[Federal Register Volume 72, Number 113 (Wednesday, June 13, 2007)]
[Rules and Regulations]
[Pages 32546-32549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-11325]
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OFFICE OF MANAGEMENT AND BUDGET
Office of Federal Procurement Policy
48 CFR Part 9903
Cost Accounting Standards Board (CAS); Applicability of Cost
Accounting Standards Coverage
AGENCY: Cost Accounting Standards Board, Office of Federal Procurement
Policy, OMB.
ACTION: Final rule.
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SUMMARY: The Office of Federal Procurement Policy, Cost Accounting
Standards (CAS) Board, has adopted, without change from the interim
rule, a final rule revising the criteria applicable to United Kingdom
(UK) contractors for filing a Disclosure Statement, Form No. CASB DS-1.
This rulemaking is authorized pursuant to Section 26 of the Office of
Federal Procurement Policy Act.
EFFECTIVE DATE: June 13, 2007.
FOR FURTHER INFORMATION CONTACT: Laura Auletta, Manager, Cost
Accounting Standards Board, 725 17th Street, NW., Room 9013,
Washington, DC 20503 (telephone: 202-395-3256).
SUPPLEMENTARY INFORMATION:
A. Background
On May 23, 2005, the Cost Accounting Standards Board published an
interim rule with request for comment (70 FR 29457) for the purpose of
revising the criteria applicable to United Kingdom (UK) contractors for
filing a Disclosure Statement, Form No. CASB DS-1. The interim rule was
adopted in order to comply with a specific request by the UK Ministry
of Defence (MOD) to simplify the compliance process with CAS Board
disclosure requirements for UK contractors.
Unlike certain other foreign contractors, UK contractors have been
required to file a CASB DS-1 in accordance with CAS regulations. The
MOD initially approached the Board with a request that UK contractors
be permitted to use the corresponding UK form ``Questionnaire on Method
of Allocation of Costs'' (QMAC), in lieu of the CASB DS-1. After a
review of the content of the QMAC, the UK and U.S. representatives
agreed that it did not have the same scope as the CASB DS-1. Therefore,
it was agreed that to cover the gap in the coverage a ``Supplemental
QMAC'' was needed.
Based upon the Board's approval of a Supplemental QMAC that is
acceptable to the MOD, the MOD requested that the CAS Board allow UK
contractors to submit their basic QMAC, together with the Supplemental
QMAC, in lieu of the DS-1. At its meeting on February 23, 2005, the
Board agreed to change the CAS requirements so that UK contractors with
CAS-covered contracts may file the UK QMAC together with its Supplement
in lieu of the CASB DS-1 required of U.S. contractors. In conjunction
with this change, the Board also agreed to eliminate the specific
paragraph addressing UK contractors at 9903.201-1(b)(12). As a result,
UK contractors are subject to the requirements of 9903.201-1(b)(4),
i.e., contracts and subcontracts with UK contractors are exempt from
CAS ``insofar as the requirements of CAS other than 9904.401 and
9904.402 are concerned.'' The May, 2005 interim rule reflected these
Board approved revisions.
B. Public Comments
The Board received one set of public comments in response to the
Interim Rule.
1. CAS Coverage for UK Contractors
Comment: The commenter requested confirmation that the rule
requires that UK contractors comply only with CAS 401 and 402.
Response: The language in the final rule requires that all UK
contractors performing U.S. Government contracts and not otherwise
exempt under 48 CFR
[[Page 32547]]
9903.201-1 will be required to comply only with CAS 401 and 402 in
accordance with 48 CFR 9903.201-1(b)(4).
2. Extent of Disclosure Requirement
Comment: The commenter expressed concern that UK contractors are
subject to more extensive disclosure requirements than other countries
listed in 48 CFR 9903.201-4(e) by virtue of the QMAC Supplement.
