Councils' response: Nonconcur. The Councils believe that it is
appropriate to include closed contracts and closed fiscal years in the
cost-impact calculation. Under the CAS clause at 48 CFR 9903.201-
4(a)(5), the contractor in connection with this contract shall ``agree
to an adjustment of the contract price or cost allowance, as
appropriate, if the contractor or a subcontractor fails to comply with
an applicable cost accounting standard, or to follow any cost
accounting practice consistently and such failure results in any
increased costs paid by the United States. Such adjustment shall
provide for recovery of the increased costs to the United States,
together with interest thereon computed at the annual rate established
under Section 6621(a)(2) of the Internal Revenue Code of 1986 (26
U.S.C. 6621(a)(2)) for such period, from the time the payment by the
United States was made to the time the adjustment is effected.''
[[Page 11747]]
The provision at 48 CFR 9903.201-4(a)(5) does not provide for the
exclusion of closed contracts or closed fiscal years from the cost-
impact calculation. Since the CAS Board has not excluded such
contracts, the Councils believe they must be included in the cost-
impact calculation. The Councils further note that this position is
consistent with the treatment of closed contracts and final negotiated
overhead rates for price adjustments under the Truth in Negotiations
Act. Defective pricing claims are often brought after the contract is
closed and closure is no barrier to Government relief. The Councils
also believe this is consistent with the position historically taken by
the Government on CAS.
Cost-Impacts in Prior Years
21. Comment: One respondent stated that the proposed language at
FAR 30.604(h)(1) infers that all cost-impacts occur in prior periods.
The cost-impact calculation for all affected contracts generally
involves the ``estimated cost to complete'' that will be incurred in
future periods, after the change is implemented. To clarify that the
cost-impact can involve existing contracts that will be performed in
the future, insert the words ``or will be'' between ``were'' and
``incurred.''
Councils' response: Concur. The Councils agree that the
respondent's recommendation will clarify the intent of the language at
FAR 30.604(h)(1). However, the Councils believe the language at FAR
30.604(h)(1), as well as 30.605(h)(1), would be better clarified by
inserting the word ``are'' in place of the word ``were.''
Change in Cost Accumulation
22. Comment: Two respondents expressed concern that the proposed
rule requires that a GDM and/or DCI is required for a change in cost
accumulation without regard to whether costs were billed. The
respondents stated that the Government cannot be harmed until an actual
billing has been submitted and paid. One respondent questioned how
there can be any increased or decreased costs paid by the Government
related to a unilateral change if contractors are complying with the
current regulations.
Councils' response: Nonconcur. The rule assumes that the
contractor's system used to accumulate costs is also used to bill those
costs. While the Government cannot be harmed until the costs are
actually billed, the CFAO is required to take action to preclude the
Government from paying increased costs. Thus, if action is not taken to
correct the noncompliance in cost accumulation, the increased costs
could ultimately be billed to the Government. Note that one of the
actions that can be taken is the correction of the accumulated costs to
correct the noncompliance.
Estimated Cost To Complete--Same Level of Work
23. Comment: One respondent recommended that the language regarding
the two estimates to complete at FAR 30.604(h)(3) be revised to state
that they should be based on contractor performance at the same level
of contract work. The respondent recommended adding the words ``in cost
accumulation'' and the phrase ``required to perform the same level of
contract work.''
Councils' response: Nonconcur. The language at issue concerns the
items to be included in a GDM and DCI proposal. Based on past
experience, the Councils believe adding the recommended language is
more likely to cause confusion and disputes rather than add clarity. In
the CAS Board Announced Notice of Proposed Rulemaking on changes in
cost accounting practice and in the first proposed rule on FAR Part 30,
the language required that the estimates be based on a ``consistent
baseline.'' In both instances, public comments were submitted that
clearly showed confusion as to the intent of the proposed language and
requested clarification as to what was meant by a ``consistent
baseline.'' The Councils believe the revised final language at FAR
30.604(h)(3) is sufficient for the parties to understand that the
purpose of using an estimate to complete is to determine the difference
in cost accumulations solely as a result of the changed practice, i.e.,
the two estimates to complete cannot use different work scopes,
different anticipated wage increases, different anticipated material
price increases, or any other differences that do not result from the
use of a different accounting practice.
Estimated Cost To Complete
24. Comment: Four respondents stated that the proposed rule
requires the contractors to use current estimates-to-complete to
calculate the cost-impact of changes to cost accounting practices. Two
of the respondents asserted that such estimates may be so impacted by
other events occurring subsequent to the award of a contract that they
do not provide a reasonable basis for measuring increased costs to the
Government.
Councils' response: Nonconcur. Although not specifically stated, it
appears that the respondents are addressing the use of current
estimates to complete for determining the cost-impact on fixed-price
contracts (see FAR 30.604(h)(3)). For flexibly-priced contracts, since
the current estimates to complete represent the actual amount that will
be reimbursed, there should be no issue regarding the use of such
estimates.
The Councils do not believe it is practical to use the original
cost estimates for determining the cost-impact on fixed-price
contracts. The Councils believe using current estimates to complete is
the only feasible method for computing the cost-impact of changes in
cost accounting practice. As noted in CAS Working Group Paper 76-9,
there are several serious impediments to using original cost estimates
for adjusting fixed-price contracts. While the parties to a fixed-price
contract have agreed to a total price, there is often no agreement as
to how much of the price represents cost and how much of the price
represents profit, and seldom a meeting of the minds on the amount of
any individual element of cost. Further, many fixed-price contracts
will have undergone numerous price changes due to engineering
modifications and other changes. In such cases, tracking an individual
cost element may prove virtually impossible. There is also the danger
that the confusion resulting from the attempt to reconstruct the
original data will provide an opportunity to re-price loss portions of
contract performance that have elapsed prior to the point of the
change.
Define ``In the Aggregate''
25. Comment: One respondent commented that the CAS Board should
define ``in the aggregate.''
Councils' response: The Councils recommend the respondent address
its suggestion to the CAS Board, which can then decide if any action is
necessary.
Increased Costs in the Aggregate
26. Comment: Eight respondents stated that the proposed rule on
increased costs in the aggregate was a violation of CAS and the
statutory provision.
Councils' response: The comment is no longer applicable--the final
rule does not include the calculation of increased cost in the
aggregate. The calculations at the following proposed coverage were
removed from the final rule: 30.604(h)(3), and (4)(iv)(A) through (C);
and 30.605(h)(5), (6), (8)(i) and (ii), and (9).
In addition, revisions were made at the following proposed coverage
as a result of the removal of the calculations: 30.604(h)(4)(i), (ii),
and (iv)--now 30.604(h)(3)(i), (ii), and (iv); and
[[Page 11748]]
30.605(h)(3), (4), and (8)--now 30.605(h)(3), (4), and (6).
Offsets Between Contract Types
27. Comment: Two respondents stated that the proposed rule
incorrectly disallows offsets between contract types. In addition, one
respondent asserted that the Government could be provided with a
``windfall profit'' if offsets are not allowed between contract types
in the case of any noncompliance or unilateral change that causes costs
to shift between fixed-price contracts and subcontracts and flexibly-
priced contracts and subcontracts.
Councils' response: The comment is no longer applicable--the final
rule does not include the calculation of increased cost in the
aggregate. The calculations were removed from the final rule (see
comment 26).
Interest Computation--Calculation
28. Comment: One respondent stated that it does not understand how
interest can be calculated by multiplying the difference in indirect
costs by an applicable base, and that the methodology used to compute
interest at FAR 30.605(d)(2)(ii)(B) makes no sense.
Councils' response: Concur. The Councils recognize that potential
confusion could result from the language, and that the language may be
overly prescriptive. The Councils have therefore revised the final rule
to eliminate the discussion of interest by deleting proposed FAR
30.605(d)(2)(ii)(B) to reduce the prescriptive nature of the language.
Interest Computation--Over and Underpayments
29. Comment: One respondent stated that the proposed requirements
for calculating quarterly interest payments associated with
overpayments or underpayments for noncompliances are overly
prescriptive.
Councils' response: Concur. The Councils believe it is imperative
for the contractor to provide information on when any increased costs
were paid, so that the CFAO can compute interest in accordance with the
statutory requirements. However, the Councils recognize that more
flexibility can be inserted in the process. Therefore, the Councils
revised the requirements for a GDM and DCI proposal at proposed FAR
30.605(d)(3)(iii) (now 30.605(d)(4)(iii)) by adding ``for fixed-price
and flexibly-priced contracts'' after the word ``underpayments'' in the
first sentence, and deleting the second sentence that required total
over and underpayments be broken down by quarter.
Quarterly Data
30. Comment: One respondent asserted that the ``proposed rule
mandates a schedule of increased or decreased costs paid by quarter (or
an analysis to demonstrate why such a schedule is necessary) by
Executive agency as a required part of a general dollar magnitude cost-
impact for an alleged noncompliance.'' The respondent stated that this
administrative burden should be evaluated.
Councils' response: Nonconcur. The proposed rule at FAR
30.605(d)(3) does not require a schedule of increased or decreased
costs paid by quarter by Executive agency as part of a general dollar
magnitude cost-impact. The proposed rule requires that the GDM include
the total overpayments and underpayments broken down by quarter, unless
each of the quarterly amounts billed during the period of noncompliance
were approximately equal. It does not require that such amounts also be
broken down by Executive agency. It is noted that the Councils removed
the requirement at proposed FAR 30.605(d)(3)(iii) that the overpayments
and underpayments be broken down by quarter in the GDM proposal (see
comment 29), as well as the requirement at proposed FAR 30.605(g)(2)(i)
and (ii) concerning the computation of interest on the quarterly
amounts billed.
Task Order Contracts
31. Comment: One respondent stated that one of the many situations
that greatly affect the cost accumulation calculation that is not
addressed in the proposal is the trend toward task order contracts that
may have both fixed fee and incentive fee tasks, as well as CAS covered
and non-CAS covered tasks.
Councils' response: Nonconcur. The Councils believe that this
situation is adequately covered by the language at FAR 30.605(h)(5),
and the definition of ``Affected CAS-covered contracts'' at FAR 30.001.
FAR 30.605(h)(5) requires that the computation of the cost-impact
include a calculation of the total increase or decrease in contract and
subcontract incentives, fees, and profits associated with the increased
or decreased costs to the Government in accordance with 48 CFR
9903.306(c). Thus, if the task involves a fixed fee, the contractor
would need to compute the increase or decrease in that fixed fee as a
result of the change or noncompliance. Conversely, if the task involved
an incentive fee, the contractor would need to compute the increase or
decrease in the incentive fee as a result of the change or
noncompliance.
