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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: April 18, 2000

FROM: Barry McVay, CPCM

SUBJECT: Federal Acquisition Regulation (FAR); Cost Accounting Standards Administration

SOURCE: Federal Register, April 18, 2000, Vol. 65, No. 75, page 20853

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Proposed Rule

SYNOPSIS: It is proposed that the FAR (particularly FAR Subpart 30.6, CAS Administration) be revised to delineate 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.

EDITOR'S NOTE: The Cost Accounting Standards (CAS) are 19 standards which apply to large contractors performing large contracts. The CAS are in Chapter 99 of Title 48 of the Code of Federal Regulations (CFR).

The Cost Accounting Standards Board (CASB) has been working since 1995 on a rule that would address what happens when a contractor makes a voluntary change to its cost accounting practices, fails to comply with a CAS, or fails to consistently follow its established cost accounting practices (the most recent round of comments on the proposed rule was published on August 20, 1999). Among the big issues are what constitutes a "voluntary change", what does "fails to comply" mean, and what does "fails to consistently follow" mean. This proposed rule is not directly related to the CASB proposed rule. This proposed rule addresses the government's administrative process for making contract price and cost adjustments when a CAS-covered contractor changes a cost accounting practice or fails to comply with its disclosed cost accounting practices.

In a somewhat related action, the CASB did revise the applicability, thresholds, and procedures for the application of the CAS recently. For more on those changes, see the February 7, 2000, FEDERAL CONTRACTS DISPATCH "Cost Accounting Standards Board (CASB); Applicability, Thresholds and Waiver of Cost Accounting Standards Coverage."

DATES: Submit comments no later than June 19, 2000.

ADDRESSES: Submit comments General Services Administration, FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, or by e-mail to farcase.1999-025@gsa.gov. Cite FAR case 1999-025 in all correspondence related to this proposed rule.

FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson, 202-501-0692.

SUPPLEMENTAL INFORMATION: FAR Part 30, Cost Accounting Standards Administration, describes policies and procedures for applying the CASB rules and regulations to negotiated contracts and subcontracts that are not exempted by 48 CFR 9903.201-1, CAS Applicability (such as contracts awarded to small businesses, contracts for commercial items, competitive firm-fixed-price contracts awarded without cost or pricing data).

The CASB has found that the government does not implement in a uniform manner the administrative process for making contract price and cost adjustments resulting from contractor changes in a cost accounting practice, and that the procedures and processes are not widely understood or adequately documented.

This proposed rule would explain the cost-impact process that the government and contractor must follow when a contractor makes a compliant change to a cost accounting practice or follows a noncompliant practice. The rule should make the process easier to understand and reduce the administrative effort expended to resolve individual cases.

Among the most significant changes this proposed rule would make to the FAR are:

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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