[Code of Federal Regulations]

[Title 48, Volume 7]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR9903.306]



[Page 351-352]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

     CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL 

           PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET

 

PART 9903_CONTRACT COVERAGE--Table of Contents

 

                Subpart 9903.3_CAS Rules and Regulations

 

Sec. 9903.306  Interpretations.



    In determining amounts of increased costs in the clauses at 

9903.201-4(a), Cost Accounting Standards, 9903.201-4(c), Disclosure and 

Consistency of Cost Accounting Practices, and 9903.201-4(d), Consistency 

in Cost Accounting, the following considerations apply:

    (a) Increased costs shall be deemed to have resulted whenever the 

cost paid by the Government results from a change in a contractor's cost 

accounting practices or from failure to comply with applicable Cost 

Accounting Standards, and such cost is higher than it would have been 

had the practices not been changed or applicable Cost Accounting 

Standards complied with.

    (b) If the contractor under any fixed-price contract, including a 

firm fixed-price contract, fails during contract performance to follow 

its cost accounting practices or to comply with applicable Cost 

Accounting Standards, increased costs are measured 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 

determination of the contract price that would have been agreed to will 

be left to the contracting parties and will depend on the circumstances 

of each case.

    (c) The statutory requirement underlying this interpretation is that 

the United States not pay increased costs, including a profit enlarged 

beyond that in the contemplation of the parties to the contract when the 

contract costs, price, or profit is negotiated, by reason of a 

contractor's failure to use applicable Cost Accounting Standards, or to 

follow consistently its cost accounting practices. In making price 

adjustments under the Cost Accounting Standards clause at 9903.201-4(a) 

in fixed price or cost reimbursement incentive contracts, or contracts 

providing for prospective or retroactive price redetermination, the 

Federal agency shall apply this requirement appropriately in the 

circumstances.

    (d) The contractor and the contracting officer may enter into an 

agreement as contemplated by subdivision (a)(4)(ii) of the Cost 

Accounting Standards clause at 9903.201-4(a), covering a change in 

practice proposed by the Government or the contractor for all of the 

contractor's contracts for which the contracting officer is responsible, 

provided that the agreement does not permit any increase in the cost 

paid by the Government. Such agreement may be made final and binding, 

notwithstanding the fact that experience may subsequently establish that 

the actual impact of the change differed from that agreed to.

    (e) An adjustment to the contract price or of cost allowances 

pursuant to the Cost Accounting Standards clause at 9903.201-4(a) may 

not be required when a change in cost accounting practices or a failure 

to follow Standards or cost accounting practices is estimated to result 

in increased costs being paid under a particular contract by the United 

States. This circumstance may arise when a contractor is performing two 

or more covered contracts, and the change or failure affects all such 

contracts. The change or failure may increase the cost paid under one or 

more of the contracts, while decreasing the



[[Page 352]]



cost paid under one or more of the contracts. In such case, the 

Government will not require price adjustment for any increased costs 

paid by the United States, so long as the cost decreases under one or 

more contracts are at least equal to the increased cost under the other 

affected contracts, provided that the contractor and the affected 

contracting officers agree on the method by which the price adjustments 

are to be made for all affected contracts. In this situation, the 

contracting agencies would, of course, require an adjustment of the 

contract price or cost allowances, as appropriate, to the extent that 

the increases under certain contracts were not offset by the decreases 

under the remaining contracts.

    (f) Whether cost impact is recognized by modifying a single 

contract, several but not all contracts, or all contracts, or any other 

suitable technique, is a contract administration matter. The Cost 

Accounting Standards rules 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.