Overview
This section outlines the solicitation provisions and contract clauses used to implement Cost Accounting Standards (CAS), which require certain contractors to consistently follow documented accounting practices when estimating, accumulating, and reporting costs. It serves as the primary mechanism for the government to ensure uniformity and transparency in the cost accounting of negotiated federal contracts.
Key Rules
- Applicability & Exemptions: CAS requirements apply to negotiated contracts exceeding the statutory threshold (currently referenced in FAR 30.201-4), but specifically exclude small businesses and foreign governments.
- Disclosure Statement: Contractors must submit a formal Disclosure Statement (Form CASB DS-1 or DS-2) describing their accounting practices as a condition of receiving an award, unless a monetary or interim exemption applies.
- Types of Coverage:
- Full Coverage (52.230-2): Requires compliance with all applicable CAS standards.
- Modified Coverage (52.230-3): Generally applies to non-exempt contracts under $50 million, requiring compliance only with specific standards (CAS 401, 402, 405, and 406).
- Consistency Requirement: Contractors must follow their established cost accounting practices consistently; any changes must be applied prospectively and may require an equitable adjustment to the contract price.
- Non-Compliance Penalties: Failure to comply with CAS or follow disclosed practices that results in increased costs to the government requires a contract price adjustment, including the recovery of interest on overpayments.
- Flow-down Requirements: Prime contractors are required to flow down applicable CAS clauses to negotiated subcontracts that exceed the CAS threshold.
Practical Implications
- Audit Risk: Contractors must maintain rigorous, documented accounting systems to withstand audits by the Defense Contract Audit Agency (DCAA) or other federal auditors focused on CAS compliance.
- Financial Liability: Because non-compliance can lead to the government reclaiming "increased costs" plus interest, contractors must carefully manage any changes to their accounting systems to ensure they do not inadvertently trigger a price reduction.