As for the issue of CAS-covered versus non-CAS-covered tasks, a
contract cannot contain both CAS-covered and non-CAS-covered tasks. In
order for CAS-coverage to differ between tasks, each task would have to
be a separate contract. In such cases, the definition of affected CAS-
covered contracts would exclude the non-CAS covered tasks from the
computation of the cost-impact.
Cost-Impact on Incentives, Fee, and Profit
32. Comment: One respondent stated that FAR 30.605(h)(5) excludes
flexibly-priced contract cost ceilings or target costs for determining
increased costs in the aggregate for noncompliances involving
estimating costs. The respondent stated that the proposed requirement
is only applied to fixed price contracts, and asserted that ``the
proposed coverage ignores the cost-impact on negotiated flexibly priced
contract cost ceilings or target costs that were understated or
overstated due to a contractor's proposal that contained estimated
costs which were based on the use of a noncompliant practice.'' The
respondent recommended that FAR 30.605(h)(5) be revised to include
flexibly-priced contracts in the computation of increased costs in the
aggregate for estimating noncompliances. The respondent also stated
that under FAR 30.606(c)(4)(ii), as proposed, fixed price contracts
would only be subject to downward price adjustment if there are ``net''
increased cost to the Government and opined that flexibly-priced
contracts should not be excluded from the adjustment process. The
respondent believes that the proposed approach to only recover the
aggregate increased cost to the Government for fixed price contracts
can result in inequities.
Councils' response: Nonconcur. The Councils believe that flexibly-
priced contracts are properly included in the computation of increased
costs in the aggregate. For a noncompliance in estimating costs, the
Councils do not believe the impact on negotiated flexibly-priced
contract cost ceilings or target costs should be included in the
computation of increased costs in the aggregate. Under a flexibly-
priced contract, the Government reimburses the actual costs incurred.
As a result, a noncompliance in estimating the costs does not affect
the total costs the Government will ultimately reimburse on flexibly-
priced contracts. However, an estimating noncompliance may have a
significant impact on the amount of
[[Page 11749]]
incentives, fees or profits for flexibly-priced contracts. Thus, the
final rule requires inclusion of the impact on incentives, fees, and
profits in computing the increased costs in the aggregate for
estimating noncompliances.
Records Retention
33. Comment: One respondent stated that problems with the current
process for handling cost-impacts could be addressed by adding a
requirement for contractors to retain cost proposals that were the
basis for negotiating the value of the CAS-covered pricing actions.
Councils' response: Nonconcur. The Councils disagree that adding a
specific requirement to FAR Part 30 is appropriate. FAR 4.703, Policy-
Contractor Records Retention, already describes the record retention
requirements for contract negotiations, administration, and audit
requirements of the contracting agencies. The Councils believe these
record retention requirements are adequate for purposes of CAS
administration.
Adjust Each Individual Contract
34. Comment: One respondent recommended that FAR 30.606(a)(2)
include an analysis of the total payments that would be made if all
affected contracts were individually adjusted so that the CFAO can
determine whether one or more contracts are to be adjusted, or if an
alternative method can be used to resolve the impact. The respondent
asked how, without such data, the CFAO can determine that the
Government will not pay more, in the aggregate, than would be paid if
the CFAO had adjusted all affected contracts?
Councils' response: Nonconcur. In an ideal world, the contractor
would provide a detailed analysis of the total payments for each and
every affected contract. However, the Councils recognize that this is
often not feasible and, in fact, would impose a significant
administrative burden on contractors, extending the cost-impact process
by years. The Councils do not believe that individual contract data is
necessary in every circumstance in order for the CFAO to determine
increased costs in the aggregate. The final rule, therefore, provides
the CFAO the flexibility to obtain data at a more macro level, if
appropriate.
Combining Certain Types of Impacts
35. Comment: Two respondents stated that they believe the proposed
language at FAR 30.606(a)(3) is counter productive as it contains
language that will further limit the Government and the contractor from
resolving some of the more complex cost-impacts. The section precludes
the Government from combining cost-impacts that include: (a) Changes
implemented in different fiscal years, (b) changes and noncompliances,
(c) two or more noncompliances, and (d) different categories of
changes.
Councils' response: Partially concur. The Councils believe that
some language at FAR 30.606(a)(3) is necessary to protect the interests
of the Government. However, the Councils also recognize that the
proposed language should be revised to provide some additional
flexibility to the CFAO in resolving cost-impacts. The Councils,
therefore, revised the language at FAR 30.606(a)(3) to reflect the
following:
(a) Changes implemented in different fiscal years. The Councils
agree with the respondent that implementing changes in different fiscal
years should not be the basis for precluding the combination of such
changes. The Councils have, therefore, deleted proposed 30.606(a)(3)(i)
from the final rule.
(b) Required/desirable changes combined with unilateral changes/
noncompliances. The actions taken to resolve a required or desirable
change (negotiate an equitable adjustment) are different from the
actions taken to resolve a unilateral change or a noncompliance
(recover increased costs to the Government). Therefore, the Councils
believe that combining cost-impacts of required/desirable changes with
the cost-impacts of unilateral changes/noncompliances should be
prohibited, as indicated at FAR 30.606(a)(3)(i).
(c) Combining unilateral changes and/or noncompliances. When the
individual cost-impact of each unilateral change and each noncompliance
is increased costs in the aggregate, the Councils agree that the change
and noncompliance may be combined for administrative ease in resolving
cost-impacts, as indicated at FAR 30.606(a)(3)(ii). Such combinations
can only be made by mutual agreement of both parties.
The Councils further believe that combining the cost-impacts of
unilateral changes and/or noncompliances must be precluded if any of
the individual changes or noncompliances involved results in decreased
costs in the aggregate. When there are two or more unilateral changes/
noncompliances, some with increased costs and others with decreased
costs, combining the cost-impact of those changes does not comply with
the statutory requirement that the Government recover the increased
costs in the aggregate for each unilateral change/noncompliance. There
is no statutory provision that permits offsetting the cost-impact of
one unilateral change/noncompliance with the cost-impact of any other
unilateral change/noncompliance.
(d) Cost-impacts of a unilateral change affecting two or more
segments. The Councils recognize that, in some circumstances, a
unilateral change may affect more than one segment. When such a change
affects the flow of costs between segments or implements a common cost
accounting practice for two or more segments, the CFAO may treat this
as a single change for cost-impact purposes, as indicated at FAR
30.606(a)(3)(iii).
Mandatory Adjustments and Disallowance of Costs
36. Comment: Regarding FAR 30.606, one respondent stated that ``The
proposed mandatory provisions in (c)(3)(i) and (ii) appear incompatible
with the CASB provision at 48 CFR 9903.201-6(b) and the proposed
permissive provision at (c)(3)(iii).'' The respondent further stated
that ``The proposed provision at (c)(3)(iii) provides the CFAO `may'
adjust contract prices, including cost ceilings or target costs,
provided contract prices are not increased in the aggregate.'' The
respondent also stated that ``This appears predicated on the CASB
regulatory provision at 48 CFR 9903.201-6(b), but the FAR proposal
makes it subservient to the mandatory provisions at (c)(3)(i) and (ii)
which do not sanction such adjustments.'' The respondent then stated
that ``the proposed rule appears to conflict with the CAS rules, as
amended on June 14, 2000,'' and cited similar inconsistencies with FAR
30.606(c)(4). The respondent recommended that FAR 30.606(c)(3)(i) and
(ii), and FAR 30.606(c)(4)(i) and (ii) be deleted and make the proposed
provisions at (c)(3)(iii) and (c)(4)(iii) mandatory, for consistency
with CAS rules. The respondent further recommended that the
parenthetical at FAR 30.605(h)(3) be deleted because it does not
require the adjustment of contract cost ceilings and target prices.
Finally, the respondent recommended that, after adjusting the contract
ceilings and target prices, FAR 30.606(c)(3) and (c)(4) include a
``mandatory provision requiring the CFAO to disallow accumulated costs
under flexibly-priced contracts, but only for the portion of estimated
increased cost accumulations that remains in a cost overrun condition
after contract cost ceiling adjustments, if any, are made.''
Councils' response: Nonconcur. In an ideal world, the CFAO would
adjust all
[[Page 11750]]
contracts so each and every dollar of the cost-impact is perfectly re-
allocated to each and every affected contract. This would include all
contract ceilings and target prices. However, the Councils recognize
that this is often not feasible and, in fact, would impose a
significant administrative burden on contractors, extending the cost-
impact process by years. The CAS rules recognize the need for
flexibility at 48 CFR 9903.306(f), which states:
``Whether cost-impact is recognized by modifying a single
contract, several but not all contracts, or any other suitable
technique, is a contract administration matter. The Cost Accounting
Standards do not in any way restrict the capacity of the parties to
select the method by which the cost-impact attributable to a change
in cost accounting practice is recognized.''
The Councils believe the final rule provides the CFAO the
flexibility to adjust the contract cost ceilings and target prices when
the CFAO deems appropriate, as provided for by the CAS rules.
Cost Accumulation Noncompliances
37. Comment: One respondent commented that the FAR Council should
rethink its requirement for cost accumulation noncompliances. The
respondent asserted that the only harm to the Government in such
noncompliances is the application of interest to the difference between
a compliant and noncompliant billing.
Councils' response: Nonconcur. The Councils do not agree with the
respondent's assessment of the harm to the Government in the case of a
noncompliance in accumulating costs. The respondent assumes that the
contractor agrees to correct the noncompliance and immediately reflects
the correction in subsequent billings to the Government. This may not
always be the case since the Government and contractor may not agree on
the nature and extent of the noncompliance and the contractor may
decline to make appropriate adjustments to billed costs. In addition,
the noncompliance may affect closed contracts for which there can be no
corrections to billings. The calculation of the cost-impact of the
accumulation noncompliance is necessary to ensure that the Government
recovers the full extent of any increased costs as well as any
statutorily required interest (see FAR 30.606(c)(5)).
Adjustment of Final Indirect Rates
38. Comment: Two respondents stated that the adjustment of final
indirect rates by the CFAO is inappropriate. They stated that since
``final incurred cost rates are applicable to all Government contracts,
not just CAS-covered Government contracts. Therefore, CAS issues are
being forced on non CAS-covered contracts through the application of
adjusted final incurred cost rates.'' One respondent also argued that
the proposed rule does not reflect the position taken by the CAS Board
in its second supplemental notice of proposed rulemaking, 64 FR 45700,
August 20, 1999, in response to a respondent suggesting the use of the
final indirect expense rate settlement process rather than contract
price adjustments as a method to resolve a cost-impact. In response to
that comment, the CAS Board stated ``Adjustments of indirect expense
rates to settle a cost-impact action can result in the adjustment of
the wrong contracts for the impact of the change in accounting
practice. This method also results in the establishment of final
indirect expense rates that are not consistent with a contractor's
established and disclosed accounting practices for allocating indirect
costs to final cost objectives.''
