Overview
FAR Part 30 prescribes the policies and procedures for administering Cost Accounting Standards (CAS) for negotiated government contracts and subcontracts. It ensures that contractors disclose their accounting practices in writing and follow them consistently to maintain transparency and prevent the government from paying increased costs due to accounting changes or noncompliances.
Key Rules
- Applicability: CAS applies to negotiated contracts and subcontracts exceeding certain dollar thresholds (linked to the Truth in Negotiations Act/TINA). It specifically excludes sealed bid contracts, small businesses, and commercial item acquisitions under certain conditions.
- Types of Coverage:
- Full Coverage: Requires compliance with all 19 Cost Accounting Standards.
- Modified Coverage: Requires compliance only with Standards 401, 402, 405, and 406 (applicable to contracts between $2.5 million and $50 million).
- Types of Accounting Changes:
- Required Change: Necessary to comply with a new standard or to remain in compliance.
- Unilateral Change: A change from one compliant practice to another initiated by the contractor. The Government will pay no aggregate increased costs resulting from a unilateral change.
- Desirable Change: A change the CFAO determines is beneficial to the Government, even if it results in increased costs.
- The "No-Increased-Cost" Rule: For unilateral changes and noncompliances, the Government is legally protected from paying any more in the aggregate than it would have under the previous or compliant practice.
- Disclosure Statement: Large contractors must submit a formal Disclosure Statement (Form CASB-DS-1) detailing their accounting practices. This must be deemed "adequate" by the CFAO before a contract can be awarded.
Responsibilities
- Contracting Officer (CO): Responsible for determining if CAS applies to a solicitation, inserting the correct FAR clauses (e.g., 52.230-2), and requesting CAS administration from the CFAO within 30 days of award.
- Cognizant Federal Agency Official (CFAO): The primary authority for CAS administration. They make the final determination on whether accounting practices are adequate and compliant, evaluate the materiality of cost impacts, and resolve noncompliances.
- Cognizant Auditor (usually DCAA): Responsible for conducting the actual audit of the contractor’s Disclosure Statement and cost accounting practices to advise the CFAO on adequacy and compliance.
- Agency Head: Holds the non-delegable authority (below a senior level) to waive CAS requirements under exceptional circumstances or for specific commercial segments.
- Contractor: Must maintain a compliant accounting system, submit timely notices of accounting changes (usually 60 days in advance), and provide cost impact proposals when changes occur.
Practical Implications
- Administrative Burden: Achieving "Full CAS" coverage is a significant milestone for a contractor, requiring robust internal controls and sophisticated accounting systems to track costs exactly as disclosed.
- Pricing Risk: Contractors must be extremely careful when changing overhead allocation methods or labor categories mid-contract. If the CFAO deems a change "unilateral," the contractor may have to absorb any resulting cost increases across their entire CAS-covered portfolio.
- Audit Scrutiny: Because CAS is designed to ensure consistency, any deviation between how a contractor estimates a job and how they accumulate the actual costs can trigger a noncompliance finding, leading to potential price adjustments and interest penalties.
- Subcontractor Management: Prime contractors are responsible for ensuring their subcontractors comply with CAS. This includes flowing down the correct clauses and coordinating with the subcontractor’s CFAO for adequacy determinations.