[Congressional Record Volume 145, Number 78 (Thursday, May 27, 1999)]
[Senate]
[Pages S6296-S6297]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. THOMPSON (for himself, Mr. Lieberman, Mr. Warner, and Mr. 
        Levin):
  S. 1151. A bill to amend the Office of Federal Procurement Policy Act 
to streamline the application of cost accounting standards; to the 
Committee on Governmental Affairs.


              cost accounting standards amendments of 1999

  Mr. THOMPSON Mr. President, I rise today to introduce a bill on 
behalf of myself as chairman of the Governmental Affairs Committee and 
Senator Lieberman, the Committee's ranking minority member, and 
Senators Warner and Levin, the chairman and ranking minority member of 
the Armed Services Committee. This legislation will benefit the 
procurement process in all agencies across the Federal government.

  In recent years, Congress has enacted two major acquisition reform 
statutes--the Federal Acquisition Streamlining Act of 1994 (FASA) and 
the Clinger-Cohen Act of 1996. These statutes changed the trend in 
government contracting toward simplifying the government's acquisition 
process and eliminating many government-unique requirements. The goal 
of these changes in the government's purchasing processes has been to 
modify or eliminate unnecessary and burdensome legislative mandates, 
increase the use of commercial items to meet government needs, and give 
more discretion to contracting agencies in making their procurement 
decisions.
  Since the early 1900's, the Federal government has required certain 
unique accounting standards or criteria designed to protect it from the 
risk of overpaying for goods and services by directing the manner or 
degree to which Federal contractors apportion costs to their contracts 
with the government. The Cost Accounting Standards (CAS standards) are 
a set of 19 accounting principles developed and maintained by the Cost 
Accounting Standards (CAS) Board, a body created by Congress to develop 
uniform and consistent standards. The CAS standards require government 
contractors to account for their costs on a consistent basis and 
prohibit any shifting of overhead or other costs from commercial 
contracts to government contracts, or from fixed-priced contracts to 
cost-type contracts.
  FASA and the Clinger-Cohen Act took significant steps to exempt 
commercial items from the applicability of the CAS standards. 
Nonetheless, executive agencies, particularly the Department of 
Defense, and others in the public and private sectors continue to 
identify the CAS standards as a continuing barrier to the integration 
of commercial items into the government marketplace. Advocates of 
relaxing the CAS standards argue that they require companies to create 
unique accounting systems to do business with the government in cost-
type contracts. They believe that the added cost of developing the 
required accounting systems has discouraged some commercial companies 
from doing business with the government and led others to set up 
separate assembly lines for government products, substantially 
increasing costs to the government.
  This bill carefully balances the government's need for greater access 
to commercial items, particularly those of nontraditional suppliers, 
with the need for a strong set of CAS standards to protect the 
taxpayers from overpayments to contractors. The bill would

[[Page S6297]]

modify the CAS standards to streamline their applicability, while 
maintaining the applicability of the standards to the vast majority of 
contract dollars that are currently covered. In particular, the bill 
would raise the threshold for coverage under the CAS standards from $25 
million to $50 million; exempt contractors from coverage if they do not 
have a contract in excess of $5 million; and exclude coverage based on 
firm, fixed price contracts awarded on the basis of adequate price 
competition without the submission of certified cost or pricing data.
  The bill also would provide for waivers of the CAS standards by 
Federal agencies in limited circumstances. This would allow contracting 
agencies to handle this contract administration function, in limited 
circumstances, as part of their traditional role in administering 
contracts. Our intent is that waivers would be available for contracts 
in excess of $10 million only in ``exceptional circumstances.'' The 
``exceptional circumstances'' waiver may be used only when a waiver is 
necessary to meet the needs of an agency, and i.e., the agency 
determines that it would not be able to obtain the products or services 
in the absence of a waiver.
  I ask unanimous consent that a copy of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1151

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1.SHORT TITLE.

       This Act may be cited as the ``Cost Accounting Standards 
     Amendments of 1999''.

     SEC. 2. STREAMLINED APPLICABILITY OF COST ACCOUNTING 
                   STANDARDS.

       (a) Applicability.--Paragraph (2) of section 26(f) of the 
     Office of Federal Procurement Policy Act (41 U.S.C. 
     422(f)(2)) is amended--
       (1) by redesignating subparagraph (C) as subparagraph (D);
       (2) by striking subparagraph (B) and inserting the 
     following:
       ``(B) The cost accounting standards shall not apply to a 
     contractor or subcontractor for a fiscal year (or other one-
     year period used for cost accounting by the contractor or 
     subcontractor) if the total value of all of the contracts and 
     subcontracts covered by the cost accounting standards that 
     were entered into by the contractor or subcontractor, 
     respectively, in the previous fiscal year (or other one-year 
     cost accounting period) was less than $50,000,000.
       ``(C) Subparagraph (A) does not apply to the following 
     contracts or subcontracts for the purpose of determining 
     whether the contractor or subcontractor is subject to the 
     cost accounting standards:
       ``(i) Contracts or subcontracts for the acquisition of 
     commercial items.
       ``(ii) Contracts or subcontracts where the price negotiated 
     is based on prices set by law or regulation.
       ``(iii) Firm, fixed-price contracts or subcontracts awarded 
     on the basis of adequate price competition without submission 
     of certified cost or pricing data.
       ``(iv) Contracts or subcontracts with a value that is less 
     than $5,000,000.''.
       (b) Waiver.--Such section is further amended by adding at 
     the end the following:
       ``(5)(A) The head of an executive agency may waive the 
     applicability of cost accounting standards for a contract or 
     subcontract with a value less than $10,000,000 if that 
     official determines in writing that--
       ``(i) the contractor or subcontractor is primarily engaged 
     in the sale of commercial items; and
       ``(ii) the contractor or subcontractor would not otherwise 
     be subject to the cost accounting standards.
       ``(B) The head of an executive agency may also waive the 
     applicability of cost accounting standards for a contract or 
     subcontract under extraordinary circumstances when necessary 
     to meet the needs of the agency. A determination to waive the 
     applicability of cost accounting standards under this 
     subparagraph shall be set forth in writing and shall include 
     a statement of the circumstances justifying the waiver.
       ``(C) The head of an executive agency may not delegate the 
     authority under subparagraph (A) or (B) to any official in 
     the executive agency below the senior policymaking level in 
     the executive agency.
       ``(D) The Federal Acquisition Regulation shall include the 
     following:
       ``(i) Criteria for selecting an official to be delegated 
     authority to grant waivers under subparagraph (A) or (B).
       ``(ii) The specific circumstances under which such a waiver 
     may be granted.
       ``(E) The head of each executive agency shall report the 
     waivers granted under subparagraphs (A) and (B) for that 
     agency to the Board on an annual basis.''.
       (c) Construction Regarding Certain Not-For-Profit 
     Entities.--The amendments made by this section shall not be 
     construed as modifying or superseding, nor as intended to 
     impair or restrict, the applicability of the cost accounting 
     standards to--
       (1) any educational institution or federally funded 
     research and development center that is associated with an 
     educational institution in accordance with Office of 
     Management and Budget Circular A-21, as in effect on January 
     1, 1999; or
       (2) any contract with a nonprofit entity that provides 
     research and development and related products or services to 
     the Department of Defense.

     SEC. 3. EFFECTIVE DATE.

       This Act and the amendments made by this Act shall take 
     effect 180 days after the date of enactment of this Act.
                                 ______