Councils' response: Nonconcur. CAS issues are not being forced on
non CAS-covered contracts because the contractor must agree to any
adjustment of final indirect rates. FAR 30.606(d)(1) states that the
CFAO may use an alternate method to resolve the cost-impact provided
the contracting parties agree on the use of that alternate method.
Thus, the impact of the change or noncompliance will not affect non
CAS-covered contracts unless the contractor agrees. The CAS Board
recognizes the use of an alternate method such as adjusting indirect
rates at 48 CFR 9903.306(f), which states ``Whether cost-impact is
recognized by modifying a single contract, several but not all
contracts, or any other suitable technique, is a contract
administration matter. The Cost Accounting Standards rules do not in
any way restrict the method by which the cost-impact attributable to a
change in cost accounting practice is recognized.''
Other Changes
The Councils revised the clause language at FAR 52.230-6,
Administration of Cost Accounting Standards, to be in accord with the
changes made to the final rule as described in the Councils' responses
to the public comments, above. In addition, the Councils made several
editorial-type changes to the proposed language to enhance clarity and
structure of the final rule.
The Councils also made a clarifying change at FAR 30.001 to the
definition of ``Fixed-price contracts and subcontracts'' to exclude
fixed-price contracts with economic price adjustments (EPA) based on
actual costs of labor or material (described at 16.203-1(a)(2)), and
included these EPA contracts in the definition of ``Flexibly-priced
contracts and subcontracts.''
C. Summary of Changes
------------------------------------------------------------------------
Issue Current FAR rule Final FAR rule
------------------------------------------------------------------------
Definitions
------------------------------------------------------------------------
1.............. No definitions for Added new definitions for
``Affected CAS-covered ``Affected CAS-covered
contract,'' ``Fixed-price contract,'' ``Fixed-price
contracts,'' and contracts,'' and
``Flexibly-priced ``Flexibly-priced
contracts.''. contracts'' (30.001).
2.............. Included old CAS Updated definitions to
definitions and match CAS definitions and
terminology of ``Mandatory terminology for
change,'' ``Voluntary ``Required change,''
change,'' and ``Desirable ``Unilateral change,''
change.''. and ``Desirable change''
(30.001).
----------------
Responsibilities
------------------------------------------------------------------------
3.............. ACO is used throughout FAR Changed Administrative
section. Contracting Officer (ACO)
to Cognizant Federal
Agency Official (CFAO) to
be consistent with
current CAS.
----------------
[[Page 11751]]
Determinations
------------------------------------------------------------------------
4.............. Did not contain actions for Provides actions to be
what to do if Disclosure taken when the Disclosure
Statement is adequate, Statement is adequate
inadequate, compliant, or (30.202-7(a)(2)(i)),
noncompliant. inadequate (30.202-
7(a)(2)(ii)), compliant
(30.202-7(b)(2)), or
noncompliant (30.605(b)).
----------------
Materiality
------------------------------------------------------------------------
5.............. No discussion of Added new section on
materiality. materiality (30.602).
Permits determination of
immateriality at any time
in the process;
references CAS section on
materiality in
determining whether a
change/noncompliance is
immaterial; and requires
CFAO to document
rationale for any
determination that the
cost impact is
immaterial.
----------------
Required Changes
------------------------------------------------------------------------
6.............. Did not address early Requires CFAO to process
implementation of a early implementation of a
required change. required change as a
unilateral change, unless
determined to be
desirable (30.603-
1(d)(2)).
----------------
Unilateral and Desirable Changes
------------------------------------------------------------------------
7.............. Did not address how a States that until a change
unilateral change is is determined to be
treated if a decision on desirable, it shall be
desirability has not been treated as a unilateral
made. change (30.603-2(b)(2)).
8.............. Did not provide information Provides specific factors
on how to determine to consider in
whether a change is determining whether a
desirable. change is desirable
(30.603-2(b)(3)).
9.............. Did not address retroactive Provides specific section
changes. on retroactive changes
(30.603-2(d)). CFAO can
make a change retroactive
to the beginning of the
fiscal year in which the
change was made.
10............. Did not include exemption Includes current CAS
from contract price exemption from contract
adjustments for changes price adjustments for
related to external changes related to
restructuring activities. external restructuring
activities (30.603-2(e)).
----------------
Processing Changes to Disclosed or Established Cost Accounting
Practices, And Processing Noncompliances
------------------------------------------------------------------------
11............. No process for evaluating Includes process for
changes or noncompliances. evaluating changes
(30.604(c)) and
noncompliances (30.605).
12............. No separation of cost Separate cost impact
impact computation and computation (30.604(h)
cost impact resolution. and 30.605(h)) from cost
impact resolution
(30.606).
13............. Required submittal of a GDM Requires submittal of GDM
in format specified by ACO in format specified by
for use in determining CFAO, provided certain
whether cost impact is basic information is
material. included (30.604(e)(3)).
GDM can be used as basis
to negotiate cost impact
(30.604(f)(1) and
30.605(e)(1)). Permits
contractor to submit DCI
proposal in lieu of GDM
proposal (30.604(d)(3)
and 30.605(d)(3)).
14............. Required DCI showing cost Requires DCI in format
impact for each contract. specified by CFAO,
DCI required anytime cost provided certain basic
impact is material. information is included.
DCI does not need to
include every contract if
CFAO and contractor can
agree on sample and to
project results to
universe (30.604(e)(2)(i)
and 30.605(d)(2)(i)). DCI
only required when GDM is
not adequate for
resolving cost impact
(30.604(f)(2) and
30.605(e)(2)).
15............. Provided no information on Provides specific
what constituted increased information on what
or decreased cost. constitutes increased and
decreased cost. Does not
include how to compute
increased cost in the
aggregate
(30.604(h)(3)(iv) and
30.605(h)(6)). Also see
Comment 26.
16............. Did not discuss equitable States that cost impact
adjustments for required computation is used as
or desirable changes. basis for determining
amount of equitable
adjustments resulting
from required or
desirable changes
(30.604(h)(4)).
----------------
Interest
------------------------------------------------------------------------
17............. Does not address use of Does not address use of
simple versus compound simple versus compound
interest in determining interest in determining
amounts due resulting from amounts due resulting
increased cost paid on a from increased cost paid
noncompliance. on a noncompliance
(30.605(g)).
----------------
Resolving Cost Impacts
------------------------------------------------------------------------
18............. Requires ACO to coordinate Requires CFAO to
with all PCO's whose coordinate with all PCO's
contracts will be affected whose contracts will be
by $10,000 or more. affected by $100,000 or
more (30.606(a)).
[[Page 11752]]
19............. Did not discuss which cost Specifies which cost
impacts could and could impacts cannot be
not be combined. combined. Never combine a
required change and a
unilateral change; a
required change and a
noncompliance; a
desirable change and a
unilateral change; a
desirable change and a
noncompliance
(30.606(a)(3)(i)). Never
combine, unless all have
increased costs, one or
more unilateral changes;
one or more
noncompliances;
unilateral changes and
noncompliances
(30.606(a)(3)(ii)). May
treat as a single change
any change affecting
costs flowing between
multiple segments and
implementation of a
common accounting
practice among segments
(30.606(a)(3)(iii)).
20............. ACO notifies PCO's of CFAO settles cost impact
settlement, PCO's issue by modifying single
modifications adjusting contract, more than one
contracts. No option other contract, all contracts,
than adjusting contracts. or some alternate method
(e.g., adjusting indirect
rates) (30.606(a)(2)). In
adjusting indirect rates,
CFAO must provide for
appropriate gross-up to
reflect Government
participation
(30.606(d)(3)(ii)) and
can only make adjustments
to final indirect cost
rates (30.606(d)(3)(i)).
----------------
Subcontract Administration
------------------------------------------------------------------------
21............. Does not provide for Specifies that remedies
remedies if a are at the prime contract
subcontractor refuses to level if a subcontractor
submit a required GDM or refuses to submit a
DCI proposal. required GDM or DCI
proposal (30.607).
----------------
Contract Clause--Administration of CAS
------------------------------------------------------------------------
22............. Contract clause did not Contract clause
reflect process. incorporates process
(52.230-6).
----------------
Contract Clause--Proposal Disclosure--Cost Accounting Practice Changes
------------------------------------------------------------------------
23............. No provision to address how Added a new provision to
to price proposal when address how to price
contract award will result proposal when contract
in a change in accounting award will result in a
practice. change in accounting
practice (52.230-7).
------------------------------------------------------------------------
This is not a significant regulatory action and, therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
D. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will 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 contracts and
subcontracts with small businesses are exempt from all cost accounting
standard requirements in accordance with 48 CFR 9903.201-1(b)(3).
E. Paperwork Reduction Act
The Paperwork Reduction Act does apply; however, these changes to
the FAR do not impose additional information collection requirements to
the paperwork burden previously approved under OMB Control Number 9000-
0129.
List of Subjects in 48 CFR Parts 30 and 52
Government procurement.
Dated: February 24, 2005.
Rodney P. Lantier,
Director, Contract Policy Division.
0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 30 and 52 as set forth
below:
0
1. The authority citation for 48 CFR parts 30 and 52 is revised to read
as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 30--COST ACCOUNTING STANDARDS ADMINISTRATION
0
2. Add section 30.001 to read as follows:
30.001 Definitions.
As used in this part--
Affected CAS-covered contract or subcontract means a contract or
subcontract subject to Cost Accounting Standards (CAS) rules and
regulations for which a contractor or subcontractor--
(1) Used one cost accounting practice to estimate costs and a
changed cost accounting practice to accumulate and report costs under
the contract or subcontract; or
(2) Used a noncompliant practice for purposes of estimating or
accumulating and reporting costs under the contract or subcontract.
Cognizant Federal agency official (CFAO) means the contracting
officer assigned by the cognizant Federal agency to administer CAS.
Desirable change means a unilateral change to a contractor's
established or disclosed cost accounting practices that the CFAO finds
is desirable and not detrimental to the Government and is, therefore,
not subject to the no increased cost prohibition provisions of CAS-
covered contracts and subcontracts affected by the change.
