Overview
FAR Subpart 30.6 prescribes the policies and procedures for the administration of Cost Accounting Standards (CAS) on government contracts and subcontracts. It establishes the authority of the Cognizant Federal Agency Official (CFAO) to determine compliance, manage changes in cost accounting practices, and resolve cost impacts resulting from noncompliance or accounting shifts to ensure the government does not pay increased costs in the aggregate.
Key Rules
- Aggregate Cost Impact: For unilateral changes and noncompliances, the government will not pay any increased costs in the aggregate. Any net increase in costs to the government across all CAS-covered contracts must be recovered.
- Materiality: The CFAO is the sole authority for determining if a cost impact is "material." If a change or noncompliance is deemed immaterial, no contract adjustments are made, though the contractor is usually required to correct the practice for the future.
- Types of Accounting Changes:
- Required Changes: Necessary to comply with a new or modified CAS; these may allow for equitable adjustments.
- Unilateral Changes: Contractor-initiated changes; the government is protected from any resulting cost increases.
- Desirable Changes: Changes that the CFAO deems not detrimental to the government's interest, which may bypass the "no-increase" rule of unilateral changes.
- Cost Impact Proposals: Contractors must submit either a General Dollar Magnitude (GDM) proposal for a high-level estimate or a Detailed Cost-Impact (DCI) proposal for a contract-by-contract analysis when a material change occurs.
- Interest on Noncompliance: The government is entitled to interest on any increased costs paid due to noncompliance, calculated from the date of overpayment to the date of repayment.
- Payment Withholding: If a contractor fails to submit required accounting descriptions or cost impact proposals on time, the CFAO can withhold up to 10% of payments on CAS-covered contracts.
Responsibilities
- Cognizant Federal Agency Official (CFAO):
- Performs CAS administration for all contracts within a business unit.
- Makes final determinations on whether a change or noncompliance has occurred.
- Determines materiality and negotiates cost impact resolutions.
- Contracting Officer (CO):
- Must request CAS administration from the CFAO within 30 days of awarding a CAS-covered contract.
- Notifies the CFAO if an offeror's proposal indicates a required change in cost accounting practices.
- Auditor:
- Provides advice and technical assistance to the CFAO.
- Identifies and reports alleged noncompliances to the CFAO.
- Contractor:
- Must notify the CFAO of accounting changes at least 60 days before implementation.
- Responsible for submitting timely GDM and DCI proposals.
- Must correct noncompliant practices within 60 days of a determination.
Practical Implications
- Strategic Accounting Shifts: Contractors must carefully evaluate the "aggregate" impact before making unilateral accounting changes. A change that saves money on one contract but increases costs on another could result in the government claiming the savings while refusing to pay the increases.
- Administrative Burden: CAS administration requires significant documentation. Contractors must be prepared to provide detailed "cost to complete" estimates under both old and new accounting practices to satisfy CFAO requirements for GDM/DCI proposals.
- Risk of Non-Disclosure: Implementing a change without the required 60-day notice allows the CFAO to treat the change as a noncompliance, which triggers more rigid enforcement and potential interest penalties.
- External Restructuring: There is a specific "safe harbor" for accounting changes directly associated with compliant external restructuring (under 10 U.S.C. 3761), where the standard cost adjustment rules may not apply, though disclosure is still required.