Response: The Board believes that the disclosure requirements for
UK contractors provide the information necessary for the UK MOD to
determine whether such contractors are complying with the provisions of
CAS 401 and 402. The MOD initially requested that its contractors be
permitted to file only the QMAC. However, as described in the
Background section above, the Board determined that the QMAC, by
itself, did not provide sufficient information about the accounting
practices of UK contractors. Therefore, working jointly with the MOD,
the QMAC supplement was developed to minimize duplicate disclosures
while providing the additional information needed to cover the gap
between the QMAC and CASB DS-1.
C. Paperwork Reduction Act
The Paperwork Reduction Act, Public Law 96-511, does not apply to
this rulemaking, because this rule imposes no paperwork burden on
offerors, affected contractors and subcontractors, or members of the
public which requires the approval of OMB under 44 U.S.C. 3501, et seq.
D. Executive Order 12866 and the Regulatory Flexibility Act
The Board certifies that this rule will not have a significant
effect on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act, 5. U.S.C. 601, et seq., because small
businesses are exempt from the application of the Cost Accounting
Standards.
List of Subjects in 48 CFR Part 9903
Accounting, Government procurement.
Paul A. Denett,
Administrator, Office of Federal Procurement Policy.
0
For the reasons set forth in this preamble, Chapter 99 of title 48 of
the Code of Federal Regulations is amended as set forth below. Please
note that, in publishing the interim rule, the Code of Federal
Regulations inadvertently removed and reserved paragraph (d) of the
first clause under Section 9903.201-4 entitled ``Cost Accounting
Standards (June 2000)'' instead of paragraph (d) of the section. This
final rule corrects that error and, for clarity, restates the section
in its entirety. Therefore, the interim final rule published at 70 FR
29457, May 23, 2005, is adopted as final with the following changes.
PART 9903--CONTRACT COVERAGE
0
1. The authority citation for part 9903 continues to read as follows:
Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.
Subpart 9903.2--CAS Program Requirements
0
2. Section 9903.201-4 is revised to read as follows:
9903.201-4 Contract clauses.
(a) Cost Accounting Standards. (1) The contracting officer shall
insert the clause set forth below, Cost Accounting Standards, in
negotiated contracts, unless the contract is exempted (see 9903.201-1),
the contract is subject to modified coverage (see 9903.201-2), or the
clause prescribed in paragraph (e) of this section is used.
(2) The clause below requires the contractor to comply with all CAS
specified in part 9904, to disclose actual cost accounting practices
(applicable to CAS-covered contracts only), and to follow disclosed and
established cost accounting practices consistently.
Cost Accounting Standards (June 2000)
(a) Unless the contract is exempt under 9903.201-1 and 9903.201-
2, the provisions of 9903 are incorporated herein by reference and
the Contractor in connection with this contract, shall--
(1) (CAS-covered Contracts Only) By submission of a Disclosure
Statement, disclosed in writing the Contractor's cost accounting
practices as required by 9903.202-1 through 9903.202-5 including
methods of distinguishing direct costs from indirect costs and the
basis used for allocating indirect costs. The practices disclosed
for this contract shall be the same as the practices currently
disclosed and applied on all other contracts and subcontracts being
performed by the Contractor and which contain a Cost Accounting
Standards (CAS) clause. If the Contractor has notified the
Contracting Officer that the Disclosure Statement contains trade
secrets, and commercial or financial information which is privileged
and confidential, the Disclosure Statement shall be protected and
shall not be released outside of the Government.
(2) Follow consistently the Contractor's cost accounting
practices in accumulating and reporting contract performance cost
data concerning this contract. If any change in cost accounting
practices is made for the purposes of any contract or subcontract
subject to CAS requirements, the change must be applied
prospectively to this contract and the Disclosure Statement must be
amended accordingly. If the contract price or cost allowance of this
contract is affected by such changes, adjustment shall be made in
accordance with subparagraph (a)(4) or (a)(5) of this clause, as
appropriate.
