[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Proposed Rules]
[Pages 53377-53378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21897]
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OFFICE OF MANAGEMENT AND BUDGET
Office of Federal Procurement Policy
48 CFR Part 9904
Cost Accounting Standards; Allocation of Home Office Expenses to
Segments
AGENCY: Office of Management and Budget (OMB), Office of Federal
Procurement Policy (OFPP), Cost Accounting Standards Board (Board).
ACTION: Notice of Discontinuation of Rulemaking.
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SUMMARY: The Office of Federal Procurement Policy (OFPP), Cost
Accounting Standards (CAS) Board, is providing public notification of
the decision to discontinue the rulemaking in the review of the CAS 403
thresholds at 48 CFR 9904.403-40(c)(2) that require use of the three
factor formula described at 48 CFR 9904.403-50(c)(1) for allocating
residual home office expenses.
FOR FURTHER INFORMATION CONTACT: Raymond J.M. Wong, Director, Cost
Accounting Standards Board (telephone: 202-395-6805; e-mail: [email protected]).
SUPPLEMENTARY INFORMATION:
A. Regulatory Process
Rules, Regulations and Standards issued by the Cost Accounting
Standards (Board) are codified at 48 CFR chapter 99. The Office of
Federal Procurement Policy Act, at 41 U.S.C. 1502(c) [formerly, 41
U.S.C. 422(g)], requires the Board, prior to the establishment of any
new or revised Cost Accounting Standard, to complete a prescribed
rulemaking process. The process generally consists of four steps.
The CAS Board has completed step one of the statutory rulemaking
process, which required the Board to consult with interested persons
concerning the advantages, disadvantages, and improvements anticipated
in the pricing and administration of Government contracts as a result
of the adoption of a proposed Standard. This notice announces the
discontinuation of the rulemaking after completing step one of the
four-step process in accordance with the requirements at 41 U.S.C.
1502(c).
B. Background and Summary
The CAS Board opened a review of the CAS 403 operating revenue
thresholds at the urging of interested parties, an industry group and a
Federal agency. They recommended revisions to the CAS operating revenue
thresholds for determining whether a contractor is
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required to use the three factor formula to allocate residual home
office expenses to the segments. To update the thresholds to reflect
the changed economic and business environment since they were initially
established, the parties took different approaches to revising the
thresholds. One party advocated that the operating revenue thresholds
be raised by 400 percent to reflect the changes in the consumer price
index (CPI) from 1973 to 2003. The other party urged the Board to
conduct a Staff Study, similar to that performed by the Board to
establish the current thresholds. On February 13, 2008, the CAS Board
published a Staff Discussion Paper (SDP) on the Allocation of Home
Office Expenses to Segments as the first step in its review to
determine whether the current CAS 403 thresholds should be revised (73
FR 8260).
C. Public Comments
Three respondents submitted comments in response to the SDP. Two
respondents supported a comprehensive study to determine the
appropriate operating revenue thresholds at 48 CFR 9904.403-40(c)(2)
for the application of the three factor formula described at 48 CFR
9904.403-50(c)(1), while another respondent supported adjusting the
current thresholds by the change in the CPI. The arguments for the
comprehensive study included the development of objective data to
understand the impact of adjusting the operating revenue thresholds
upon contractors subject to the three factor formula, and the
possibility to measure the relationship of residual expenses to
operating revenue for a representative contractor population. An
impediment to conducting the comprehensive study is the time and effort
required to compile and evaluate the data. In support of adjusting the
current operating revenue thresholds by the change in the CPI, a
respondent argued that the CPI is readily available and an independent,
objective measure, while the Staff Study will require significant time
and effort to accomplish without any certainty that the results would
materially differ or be demonstrably superior to a CPI indexing
approach. The other respondents noted that increasing the current
thresholds by the change in the CPI was arbitrary and would risk
exposing the acquisition community to the same underlying conditions
which caused the CAS Board to promulgate CAS 403 originally.
Response: The CAS Board noted the arguments provided by the
respondents.
D. Conclusion
After reviewing the comments and regulatory history of CAS 403, the
CAS Board believes that it would be prudent to discontinue the review
of the CAS 403 three factor formula operating revenue thresholds at
this time. No evidence has been presented to the Board that the current
thresholds are creating an inequity, or that adjusting the thresholds
would substantially change the outcome, i.e., the pool of contractors
required to use the three factor formula to allocate residual home
office expenses to the segments would not change significantly. The
Board will revisit the issue in the future if circumstances warrant
doing so.
Daniel I. Gordon,
Chair, Cost Accounting Standards Board.
[FR Doc. 2011-21897 Filed 8-25-11; 8:45 am]
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