Fixed-price contracts and subcontracts means--
(1) Fixed-price contracts and subcontracts described at 16.202,
16.203 (except when price adjustments are based on actual costs of
labor or material, described at 16.203-1(a)(2)), and 16.207;
(2) Fixed-price incentive contracts and subcontracts where the
price is not adjusted based on actual costs incurred (Subpart 16.4);
(3) Orders issued under indefinite-delivery contracts and
subcontracts where final payment is not based on actual costs incurred
(Subpart 16.5); and
(4) The fixed-hourly rate portion of time-and-materials and labor-
hours
[[Page 11753]]
contracts and subcontracts (Subpart 16.6).
Flexibly-priced contracts and subcontracts means--
(1) Fixed-price contracts and subcontracts described at 16.203-
1(a)(2), 16.204, 16.205, and 16.206;
(2) Cost-reimbursement contracts and subcontracts (Subpart 16.3);
(3) Incentive contracts and subcontracts where the price may be
adjusted based on actual costs incurred (Subpart 16.4);
(4) Orders issued under indefinite-delivery contracts and
subcontracts where final payment is based on actual costs incurred
(Subpart 16.5); and
(5) The materials portion of time-and-materials contracts and
subcontracts (Subpart 16.6).
Noncompliance means a failure in estimating, accumulating, or
reporting costs to--
(1) Comply with applicable CAS; or
(2) Consistently follow disclosed or established cost accounting
practices.
Required change means--
(1) A change in cost accounting practice that a contractor is
required to make in order to comply with a CAS, or a modification or
interpretation thereof, that subsequently becomes applicable to an
existing CAS-covered contract due to the receipt of another CAS-covered
contract or subcontract; or
(2) A prospective change to a disclosed or established cost
accounting practice when the CFAO determines that the former practice
was in compliance with applicable CAS and the change is necessary for
the contractor to remain in compliance.
Unilateral change means a change in cost accounting practice from
one compliant practice to another compliant practice that a contractor
with a CAS-covered contract(s) or subcontract(s) elects to make that
has not been deemed a desirable change by the CFAO and for which the
Government will pay no aggregate increased costs.
0
3. Amend section 30.201-3 by adding paragraph (c) to read as follows:
30.201-3 Solicitation provisions.
* * * * *
(c) Insert the provision at FAR 52.230-7, Proposal Disclosure--Cost
Accounting Practice Changes, in solicitations for contracts subject to
CAS as specified in 48 CFR 9903.201 (FAR Appendix).
0
4. Amend section 30.202-6 by revising paragraphs (b) and (d) to read as
follows:
30.202-6 Responsibilities.
* * * * *
(b) The contracting officer shall not award a CAS-covered contract
until the cognizant Federal agency official (CFAO) has made a written
determination that a required Disclosure Statement is adequate unless,
in order to protect the Government's interest, the agency head, on a
nondelegable basis, authorizes award without obtaining submission of
the required Disclosure Statement (see 48 CFR 9903.202-2). In this
event, the contractor shall submit the required Disclosure Statement
and the CFAO shall make a determination of adequacy as soon as possible
after the award.
* * * * *
(d) The CFAO is responsible for issuing determinations of adequacy
and compliance of the Disclosure Statement.
0
5. Revise section 30.202-7 to read as follows:
30.202-7 Determinations.
(a) Adequacy determination. (1) As prescribed by 48 CFR 9903.202-6
(FAR Appendix), the auditor shall--
(i) Conduct a review of the Disclosure Statement to ascertain
whether it is current, accurate, and complete; and
(ii) Report the results to the CFAO.
(2) The CFAO shall determine if the Disclosure Statement adequately
describes the contractor's cost accounting practices. Also, the CFAO
shall--
(i) If the Disclosure Statement is adequate, notify the contractor
in writing, and provide a copy to the auditor with a copy to the
contracting officer if the proposal triggers submission of a Disclosure
Statement. The notice of adequacy shall state that--
(A) The disclosed practices are adequately described and the CFAO
currently is not aware of any additional practices that should be
disclosed;
(B) The notice is not a determination that all cost accounting
practices were disclosed; and
(C) The contractor shall not consider a disclosed practice, by
virtue of such disclosure, an approved practice for estimating
proposals or accumulating and reporting contract and subcontract cost
data; or
(ii) If the Disclosure Statement is inadequate, notify the
contractor of the inadequacies and request a revised Disclosure
Statement.
(3) Generally, the CFAO should furnish the contractor notification
of adequacy or inadequacy within 30 days after the CFAO receives the
Disclosure Statement.
(b) Compliance determination. (1) After the notification of
adequacy, the auditor shall--
(i) Conduct a detailed compliance review to ascertain whether or
not the disclosed practices comply with CAS and Part 31, as applicable;
and
(ii) Advise the CFAO of the results.
(2) The CFAO shall make a determination of compliance or take
action regarding a report of alleged noncompliance in accordance with
30.605(b). Such action should include requesting a revised Disclosure
Statement that corrects the CAS noncompliance. Noncompliances with Part
31 shall be processed separately.
0
6. Amend section 30.202-8 by revising paragraph (a) to read as follows:
30.202-8 Subcontractor disclosure statements.
(a) When the Government requires determinations of adequacy of
subcontractor disclosure statements, the CFAO for the subcontractor
shall provide this determination to the CFAO for the contractor or next
higher-tier subcontractor. The higher-tier CFAO shall not change the
determination of the lower-tier CFAO.
* * * * *
0
7. Revise Subpart 30.6 to read as follows:
Subpart 30.6--CAS Administration
Sec.
30.601 Responsibility.
30.602 Materiality.
30.603 Changes to disclosed or established cost accounting
practices.
30.603-1 Required changes.
30.603-2 Unilateral and desirable changes.
30.604 Processing changes to disclosed or established cost
accounting practices.
30.605 Processing noncompliances.
30.606 Resolving cost impacts.
30.607 Subcontract administration.
30.601 Responsibility.
(a) The CFAO shall perform CAS administration for all contracts and
subcontracts in a business unit, even when the contracting officer
retains other administration functions. The CFAO shall make all CAS-
related required determinations and findings (see Subpart 1.7) for all
CAS-covered contracts and subcontracts, including--
(1) Whether a change in cost accounting practice or noncompliance
has occurred; and
(2) If a change in cost accounting practice or noncompliance has
occurred, how any resulting cost impacts are resolved.
(b) Within 30 days after the award of any new contract subject to
CAS, the contracting officer making the award shall request the CFAO to
perform administration for CAS matters (see Subpart 42.2). For
subcontract awards, the contractor awarding the subcontract must follow
the procedures at 52.230-6(b).
[[Page 11754]]
30.602 Materiality.
(a) In determining materiality, the CFAO shall use the criteria in
48 CFR 9903.305 (FAR Appendix).
(b) A CFAO determination of materiality--
(1) May be made before or after a general dollar magnitude proposal
has been submitted, depending on the particular facts and
circumstances; and
(2) Shall be based on adequate documentation.
(c) When the CFAO determines the cost impact is immaterial, the
CFAO shall--
(1) Make no contract adjustments and conclude the cost impact
process;
(2) Document the rationale for the determination; and
(3) In the case of noncompliance issues, inform the contractor
that--
(i) The noncompliance should be corrected; and
(ii) If the noncompliance is not corrected, the Government reserves
the right to make appropriate contract adjustments should the cost
impact become material in the future.
(d) For required, unilateral, and desirable changes, and CAS
noncompliances, when the amount involved is material, the CFAO shall
adjust the contract or use another suitable method (see 30.606).
30.603 Changes to disclosed or established cost accounting practices.
30.603-1 Required changes.
(a) General. Offerors shall state whether or not the award of a
contract would require a change to an established cost accounting
practice affecting existing contracts and subcontracts (see 52.230-1).
The contracting officer shall notify the CFAO if the offeror states
that a change in cost accounting practice would be required.
(b) CFAO responsibilities. Prior to making an equitable adjustment
under the applicable paragraph(s) that address a required change at
52.230-2, Cost Accounting Standards; 52.230-3, Disclosure and
Consistency of Cost Accounting Practices; or 52.230-5, Cost Accounting
Standards--yEducational Institution, the CFAO shall determine that--
(1) The cost accounting practice change is required to comply with
a CAS, or a modification or interpretation thereof, that subsequently
became applicable to one or more contracts or subcontracts; or
(2) The former cost accounting practice was in compliance with
applicable CAS and the change is necessary to remain in compliance.
(c) Notice and proposal preparation. (1) When the award of a
contract would require a change to an established cost accounting
practice, the provision at 52.230-7, Proposal Disclosure--Cost
Accounting Practice Changes, requires the offeror to--
(i) Prepare the contract pricing proposal in response to the
solicitation using the changed cost accounting practice for the period
of performance for which the practice will be used; and
(ii) Submit a description of the changed cost accounting practice
to the contracting officer and the CFAO as pricing support for the
proposal.
(2) When a change is required to remain in compliance (for reasons
other than a contract award) or to comply with a new or modified
standard, the clause at 52.230-6, Administration of Cost Accounting
Standards, requires the contractor to--
(i) Submit a description of the change to the CFAO not less than 60
days (or other mutually agreeable date) before implementation of the
change; and
(ii) Submit rationale to support any contractor written statement
that the cost impact of the change is immaterial.
(d) Equitable adjustments for new or modified standards. (1)
Required changes made to comply with new or modified standards may
require equitable adjustments, but only to those contracts awarded
before the effective date of the new or modified standard (see 52.230-
2, 52.230-3, or 52.230-5).
(2) When a contractor elects to implement a required change to
comply with a new or modified standard prior to the applicability date
of the standard, the CFAO shall administer the change as a unilateral
change (see 30.603-2). Contractors shall not receive an equitable
adjustment that will result in increased costs in the aggregate to the
Government prior to the applicability date unless the CFAO determines
that the unilateral change is a desirable change.
30.603-2 Unilateral and desirable changes.
(a) Unilateral changes. (1) The contractor may unilaterally change
its disclosed or established cost accounting practices, but the
Government shall not pay any increased cost, in the aggregate, as a
result of the unilateral change.
(2) Prior to making any contract price or cost adjustments under
the applicable paragraph(s) addressing a unilateral change at 52.230-2,
52.230-3, or 52.230-5, the CFAO shall determine that--
(i) The contemplated contract price or cost adjustments will
protect the Government from the payment of the estimated increased
costs, in the aggregate; and
(ii) The net effect of the contemplated adjustments will not result
in the recovery of more than the increased costs to the Government, in
the aggregate.
(b) Desirable changes. (1) Prior to taking action under the
applicable paragraph(s) addressing a desirable change at 52.230-2,
52.230-3, or 52.230-5, the CFAO shall determine the change is a
desirable change and not detrimental to the interests of the
Government.
(2) Until the CFAO has determined a change to a cost accounting
practice is a desirable change, the change is a unilateral change.