(3) Comply with all CAS, including any modifications and
interpretations indicated thereto contained in part 9904, in effect
on the date of award of this contract or, if the Contractor has
submitted cost or pricing data, on the date of final agreement on
price as shown on the Contractor's signed certificate of current
cost or pricing data. The Contractor shall also comply with any CAS
(or modifications to CAS) which hereafter become applicable to a
contract or subcontract of the Contractor. Such compliance shall be
required prospectively from the date of applicability of such
contract or subcontract.
(4)(i) Agree to an equitable adjustment as provided in the
Changes clause of this contract if the contract cost is affected by
a change which, pursuant to subparagraph (a)(3) of this clause, the
Contractor is required to make to the Contractor's established cost
accounting practices.
(ii) Negotiate with the Contracting Officer to determine the
terms and conditions under which a change may be made to a cost
accounting practice, other than a change made under other provisions
of subparagraph (a)(4) of this clause; provided that no agreement
may be made under this provision that will increase costs paid by
the United States.
(iii) When the parties agree to a change to a cost accounting
practice, other than a change under subdivision (a)(4)(i) of this
clause, negotiate an equitable adjustment as provided in the Changes
clause of this contract.
(5) 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. In no case shall the Government recover costs greater
than the increased cost to the Government, in the aggregate, on the
relevant contracts subject to the price adjustment, unless the
Contractor made a change in its cost accounting practices of which
it was aware or should have been aware at the time of price
negotiations and which it failed to disclose to the Government.
(b) If the parties fail to agree whether the Contractor or a
subcontractor has complied with an applicable CAS in part 9904 or a
CAS rule or regulation in part 9903 and as to any cost adjustment
demanded by the United States, such failure to agree will
[[Page 32548]]
constitute a dispute under the Contract Disputes Act (41 U.S.C.
601).
(c) The Contractor shall permit any authorized representatives
of the Government to examine and make copies of any documents,
papers, or records relating to compliance with the requirements of
this clause.
(d) The contractor shall include in all negotiated subcontracts
which the Contractor enters into, the substance of this clause,
except paragraph (b), and shall require such inclusion in all other
subcontracts, of any tier, including the obligation to comply with
all CAS in effect on the subcontractor's award date or if the
subcontractor has submitted cost or pricing data, on the date of
final agreement on price as shown on the subcontractor's signed
Certificate of Current Cost or Pricing Data. If the subcontract is
awarded to a business unit which pursuant to 9903.201-2 is subject
to other types of CAS coverage, the substance of the applicable
clause set forth in 9903.201-4 shall be inserted. This requirement
shall apply only to negotiated subcontracts in excess of $500,000,
except that the requirement shall not apply to negotiated
subcontracts otherwise exempt from the requirement to include a CAS
clause as specified in 9903.201-1.
(End of clause)
(b) [Reserved].
(c) Disclosure and Consistency of Cost Accounting Practices. (1)
The contracting officer shall insert the clause set forth below,
Disclosure and Consistency of Cost Accounting Practices, in negotiated
contracts when the contract amount is over $500,000 but less than $50
million, and the offeror certifies it is eligible for and elects to use
modified CAS coverage (see 9903.201-2, unless the clause prescribed in
paragraph (d) of this subsection is used).
(2) The clause below requires the contractor to comply with CAS
9904.401, 9904.402, 9904.405, and 9904.406, to disclose (if it meets
certain requirements) actual cost accounting practices, and to follow
consistently disclosed and established cost accounting practices.
Disclosure and Consistency of Cost Accounting Practices (June 2000)
(a) The Contractor, in connection with this contract, shall--
(1) Comply with the requirements of 9904.401, Consistency in
Estimating, Accumulating, and Reporting Costs; 9904.402, Consistency
in Allocating Costs Incurred for the Same Purpose; 9904.405,
Accounting for Unallowable Costs; and 9904.406, Cost Accounting
Standard--Cost Accounting Period, in effect on the date of award of
this contract, as indicated in part 9904.
