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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: June 9, 2000

FROM: Barry McVay, CPCM

SUBJECT: Cost Accounting Standards Board (CASB); Applicability, Thresholds and Waiver of Cost Accounting Standards Coverage

SOURCE: Federal Register, June 9, 2000, Vol. 65, No. 112, page 36767

AGENCIES: Cost Accounting Standards Board (CASB), Office of Federal Procurement Policy (OFPP), Office of Management and Budget (OMB)

ACTION: Final Rule

SYNOPSIS: The CASB is finalizing, without change, the February 7, 2000, interim rule that revised the applicability, thresholds, and procedures for the application of the Cost Accounting Standards (CAS) to negotiated government contracts, as required by Section 802 of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65).

EDITOR'S NOTE: The CAS are Chapter 99 of Title 48 of the Code of Federal Regulations, and are included as an appendix to the paper-version of the Federal Acquisition Regulation (FAR) for information purposes. It is available on the Internet at http://www.arnet.gov/far/97/html/appendix.html.

For more on the interim rule, see the February 7, 2000, FEDERAL CONTRACTS DISPATCH "Cost Accounting Standards Board (CASB); Applicability, Thresholds and Waiver of Cost Accounting Standards Coverage."

On June 6, 2000, the FAR was revised to conform to the CASB interim rule, and the Defense FAR Supplement was revised to provide procedures for processing CAS waivers. See the June 6, 2000, FEDERAL CONTRACTS DISPATCHES "Federal Acquisition Circular (FAC) 97-18, Miscellaneous Amendments" and "Defense Federal Acquisition Regulation Supplement (DFARS); Waiver of Cost Accounting Standards (CAS)."

EFFECTIVE DATE: June 9, 2000.

FOR FURTHER INFORMATION CONTACT: Richard C. Loeb, Executive Secretary, Cost Accounting Standards Board, 202-395-3254.

SUPPLEMENTAL INFORMATION: Section 802, Streamlined Applicability of Cost Accounting Standards, directed that (1) firm-fixed-price contracts or subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data be exempt from CAS; (2) a contract or subcontract less than $7,500,000 if the segment of the contractor or subcontractor that will perform the work has not been awarded at least one contract or subcontract with a value of more than $7,500,000 that is covered by the CAS (the "trigger contract" concept -- previously, the "trigger" had been $1,000,000); and (3) that the threshold for full CAS coverage be increased from $25,000,000 to $50,000,000. Also, Section 802 authorized the head of an executive agency to waive CAS applicability for a contract or subcontract (1) that is less than $15,000,000 for commercial items and is not otherwise subject to the CAS, or (2) under exceptional circumstances when necessary to meet the needs of the agency.

On February 7, 2000, the CASB issued an interim rule implementing these changes effective April 7, 2000, and invited comments. Thirteen comments were received, but many of the comments addressed issues that were beyond the scope of the interim rule (such as the opinion that Section 802 provides too many opportunities for contractors to avoid CAS coverage, and the suggestion that additional CAS exemptions be granted). Of the comments that addressed the interim rule itself, none of them persuaded the CASB to make any revisions, so the CASB is finalizing the interim rule without change.

The following is a summary of the changes that are being finalized, all of which are in Part 9903, Contract Coverage, Subpart 9903.2, CAS Program Requirements:

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

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