Overview
FAR 30.602 outlines the process and criteria for the Cognizant Federal Agency Official (CFAO) to determine if a cost impact resulting from a CAS change or noncompliance is significant enough to warrant a formal contract price adjustment. It provides the procedural framework for dismissing negligible impacts while maintaining the Government’s right to future adjustments.
Key Rules
- Criteria for Determination: The CFAO must use the specific materiality criteria established in 48 CFR 9903.305 to evaluate cost impacts.
- Timing and Evidence: A determination can be made before or after a General Dollar Magnitude (GDM) proposal is submitted, but it must always be supported by adequate documentation.
- Handling Immaterial Impacts: If the impact is immaterial, the CFAO concludes the process without contract adjustments, documents the rationale, and notifies the contractor to correct any underlying noncompliance.
- Reservation of Rights: For uncorrected immaterial noncompliances, the Government expressly reserves the right to make adjustments in the future should the cost impact become material.
- Mandatory Procedures for Material Impacts: When an impact is deemed material, the CFAO is required to follow the formal adjustment and notification procedures specified in FAR 30.603 through 30.606.
Practical Implications
- Administrative Efficiency: This section allows the CFAO to waive burdensome negotiations and administrative costs for both parties when the financial impact of an accounting change does not justify the effort of a formal adjustment.
- Ongoing Compliance Risk: Contractors remain obligated to fix noncompliant accounting practices even if the current impact is immaterial; failure to do so creates a "latent" liability that the Government can trigger if the contractor’s business base or cost structure changes.