(2) (CAS-covered Contracts Only) If it is a business unit of a
company required to submit a Disclosure Statement, disclose in
writing its cost accounting practices as required by 9903.202-1
through 9903.202-5. If the Contractor has notified the Contracting
Officer that the Disclosure Statement contains trade secrets and
commercial or financial information which is privileged and
confidential, the Disclosure Statement shall be protected and shall
not be released outside of the Government.
(3)(i) Follow consistently the Contractor's cost accounting
practices. A change to such practices may be proposed, however, by
either the Government or the Contractor, and the Contractor agrees
to negotiate with the Contracting Officer the terms and conditions
under which a change may be made. After the terms and conditions
under which the change is to be made have been agreed to, the change
must be applied prospectively to this contract, and the Disclosure
Statement, if affected, must be amended accordingly.
(ii) The Contractor shall, when the parties agree to a change to
a cost accounting practice and the Contracting Officer has made the
finding required in 9903.201-6(c) that the change is desirable and
not detrimental to the interests of the Government, negotiate an
equitable adjustment as provided in the Changes clause of this
contract. In the absence of the required finding, no agreement may
be made under this contract clause that will increase costs paid by
the United States.
(4) Agree to an adjustment of the contract price or cost
allowance, as appropriate, if the Contractor or a subcontractor
fails to comply with the applicable CAS or to follow any cost
accounting practice, 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.
(b) If the parties fail to agree whether the Contractor has
complied with an applicable CAS rule, or regulation as specified in
parts 9903 and 9904 and as to any cost adjustment demanded by the
United States, such failure to agree will constitute a dispute under
the Contract Disputes Act (41 U.S.C. 601).
(c) The Contractor shall permit any authorized representatives
of the Government to examine and make copies of any documents,
papers, and records relating to compliance with the requirements of
this clause.
(d) The Contractor shall include in all negotiated subcontracts,
which the Contractor enters into, the substance of this clause,
except paragraph (b), and shall require such inclusion in all other
subcontracts of any tier, except that--
(1) If the subcontract is awarded to a business unit which
pursuant to 9903.201-2 is subject to other types of CAS coverage,
the substance of the applicable clause set forth in 9903.201-4 shall
be inserted.
(2) This requirement shall apply only to negotiated subcontracts
in excess of $500,000.
(3) The requirement shall not apply to negotiated subcontracts
otherwise exempt from the requirement to include a CAS clause as
specified in 9903.201-1.
(End of clause)
(d) [Reserved].
(e) Cost Accounting Standards--Educational Institutions. (1) The
contracting officer shall insert the clause set forth below, Cost
Accounting Standards--Educational Institution, in negotiated contracts
awarded to educational institutions, unless the contract is exempted
(see 9903.201-1), the contract is to be performed by an FFRDC (see
9903.201-2(c)(5)), or the provision at 9903.201-2(c)(6) applies.
(2) The clause below requires the educational institution to comply
with all CAS specified in part 9905, to disclose actual cost accounting
practices as required by 9903.202-1(f), and to follow disclosed and
established cost accounting practices consistently.
Cost Accounting Standards--Educational Institutions (June 2000)
(a) Unless the contract is exempt under 9903.201-1 and 9903.201-
2, the provisions of part 9903 are incorporated herein by reference
and the Contractor in connection with this contract, shall--
(1) (CAS-covered Contracts Only) If a business unit of an
educational institution required to submit a Disclosure Statement,
disclose in writing the Contractor's cost accounting practices as
required by 9903.202-1 through 9903.202-5 including methods of
distinguishing direct costs from indirect costs and the basis used
for accumulating and allocating indirect costs. The practices
disclosed for this contract shall be the same as the practices
currently disclosed and applied on all other contracts and
subcontracts being performed by the Contractor and which contain a
Cost Accounting Standards (CAS) clause. If the Contractor has
notified the Contracting Officer that the Disclosure Statement
contains trade secrets, and commercial or financial information
which is privileged and confidential, the Disclosure Statement shall
be protected and shall not be released outside of the Government.