(3) Some factors to consider in determining if a change is
desirable include, but are not limited to, whether--
(i) The contractor must change the cost accounting practices it
uses for Government contract and subcontract costing purposes to remain
in compliance with the provisions of Part 31;
(ii) The contractor is initiating management actions directly
associated with the change that will result in cost savings for
segments with CAS-covered contracts and subcontracts over a period for
which forward pricing rates are developed or 5 years, whichever is
shorter, and the cost savings are reflected in the forward pricing
rates; and
(iii) Funds are available if the determination would necessitate an
upward adjustment of contract cost or price.
(c) Notice and proposal preparation. (1) When a contractor makes a
unilateral change, the clause at 52.230-6, Administration of Cost
Accounting Standards, requires the contractor to--
(i) Submit a description of the change to the CFAO not less than 60
days (or other mutually agreeable date) before implementation of the
change; and
(ii) Submit rationale to support any contractor written statement
that the cost impact of the change is immaterial.
(2) If a contractor implements the change in cost accounting
practice without submitting the notice as required in paragraph (c)(1)
of this subsection, the CFAO may determine the change a failure to
follow a cost accounting practice consistently and process it as a
noncompliance in accordance with 30.605.
(d) Retroactive changes. (1) If a contractor requests that a
unilateral change be retroactive, the contractor shall submit
supporting rationale.
[[Page 11755]]
(2) The CFAO shall promptly evaluate the contractor's request and
shall, as soon as practical, notify the contractor in writing whether
the request is or is not approved.
(3) The CFAO shall not approve a date for the retroactive change
that is before the beginning of the contractor's fiscal year in which
the request is made.
(e) Contractor accounting changes due to external restructuring
activities. The requirements for contract price and cost adjustments do
not apply to compliant cost accounting practice changes that are
directly associated with external restructuring activities that are
subject to and meet the requirements of 10 U.S.C. 2325. However, the
disclosure requirements in 52.230-6(b) shall be followed.
30.604 Processing changes to disclosed or established cost accounting
practices.
(a) Scope. This section applies to required, unilateral, and
desirable changes in cost accounting practices.
(b) Procedures. Upon receipt of the contractor's notification and
description of the change in cost accounting practice, the CFAO, with
the assistance of the auditor, should review the proposed change
concurrently for adequacy and compliance. The CFAO shall--
(1) If the description of the change is both adequate and
compliant, notify the contractor in writing and--
(i) For required or unilateral changes (except those requested to
be determined desirable changes), request the contractor submit a
general dollar magnitude (GDM) proposal by a specified date, unless the
CFAO determines the cost impact is immaterial; or
(ii) For unilateral changes that the contractor requests to be
determined desirable changes, inform the contractor that the request
shall include supporting rationale and--
(A) For any request based on the criteria in 30.603-2(b)(3)(ii),
the data necessary to demonstrate the required cost savings; or
(B) For any request other than those based on the criteria in
30.603-2(b)(3)(ii), a GDM proposal and any other data necessary for the
CFAO to determine if the change is a desirable change;
(2) If the description of the change is inadequate, request a
revised description of the new cost accounting practice; and
(3) If the disclosed practice is noncompliant, notify the
contractor in writing that, if implemented, the CFAO will determine the
cost accounting practice to be noncompliant and process it accordingly.
(c) Evaluating requests for desirable changes. (1) When a
contractor requests a unilateral change be determined a desirable
change, the CFAO shall promptly evaluate the contractor's request and,
as soon as practical, notify the contractor in writing whether the
change is a desirable change or the request is denied.
(2) If the CFAO determines the change is a desirable change, the
CFAO shall negotiate any cost or price adjustments that may be needed
to resolve the cost impact (see 30.606).
(3) If the request is denied, the change is a unilateral change and
shall be processed accordingly.
(d) General dollar magnitude proposal. The GDM proposal--
(1) Provides information to the CFAO on the estimated overall
impact of a change in cost accounting practice on affected CAS-covered
contracts and subcontracts that were awarded based on the previous cost
accounting practice;
(2) Assists the CFAO in determining whether individual contract
price or cost adjustments are required; and
(3) The contractor may submit a detailed cost-impact (DCI) proposal
in lieu of a GDM proposal provided the DCI proposal is in accordance
with paragraph (g) of this section.
(e) General dollar magnitude proposal content. The GDM proposal--
(1) Shall calculate the cost impact in accordance with paragraph
(h) of this section;
(2) May use one or more of the following methods to determine the
increase or decrease in cost accumulations:
(i) A representative sample of affected CAS-covered contracts and
subcontracts.
(ii) The change in indirect rates multiplied by the total estimated
base computed for each of the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(iii) Any other method that provides a reasonable approximation of
the total increase or decrease in cost accumulations for all affected
fixed-price and flexibly-priced contracts and subcontracts.
(3) May be in any format acceptable to the CFAO but, as a minimum,
shall include the following data:
(i) A general dollar magnitude estimate of the total increase or
decrease in cost accumulations by Executive agency, including any
impact the change may have on contract and subcontract incentives,
fees, and profits, for each of the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(ii) For unilateral changes, the increased or decreased costs to
the Government for each of the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts; and
(4) When requested by the CFAO, shall identify all affected CAS-
covered contracts and subcontracts.
(f) General dollar magnitude proposal evaluation. The CFAO, with
the assistance of the auditor, shall promptly evaluate the GDM
proposal. If the cost impact is immaterial, the CFAO shall notify the
contractor in writing and conclude the cost-impact process with no
contract adjustments. Otherwise, the CFAO shall--
(1) Negotiate and resolve the cost impact (see 30.606). If
necessary, the CFAO may request that the contractor submit a revised
GDM proposal by a specified date with specific additional data needed
to resolve the cost impact (e.g., an expanded sample of affected CAS-
covered contracts and subcontracts or a revised method of computing the
increase or decrease in cost accumulations); or
(2) Request that the contractor submit a DCI proposal by a
specified date if the CFAO determines that the GDM proposal is not
sufficient to resolve the cost impact.
(g) Detailed cost-impact proposal. The DCI proposal--
(1) Shall calculate the cost impact in accordance with paragraph
(h) of this section;
(2) Shall show the estimated increase or decrease in cost
accumulations for each affected CAS-covered contract and subcontract
unless the CFAO and contractor agree to--
(i) Include only those affected CAS-covered contracts and
subcontracts exceeding a specified amount; and
(ii) Estimate the total increase or decrease in cost accumulations
for all affected CAS-covered contracts and subcontracts, using the
results in paragraph (g)(2)(i) of this section;
(3) May be in any format acceptable to the CFAO but, as a minimum,
shall include the requirements at paragraphs (e)(3)(i) and (ii) of this
section; and
(4) When requested by the CFAO, shall identify all affected
contracts and subcontracts.
(h) Calculating cost impacts. The cost impact calculation shall--
[[Page 11756]]
(1) Include all affected CAS-covered contracts and subcontracts
regardless of their status (i.e., open or closed) or the fiscal year(s)
in which the costs are incurred (i.e., whether or not the final
indirect rates have been established);
(2) Combine the cost impact for all affected CAS-covered contracts
and subcontracts for all segments if the effect of a change results in
costs flowing between those segments;
(3) For unilateral changes--
(i) Determine the increased or decreased cost to the Government for
flexibly-priced contracts and subcontracts as follows:
(A) When the estimated cost to complete using the changed practice
exceeds the estimated cost to complete using the current practice, the
difference is increased cost to the Government.
(B) When the estimated costs to complete using the changed practice
is less than the estimated cost to complete using the current practice,
the difference is decreased cost to the Government.
(ii) Determine the increased or decreased cost to the Government
for fixed-price contracts and subcontracts as follows:
(A) When the estimated cost to complete using the changed practice
is less than the estimated cost to complete using the current practice,
the difference is increased cost to the Government.
(B) When the estimated cost to complete using the changed practice
exceeds the estimated cost to complete using the current practice, the
difference is decreased cost to the Government.
(iii) Calculate the total increase or decrease in contract and
subcontract incentives, fees, and profits associated with the increased
or decreased cost to the Government in accordance with 48 CFR
9903.306(c). The associated increase or decrease is based on the
difference between the negotiated incentives, fees and profits and the
amounts that would have been negotiated had the cost impact been known
at the time the contracts and subcontracts were negotiated.
(iv) Calculate the increased cost to the Government in the
aggregate.
(4) For equitable adjustments for required or desirable changes--
(i) Estimated increased cost accumulations are the basis for
increasing contract prices, target prices and cost ceilings; and
(ii) Estimated decreased cost accumulations are the basis for
decreasing contract prices, target prices and cost ceilings.
(i) Remedies. If the contractor does not submit the accounting
change description or the proposals required in paragraph (d) or (g) of
this section within the specified time, or any extension granted by the
CFAO, the CFAO shall--
(1) With the assistance of the auditor, estimate the general dollar
magnitude of the cost impact on affected CAS-covered contracts and
subcontracts; and
(2) Take one or both of the following actions:
(i) Withhold an amount not to exceed 10 percent of each subsequent
payment related to the contractor's CAS-covered contracts (up to the
estimated general dollar magnitude of the cost impact), until the
contractor furnishes the required information.
(ii) Issue a final decision in accordance with 33.211 and
unilaterally adjust the contract(s) by the estimated amount of the cost
impact.
30.605 Processing noncompliances.
(a) General. Prior to making any contract price or cost adjustments
under the applicable paragraph(s) addressing noncompliance at 52.230-2,
52.230-3, or 52.230-5, the CFAO shall determine that--
(1) The contemplated contract price or cost adjustments will
protect the Government from the payment of increased costs, in the
aggregate;
(2) The net effect of the contemplated contract price or cost
adjustments will not result in the recovery of more than the increased
costs to the Government, in the aggregate;
(3) The net effect of any invoice adjustments made to correct an
estimating noncompliance will not result in the recovery of more than
the increased costs paid by the Government, in the aggregate; and
(4) The net effect of any interim and final voucher billing
adjustments made to correct a cost accumulation noncompliance will not
result in the recovery of more than the increased cost paid by the
Government, in the aggregate.
(b) Notice and determination. (1) Within 15 days of receiving a
report of alleged noncompliance from the auditor, the CFAO shall--
(i) Notify the auditor that the CFAO disagrees with the alleged
noncompliance; or
(ii) Issue a notice of potential noncompliance to the contractor
and provide a copy to the auditor.
(2) The notice of potential noncompliance shall--
(i) Notify the contractor in writing of the exact nature of the
noncompliance; and
(ii) Allow the contractor 60 days or other mutually agreeable date
to--
(A) Agree or submit reasons why the contractor considers the
existing practices to be in compliance; and
(B) Submit rationale to support any written statement that the cost
impact of the noncompliance is immaterial.
