Overview
This section establishes the procedures for communicating and enforcing Cost Accounting Standards (CAS) price adjustments and noncompliance determinations across different tiers of a supply chain. It ensures that determinations made by a subcontractor's Cognizant Federal Agency Official (CFAO) are shared with higher-tier officials and remain final.
Key Rules
- Mandatory Communication: The subcontractor’s CFAO must provide copies of negotiation memorandums or noncompliance determinations to the CFAO of the next higher-tier contractor or subcontractor.
- Finality of Determinations: A higher-tier CFAO is prohibited from changing or overriding a determination made by a lower-tier subcontractor’s CFAO.
- Prime Contractor Accountability: If a subcontractor refuses to submit a General Dollar Magnitude (GDM) or Detailed Cost-Impact (DCI) proposal, the government applies administrative remedies (such as withholdings or interest) at the prime contractor level.
Practical Implications
- Flow-down Risk: Prime contractors bear the ultimate financial risk for a subcontractor’s CAS noncompliance and should utilize robust indemnity clauses in subcontracts to recover costs if the government pursues remedies at the prime level.
- Administrative Consistency: The rule prevents "forum shopping" or conflicting determinations by ensuring that the government’s position on a subcontractor's accounting system is binding on all upward tiers.