(2) Follow consistently the Contractor's cost accounting
practices in accumulating and reporting contract performance cost
data concerning this contract. If any change in cost accounting
practices is made for the purposes of any contract or subcontract
subject to CAS requirements, the change must be applied
prospectively to this contract and the Disclosure Statement, if
required, must be amended accordingly. If an accounting principle
change mandated under Office of Management and Budget (OMB) Circular
A-21, Cost Principles for Educational Institutions, requires that a
change in the Contractor's cost accounting practices be made after
the date of this contract award, the change must be applied
prospectively to this contract and the Disclosure Statement, if
required, must be amended accordingly. If the contract price or cost
allowance of this contract is affected by
[[Page 32549]]
such changes, adjustment shall be made in accordance with
subparagraph (a)(4) or (a)(5) of this clause, as appropriate.
(3) Comply with all CAS, including any modifications and
interpretations indicated thereto contained in 48 CFR part 9905, in
effect on the date of award of this contract or, if the Contractor
has submitted cost or pricing data, on the date of final agreement
on price as shown on the Contractor's signed certificate of current
cost or pricing data. The Contractor shall also comply with any CAS
(or modifications to CAS) which hereafter become applicable to a
contract or subcontract of the Contractor. Such compliance shall be
required prospectively from the date of applicability to such
contract or subcontract.
(4)(i) Agree to an equitable adjustment as provided in the
Changes clause of this contract if the contract cost is affected by
a change which, pursuant to subparagraph (a)(3) of this clause, the
Contractor is required to make to the Contractor's established cost
accounting practices.
(ii) Negotiate with the Contracting Officer to determine the
terms and conditions under which a change may be made to a cost
accounting practice, other than a change made under other provisions
of subparagraph (a)(4) of this clause; provided that no agreement
may be made under this provision that will increase costs paid by
the United States.
(iii) When the parties agree to a change to a cost accounting
practice, other than a change under subdivision (a)(4)(i) or
(a)(4)(iv) of this clause, negotiate an equitable adjustment as
provided in the Changes clause of this contract.
(iv) Agree to an equitable adjustment as provided in the Changes
clause of this contract, if the contract cost is materially affected
by an OMB Circular A-21 accounting principle amendment which, on
becoming effective after the date of contract award, requires the
Contractor to make a change to the Contractor's established cost
accounting practices.
(5) 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. In no case shall the Government recover costs greater
than the increased cost to the Government, in the aggregate, on the
relevant contracts subject to the price adjustment, unless the
Contractor made a change in its cost accounting practices of which
it was aware or should have been aware at the time of price
negotiations and which it failed to disclose to the Government.
(b) If the parties fail to agree whether the Contractor or a
subcontractor has complied with an applicable CAS or a CAS rule or
regulation in 9903 and as to any cost adjustment demanded by the
United States, such failure to agree will constitute a dispute under
the Contract Disputes Act (41 U.S.C. 601).
(c) The Contractor shall permit any authorized representatives
of the Government to examine and make copies of any documents,
papers, or records relating to compliance with the requirements of
this clause.
(d) The Contractor shall include in all negotiated subcontracts
which the Contractor enters into, the substance of this clause,
except paragraph (b), and shall require such inclusion in all other
subcontracts, of any tier, including the obligation to comply with
all applicable CAS in effect on the subcontractor's award date or if
the subcontractor has submitted cost or pricing data, on the date of
final agreement on price as shown on the subcontractor's signed
Certificate of Current Cost or Pricing Data, except that--
(1) If the subcontract is awarded to a business unit which
pursuant to 9903.201-2 is subject to other types of CAS coverage,
the substance of the applicable clause set forth in 9903.201-4 shall
be inserted; and
(2) This requirement shall apply only to negotiated subcontracts
in excess of $500,000.
(3) The requirement shall not apply to negotiated subcontracts
otherwise exempt from the requirement to include a CAS clause as
specified in 9903.201-1.
(End of clause)
[FR Doc. E7-11325 Filed 6-12-07; 8:45 am]
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