(3) The CFAO shall--
(i) If applicable, review the reasons why the contractor considers
the existing practices to be compliant or the cost impact to be
immaterial;
(ii) Make a determination of compliance or noncompliance consistent
with 1.704; and
(iii) Notify the contractor and the auditor in writing of the
determination of compliance or noncompliance and the basis for the
determination.
(4) If the CFAO makes a determination of noncompliance, the CFAO
shall follow the procedures in paragraphs (c) through (h) of this
section, as appropriate, unless the CFAO also determines the cost
impact is immaterial. If immaterial, the CFAO shall--
(i) Inform the contractor in writing that--
(A) The noncompliance should be corrected; and
(B) If the noncompliance is not corrected, the Government reserves
the right to make appropriate contract adjustments should the
noncompliance become material in the future; and
(ii) Conclude the cost-impact process with no contract adjustments.
(c) Correcting noncompliances. (1) The clause at 52.230-6 requires
the contractor to submit a description of any cost accounting practice
change needed to correct a noncompliance within 60 days after the
earlier of--
(i) Agreement with the CFAO that there is a noncompliance; or
(ii) Notification by the CFAO of a determination of noncompliance.
(2) The CFAO, with the assistance of the auditor, should review the
proposed change to correct the noncompliance concurrently for adequacy
and compliance (see 30.202-7). The CFAO shall--
(i) When the description of the change is both adequate and
compliant--
(A) Notify the contractor in writing;
(B) Request that the contractor submit by a specified date a
general dollar magnitude (GDM) proposal, unless the CFAO determines the
cost impact is immaterial; and
(C) Follow the procedures at paragraph (b)(4) of this section if
the CFAO determines the cost impact is immaterial.
(ii) If the description of the change is inadequate, request a
revised description of the new cost accounting practice; or
(iii) If the disclosed practice is noncompliant, notify the
contractor in writing that, if implemented, the CFAO
[[Page 11757]]
will determine the cost accounting practice to be noncompliant and
process it accordingly.
(d) General dollar magnitude proposal content. The GDM proposal--
(1) Shall calculate the cost impact in accordance with paragraph
(h) of this section;
(2) May use one or more of the following methods to determine the
increase or decrease in contract and subcontract price or cost
accumulations, as applicable:
(i) A representative sample of affected CAS-covered contracts and
subcontracts affected by the noncompliance.
(ii) When the noncompliance involves cost accumulation, the change
in indirect rates multiplied by the applicable base for flexibly-priced
contracts and subcontracts.
(iii) Any other method that provides a reasonable approximation of
the total increase or decrease in contract and subcontract prices and
cost accumulations;
(3) The contractor may submit a DCI proposal in lieu of a GDM
proposal provided the DCI proposal is in accordance with paragraph (f)
of this section.
(4) May be in any format acceptable to the CFAO but, as a minimum,
shall include the following data:
(i) The total increase or decrease in contract and subcontract
prices and cost accumulations, as applicable, by Executive agency,
including any impact the noncompliance may have on contract and
subcontract incentives, fees, and profits, for each of the following
groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(ii) The increased or decreased costs to the Government for each of
the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(iii) The total overpayments and underpayments for fixed-price and
flexibly-priced contracts made by the Government during the period of
noncompliance; and
(5) When requested by the CFAO, shall identify all affected CAS-
covered contracts and subcontracts.
(e) General dollar magnitude proposal evaluation. The CFAO shall
promptly evaluate the GDM proposal. If the cost impact is immaterial,
the CFAO shall follow the requirements in paragraph (b)(4) of this
section. Otherwise, the CFAO shall--
(1) Negotiate and resolve the cost impact (see 30.606). If
necessary, the CFAO may request the contractor submit a revised GDM
proposal by a specified date, with specific additional data needed to
resolve the cost impact (e.g., an expanded sample of affected CAS-
covered contracts and subcontracts or a revised method of computing the
increase or decrease in contract and subcontract price and cost
accumulations); or
(2) Request that the contractor submit a DCI proposal by a
specified date if the CFAO determines that the GDM proposal is not
sufficient to resolve the cost impact.
(f) Detailed cost-impact proposal. The DCI proposal--
(1) Shall calculate the cost impact in accordance with paragraph
(h) of this section.
(2) Shall show the increase or decrease in price and cost
accumulations, as applicable for each affected CAS-covered contract and
subcontract unless the CFAO and contractor agree to--
(i) Include only those affected CAS-covered contracts and
subcontracts having--
(A) Contract and subcontract values exceeding a specified amount
when the noncompliance involves estimating costs; and
(B) Incurred costs exceeding a specified amount when the
noncompliance involves accumulating costs; and
(ii) Estimate the total increase or decrease in price and cost
accumulations for all affected CAS-covered contracts and subcontracts
using the results in paragraph (f)(2)(i) of this section;
(3) May be in any format acceptable to the CFAO but, as a minimum,
shall include the information in paragraph (d)(4) of this section; and
(4) When requested by the CFAO, shall identify all affected CAS-
covered contracts and subcontracts.
(g) Interest. The CFAO shall--
(1) Separately identify interest on any increased cost paid, in the
aggregate, as a result of the noncompliance;
(2) Compute interest from the date of overpayment to the date of
repayment using the rate specified in 26 U.S.C. 6621(a)(2).
(h) Calculating cost impacts. The cost impact calculation shall--
(1) Include all affected CAS-covered contracts and subcontracts
regardless of their status (i.e., open or closed) or the fiscal year in
which the costs are incurred (i.e., whether or not the final indirect
cost rates have been established);
(2) Combine the cost impact for all affected CAS-covered contracts
and subcontracts for all segments if the effect of a change results in
costs flowing between those segments;
(3) For noncompliances that involve estimating costs, determine the
increased or decreased cost to the Government for fixed-price contracts
and subcontracts as follows:
(i) When the negotiated contract or subcontract price exceeds what
the negotiated price would have been had the contractor used a
compliant practice, the difference is increased cost to the Government.
(ii) When the negotiated contract or subcontract price is less than
what the negotiated price would have been had the contractor used a
compliant practice, the difference is decreased cost to the Government;
(4) For noncompliances that involve accumulating costs, determine
the increased or decreased cost to the Government for flexibly-priced
contracts and subcontracts as follows:
(i) When the costs that were accumulated under the noncompliant
practice exceed the costs that would have been accumulated using a
compliant practice (from the time the noncompliant practice was first
implemented until the date the noncompliant practice was replaced with
a compliant practice), the difference is increased cost to the
Government.
(ii) When the costs that were accumulated under the noncompliant
practice are less than the costs that would have been accumulated using
a compliant practice (from the time the noncompliant practice was first
implemented until the date the noncompliant practice was replaced with
a compliant practice) the difference is decreased cost to the
Government;
(5) Calculate the total increase or decrease in contract and
subcontract incentives, fees, and profits associated with the increased
or decreased costs to the Government in accordance with 48 CFR
9903.306(c). The associated increase or decrease is based on the
difference between the negotiated incentives, fees, and profits and the
amounts that would have been negotiated had the contractor used a
compliant practice; and
(6) Calculate the increased cost to the Government in the
aggregate.
(i) Remedies. If the contractor does not correct the noncompliance
or submit the proposal required in paragraph (d) or (f) of this section
within the specified time, or any extension granted by the CFAO, the
CFAO shall follow the procedures at 30.604(i).
[[Page 11758]]
30.606 Resolving cost impacts.
(a) General. (1) The CFAO shall coordinate with the affected
contracting officers before negotiating and resolving the cost impact
when the estimated cost impact on any of their contracts is at least
$100,000. However, the CFAO has the sole authority for negotiating and
resolving the cost impact.
(2) The CFAO may resolve a cost impact attributed to a change in
cost accounting practice or a noncompliance by adjusting a single
contract, several but not all contracts, all contracts, or any other
suitable method.
(3) In resolving the cost impact, the CFAO--
(i) Shall not combine the cost impacts of any of the following:
(A) A required change and a unilateral change.
(B) A required change and a noncompliance.
(C) A desirable change and a unilateral change.
(D) A desirable change and a noncompliance.
(ii) Shall not combine the cost impacts of any of the following
unless all of the cost impacts are increased costs to Government:
(A) One or more unilateral changes.
(B) One or more noncompliances.
(C) Unilateral changes and noncompliances; and
(iii) May consider the cost impacts of a unilateral change
affecting two or more segments to be a single change if--
(A) The change affects the flow of costs between segments; or
(B) Implements a common cost accounting practice for two or more
segments.
(4) For desirable changes, the CFAO should consider the estimated
cost impact of associated management actions on contract costs in
resolving the cost impact.
(b) Negotiations. The CFAO shall--
(1) Negotiate and resolve the cost impact on behalf of all
Government agencies; and
(2) At the conclusion of negotiations, prepare a negotiation
memorandum and send copies to the auditor and affected contracting
officers.
(c) Contract adjustments. (1) The CFAO may adjust some or all
contracts with a material cost impact, subject to the provisions in
paragraphs (c)(2) through (c)(6) of this section.
(2) In selecting the contract or contracts to be adjusted, the CFAO
should assure, to the maximum extent practical and subject to the
provisions in paragraphs (c)(3) through (c)(6) of this section, that
the adjustments reflect a pro rata share of the cost impact based on
the ratio of the cost impact of each Executive agency to the total cost
impact.
(3) For unilateral changes and noncompliances, the CFAO shall--
(i) To the maximum extent practical, not adjust the price upward
for fixed-price contracts;
(ii) If contract adjustments are made, preclude payment of
aggregate increased costs by taking one or both of the following
actions:
(A) Reduce the contract price on fixed-price contracts.
(B) Disallow costs on flexibly-priced contracts; and
(iii) The CFAO may, in consultation with the affected contracting
officers, increase or decrease individual contract prices, including
contract cost ceilings or target costs on flexibly-priced contracts. In
such cases, the CFAO shall limit any upward contract price adjustments
on affected contracts to the amount of downward price adjustments to
other affected contracts, i.e., the aggregate price of all contracts
affected by a unilateral change shall not be increased (48 CFR
9903.201-6(b)).
(4) For noncompliances that involve estimating costs, the CFAO--
(i) Shall, to the extent practical, not adjust the price upward for
fixed-price contracts;
(ii) Shall, if contract adjustments are made, preclude payment of
aggregate increased costs by reducing the contract price on fixed-price
contracts;
(iii) May, in consultation with the affected contracting officers,
increase or decrease individual contract prices, including costs
ceilings or target costs on flexibly-priced contracts. In such cases,
the CFAO shall limit any upward contract price adjustments to affected
contracts to the amount of downward price adjustments to other affected
contracts, i.e., the aggregate price of all contracts affected by a
noncompliance that involves estimating costs shall not be increased (48
CFR 9903.201-6(d));
(iv) Shall require the contractor to correct the noncompliance,
i.e., ensure that compliant cost accounting practices will now be
utilized to estimate proposed contract costs; and
(v) Shall require the contractor to adjust any invoices that were
paid based on noncompliant contract prices to reflect the adjusted
contract prices, after any contract price adjustments are made to
resolve the noncompliance.
(5) For noncompliances that involve cost accumulation, the CFAO--
(i) Shall require the contractor to--
(A) Correct noncompliant contract cost accumulations in the
contractor's cost accounting records for affected contracts to reflect
compliant contract cost accumulations; and
(B) Adjust interim payment requests (public vouchers and/or
progress payments) and final vouchers to reflect the difference between
the costs paid using the noncompliant practice and the costs that
should have been paid using the compliant practice; or
(ii) Shall adjust contract prices. In adjusting contract prices,
the CFAO shall preclude payment of aggregate increased costs by
disallowing costs on flexibly-priced contracts.
(A) The CFAO may, in consultation with the affected contracting
officers, increase or decrease individual contract prices, including
costs ceilings or target costs on flexibly-priced contracts. In such
cases, the CFAO shall limit any upward contract price adjustments to
affected contracts to the amount of downward price adjustments to other
affected contracts, i.e., the aggregate price of all contracts affected
by a noncompliance that involves cost accumulation shall not be
increased (48 CFR 9903.201-6(d)).
(B) Shall require the contractor to--
(1) Correct contract cost accumulations in the contractor's cost
accounting records to reflect the contract price adjustments; and
(2) Adjust interim payment requests (public vouchers and/or
progress payments) and final vouchers to reflect the contract price
adjustments.
(6) When contract adjustments are made, the CFAO shall--
(i) Execute the bilateral modifications if the CFAO and contractor
agree on the amount of the cost impact and the adjustments (see
42.302(a)(11)(iv)); or
(ii) When the CFAO and contractor do not agree on the amount of the
cost impact or the contract adjustments, issue a final decision in
accordance with 33.211 and unilaterally adjust the contract(s).
(d) Alternate methods. (1) The CFAO may use an alternate method
instead of adjusting contracts to resolve the cost impact, provided the
Government will not pay more, in the aggregate, than would be paid if
the CFAO did not use the alternate method and the contracting parties
agree on the use of that alternate method.
(2) The CFAO may not use an alternate method for contracts when
application of the alternate method to contracts would result in--
(i) An under recovery of monies by the Government (e.g., due to
cost overruns); or
(ii) Distortions of incentive provisions and relationships between
target costs, ceiling costs, and actual costs for incentive type
contracts.
[[Page 11759]]
(3) When using an alternate method that excludes the costs from an
indirect cost pool, the CFAO shall--
(i) Apply such exclusion only to the determination of final
indirect cost rates (see 42.705); and
(ii) Adjust the exclusion to reflect the Government participation
rate for flexibly-priced contracts and subcontracts. For example, if
there are aggregate increased costs to the Government of $100,000, and
the indirect cost pool where the adjustment is to be effected has a
Government participation rate of 50 percent for flexibly-priced
contracts and subcontracts, the contractor shall exclude $200,000 from
the indirect cost pool ($100,000/50% = $200,000).
30.607 Subcontract administration.
When a negotiated CAS price adjustment or a determination of
noncompliance is required at the subcontract level, the CFAO for the
subcontractor shall furnish a copy of the negotiation memorandum or the
determination to the CFAO for the contractor of the next higher-tier
subcontractor. The CFAO of the contractor or the next higher-tier
subcontractor shall not change the determination of the CFAO for the
lower-tier subcontractor. If the subcontractor refuses to submit a GDM
or DCI proposal, remedies are made at the prime contractor level.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
8. Revise section 52.230-6 to read as follows:
52.230-6 Administration of Cost Accounting Standards.
As prescribed in 30.201-4(d)(1), insert the following clause:
Administration of Cost Accounting Standards (April 2005)
For the purpose of administering the Cost Accounting Standards
(CAS) requirements under this contract, the Contractor shall take
the steps outlined in paragraphs (b) through (i) and (k) through (n)
of this clause:
(a) Definitions. As used in this clause--
Affected CAS-covered contract or subcontract means a contract or
subcontract subject to CAS rules and regulations for which a
Contractor or subcontractor--
(1) Used one cost accounting practice to estimate costs and a
changed cost accounting practice to accumulate and report costs
under the contract or subcontract; or
(2) Used a noncompliant practice for purposes of estimating or
accumulating and reporting costs under the contract or subcontract.
Cognizant Federal agency official (CFAO) means the Contracting
Officer assigned by the cognizant Federal agency to administer the
CAS.
Desirable change means a compliant change to a Contractor's
established or disclosed cost accounting practices that the CFAO
finds is desirable and not detrimental to the Government and is,
therefore, not subject to the no increased cost prohibition
provisions of CAS-covered contracts and subcontracts affected by the
change.
Fixed-price contracts and subcontracts means--
(1) Fixed-price contracts and subcontracts described at FAR
16.202, 16.203, (except when price adjustments are based on actual
costs of labor or material, described at 16.203-1(a)(2)), and
16.207;
(2) Fixed-price incentive contracts and subcontracts where the
price is not adjusted based on actual costs incurred (FAR Subpart
16.4);
(3) Orders issued under indefinite-delivery contracts and
subcontracts where final payment is not based on actual costs
incurred (FAR Subpart 16.5); and
(4) The fixed-hourly rate portion of time-and-materials and
labor-hours contracts and subcontracts (FAR Subpart 16.6).
Flexibly-priced contracts and subcontracts means--
(1) Fixed-price contracts and subcontracts described 16.203-
1(a)(2) at FAR 16.204, 16.205, and 16.206;
(2) Cost-reimbursement contracts and subcontracts (FAR Subpart
16.3);
(3) Incentive contracts and subcontracts where the price may be
adjusted based on actual costs incurred (FAR Subpart 16.4);
(4) Orders issued under indefinite-delivery contracts and
subcontracts where final payment is based on actual costs incurred
(FAR Subpart 16.5); and
(5) The materials portion of time-and-materials contracts and
subcontracts (FAR Subpart 16.6).
Noncompliance means a failure in estimating, accumulating, or
reporting costs to--
(1) Comply with applicable CAS; or
(2) Consistently follow disclosed or established cost accounting
practices.
Required change means--
(1) A change in cost accounting practice that a Contractor is
required to make in order to comply with a CAS, or a modification or
interpretation thereof, that subsequently becomes applicable to
existing CAS-covered contracts or subcontracts due to the receipt of
another CAS-covered contract or subcontract; or
(2) A prospective change to a disclosed or established cost
accounting practice when the CFAO determines that the former
practice was in compliance with applicable CAS and the change is
necessary for the Contractor to remain in compliance.
Unilateral change means a change in cost accounting practice
from one compliant practice to another compliant practice that a
Contractor with a CAS-covered contract(s) or subcontract(s) elects
to make that has not been deemed a desirable change by the CFAO and
for which the Government will pay no aggregate increased costs.
(b) Submit to the CFAO a description of any cost accounting
practice change as outlined in paragraphs (b)(1) through (3) of this
clause (including revisions to the Disclosure Statement, if
applicable), and any written statement that the cost impact of the
change is immaterial. If a change in cost accounting practice is
implemented without submitting the notice required by this
paragraph, the CFAO may determine the change to be a failure to
follow paragraph (a)(2) of the clause at FAR 52.230-2, Cost
Accounting Standards; paragraph (a)(4) of the clause at FAR 52.230-
3, Disclosure and Consistency of Cost Accounting Practices; or
paragraph (a)(2) of the clause at FAR 52.230-5, Cost Accounting
Standards--Educational Institution.
(1) When a description has been submitted for a change in cost
accounting practice that is dependent on a contact award and that
contract is subsequently awarded, notify the CFAO within 15 days
after such award.
(2) For any change in cost accounting practice not covered by
(b)(1) of this clause that is required in accordance with paragraphs
(a)(3) and (a)(4)(i) of the clause at FAR 52.230-2; or paragraphs
(a)(3), (a)(4)(i), or (a)(4)(iv) of the clause at FAR 52.230-5;
submit a description of the change to the CFAO not less than 60 days
(or such other date as may be mutually agreed to by the CFAO and the
Contractor) before implementation of the change.
(3) For any change in cost accounting practices proposed in
accordance with paragraph (a)(4)(ii) or (iii) of the clauses at FAR
52.230-2 and FAR 52.230-5; or with paragraph (a)(3) of the clause at
FAR 52.230-3, submit a description of the change not less than 60
days (or such other date as may be mutually agreed to by the CFAO
and the Contractor) before implementation of the change. If the
change includes a proposed retroactive date submit supporting
rationale.
(4) Submit a description of the change necessary to correct a
failure to comply with an applicable CAS or to follow a disclosed
practice (as contemplated by paragraph (a)(5) of the clause at FAR
52.230-2 and FAR 52.230-5; or by paragraph (a)(4) of the clause at
FAR 52.230-3)--
(i) Within 60 days (or such other date as may be mutually agreed
to by the CFAO and the Contractor) after the date of agreement with
the CFAO that there is a noncompliance; or
(ii) In the event of Contractor disagreement, within 60 days
after the CFAO notifies the Contractor of the determination of
noncompliance.
(c) When requested by the CFAO, submit on or before a date
specified by the CFAO--
(1) A general dollar magnitude (GDM) proposal in accordance with
paragraph (d) or (g) of this clause. The Contractor may submit a
detailed cost-impact (DCI) proposal in lieu of the requested GDM
proposal provided the DCI proposal is in accordance with paragraph
(e) or (h) of this clause;
(2) A detailed cost-impact (DCI) proposal in accordance with
paragraph (e) or (h) of this clause;
(3) For any request for a desirable change that is based on the
criteria in FAR 30.603-2(b)(3)(ii), the data necessary to
demonstrate the required cost savings; and
(4) For any request for a desirable change that is based on
criteria other than that in
[[Page 11760]]
FAR 30.603-2(b)(3)(ii), a GDM proposal and any other data necessary
for the CFAO to determine if the change is a desirable change.
(d) For any change in cost accounting practice subject to
paragraph (b)(1), (b)(2), or (b)(3) of this clause, the GDM proposal
shall--
(1) Calculate the cost impact in accordance with paragraph (f)
of this clause;
(2) Use one or more of the following methods to determine the
increase or decrease in cost accumulations:
(i) A representative sample of affected CAS-covered contracts
and subcontracts.
(ii) The change in indirect rates multiplied by the total
estimated base computed for each of the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(iii) Any other method that provides a reasonable approximation
of the total increase or decrease in cost accumulations for all
affected fixed-price and flexibly-priced contracts and subcontracts;
(3) Use a format acceptable to the CFAO but, as a minimum,
include the following data:
(i) The estimated increase or decrease in cost accumulations by
Executive agency, including any impact the change may have on
contract and subcontract incentives, fees, and profits, for each of
the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(ii) For unilateral changes, the increased or decreased costs to
the Government for each of the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts; and
(4) When requested by the CFAO, identify all affected CAS-
covered contracts and subcontracts.
(e) For any change in cost accounting practice subject to
paragraph (b)(1), (b)(2), or (b)(3) of this clause, the DCI proposal
shall--
(1) Show the calculation of the cost impact in accordance with
paragraph (f) of this clause;
(2) Show the estimated increase or decrease in cost
accumulations for each affected CAS-covered contract and subcontract
unless the CFAO and Contractor agree to include--
(i) Only those affected CAS-covered contracts and subcontracts
having an estimate to complete exceeding a specified amount; and
(ii) An estimate of the total increase or decrease in cost
accumulations for all affected CAS-covered contracts and
subcontracts, using the results in paragraph (e)(2)(i) of this
clause;
(3) Use a format acceptable to the CFAO but, as a minimum,
include the information in paragraph (d)(3) of this clause; and
(4) When requested by the CFAO, identify all affected CAS-
covered contracts and subcontracts.
(f) For GDM and DCI proposals that are subject to the
requirements of paragraph (d) or (e) of this clause, calculate the
cost impact as follows:
(1) The cost impact calculation shall include all affected CAS-
covered contracts and subcontracts regardless of their status (i.e.,
open or closed) or the fiscal year in which the costs were incurred
(i.e., whether or not the final indirect rates have been
established).
(2) For unilateral changes--
(i) Determine the increased or decreased cost to the Government
for flexibly-priced contracts and subcontracts as follows:
(A) When the estimated cost to complete using the changed
practice exceeds the estimated cost to complete using the current
practice, the difference is increased cost to the Government.
(B) When the estimated cost to complete using the changed
practice is less than the estimated cost to complete using the
current practice, the difference is decreased cost to the
Government;
(ii) Determine the increased or decreased cost to the Government
for fixed-priced contracts and subcontracts as follows:
(A) When the estimated cost to complete using the changed
practice is less than the estimated cost to complete using the
current practice, the difference is increased cost to the
Government.
(B) When the estimated cost to complete using the changed
practice exceeds the estimated cost to complete using the current
practice, the difference is decreased cost to the Government;
(iii) Calculate the total increase or decrease in contract and
subcontract incentives, fees, and profits associated with the
increased or decreased costs to the Government in accordance with 48
CFR 9903.306(c). The associated increase or decrease is based on the
difference between the negotiated incentives, fees, and profits and
the amounts that would have been negotiated had the cost impact been
known at the time the contracts and subcontracts were negotiated;
and
(iv) Calculate the increased cost to the Government in the
aggregate.
(3) For equitable adjustments for required or desirable
changes--
(i) Estimated increased cost accumulations are the basis for
increasing contract prices, target prices and cost ceilings; and
(ii) Estimated decreased cost accumulations are the basis for
decreasing contract prices, target prices and cost ceilings.
(g) For any noncompliant cost accounting practice subject to
paragraph (b)(4) of this clause, prepare the GDM proposal as
follows:
(1) Calculate the cost impact in accordance with paragraph (i)
of this clause.
(2) Use one or more of the following methods to determine the
increase or decrease in contract and subcontract prices or cost
accumulations, as applicable:
(i) A representative sample of affected CAS-covered contracts
and subcontracts.
(ii) When the noncompliance involves cost accumulation the
change in indirect rates multiplied by the applicable base for only
flexibly-priced contracts and subcontracts.
(iii) Any other method that provides a reasonable approximation
of the total increase or decrease.
(3) Use a format acceptable to the CFAO but, as a minimum,
include the following data:
(i) The total increase or decrease in contract and subcontract
price and cost accumulations, as applicable, by Executive agency,
including any impact the noncompliance may have on contract and
subcontract incentives, fees, and profits, for each of the following
groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(ii) The increased or decreased cost to the Government for each
of the following groups:
(A) Fixed-price contracts and subcontracts.
(B) Flexibly-priced contracts and subcontracts.
(iii) The total overpayments and underpayments made by the
Government during the period of noncompliance.
(4) When requested by the CFAO, identify all CAS-covered
contracts and subcontracts.
(h) For any noncompliant practice subject to paragraph (b)(4) of
this clause, prepare the DCI proposal as follows:
(1) Calculate the cost impact in accordance with paragraph (i)
of this clause.
(2) Show the increase or decrease in price and cost
accumulations for each affected CAS-covered contract and subcontract
unless the CFAO and Contractor agree to--
(i) Include only those affected CAS-covered contracts and
subcontracts having--
(A) Contract and subcontract values exceeding a specified amount
when the noncompliance involves estimating costs; and
(B) Incurred costs exceeding a specified amount when the
noncompliance involves accumulating costs; and
(ii) Estimate the total increase or decrease in price and cost
accumulations for all affected CAS-covered contracts and
subcontracts using the results in paragraph (h)(2)(i) of this
clause.
(3) Use a format acceptable to the CFAO that, as a minimum,
include the information in paragraph (g)(3) of this clause.
(4) When requested by the CFAO, identify all CAS-covered
contracts and subcontracts.
(i) For GDM and DCI proposals that are subject to the
requirements of paragraph (g) or (h) of this clause, calculate the
cost impact as follows:
(1) The cost impact calculation shall include all affected CAS-
covered contracts and subcontracts regardless of their status (i.e.,
open or closed) or the fiscal year in which the costs are incurred
(i.e., whether or not the final indirect rates have been
established).
(2) For noncompliances that involve estimating costs, determine
the increased or decreased cost to the Government for fixed-price
contracts and subcontracts as follows:
(i) When the negotiated contract or subcontract price exceeds
what the negotiated price would have been had the Contractor used a
compliant practice, the difference is increased cost to the
Government.
(ii) When the negotiated contract or subcontract price is less
than what the negotiated price would have been had the Contractor
used a compliant practice, the difference is decreased cost to the
Government.
(3) For noncompliances that involve accumulating costs,
determine the increased or decreased cost to the Government for
[[Page 11761]]
flexibly-priced contracts and subcontracts as follows:
(i) When the costs that were accumulated under the noncompliant
practice exceed the costs that would have been accumulated using a
compliant practice (from the time the noncompliant practice was
first implemented until the date the noncompliant practice was
replaced with a compliant practice), the difference is increased
cost to the Government.
(ii) When the costs that were accumulated under the noncompliant
practice are less than the costs that would have been accumulated
using a compliant practice (from the time the noncompliant practice
was first implemented until the date the noncompliant practice was
replaced with a compliant practice), the difference is decreased
cost to the Government.
(4) Calculate the total increase or decrease in contract and
subcontracts incentives, fees, and profits associated with the
increased or decreased cost to the Government in accordance with 48
CFR 9903.306(c). The associated increase or decrease is based on the
difference between the negotiated incentives, fees, and profits and
the amounts that would have been negotiated had the Contractor used
a compliant practice.
(5) Calculate the increased cost to the Government in the
aggregate.
(j) If the Contractor does not submit the information required
by paragraph (b) or (c) of this clause within the specified time, or
any extension granted by the CFAO, the CFAO may take one or both of
the following actions:
(1) Withhold an amount not to exceed 10 percent of each
subsequent amount payment to the Contractor's affected CAS-covered
contracts, (up to the estimated general dollar magnitude of the cost
impact), until such time as the Contractor provides the required
information to the CFAO.
(2) Issue a final decision in accordance with FAR 33.211 and
unilaterally adjust the contract(s) by the estimated amount of the
cost impact.
(k) Agree to--
(1) Contract modifications to reflect adjustments required in
accordance with paragraph (a)(4)(ii) or (a)(5) of the clauses at FAR
52.230-2 and 52.230-5; or with paragraph (a)(3)(i) or (a)(4) of the
clause at FAR 52.230-3; and
(2) Repay the Government for any aggregate increased cost paid
to the Contractor.
(l) For all subcontracts subject to the clauses at FAR 52.230-2,
52.230-3, or 52.230-5--
(1) So state in the body of the subcontract, in the letter of
award, or in both (do not use self-deleting clauses);
(2) Include the substance of this clause in all negotiated
subcontracts; and
(3) Within 30 days after award of the subcontract, submit the
following information to the Contractor's CFAO:
(i) Subcontractor's name and subcontract number.
(ii) Dollar amount and date of award.
(iii) Name of Contractor making the award.
(m) Notify the CFAO in writing of any adjustments required to
subcontracts under this contract and agree to an adjustment to this
contract price or estimated cost and fee. The Contractor shall--
(1) Provide this notice within 30 days after the Contractor
receives the proposed subcontract adjustments; and
(2) Include a proposal for adjusting the higher-tier subcontract
or the contract appropriately.
(n) For subcontracts containing the clause or substance of the
clause at FAR 52.230-2, FAR 52.230-3, or FAR 52.230-5, require the
subcontractor to comply with all Standards in effect on the date of
award or of final agreement on price, as shown on the
subcontractor's signed Certificate of Current Cost or Pricing Data,
whichever is earlier.
(End of clause)
0
9. Add section 52.230-7 to read as follows:
52.230-7 Proposal Disclosure--Cost Accounting Practice Changes.
As prescribed in 30.201-3(c), insert the following provision:
Proposal Disclosure--Cost Accounting Practice Changes (Apr 2005)
The offeror shall check ``yes'' below if the contract award will
result in a required or unilateral change in cost accounting
practice, including unilateral changes requested to be desirable
changes.
[ballot] Yes [ballot] No
If the offeror checked ``Yes'' above, the offeror shall--
(1) Prepare the price proposal in response to the solicitation
using the changed practice for the period of performance for which
the practice will be used; and
(2) Submit a description of the changed cost accounting practice
to the Contracting Officer and the Cognizant Federal Agency Official
as pricing support for the proposal.
(End of provision)
[FR Doc. 05-4093 Filed 3-8-05; 8:45 am]
BILLING CODE 6820-EP-P