[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30649]


[Federal Register: December 28, 1994]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 28, 30, 32, 42, 44, and 52

[FAC 90-23; FAR Case 93-27; Item XX]
RIN 9000-AG01


Federal Acquisition Regulation; Cost Accounting Standards 
Applicability and Thresholds

AGENCIES: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: This final FAR rule implements the final rule, issued by the 
Cost Accounting Standards (CAS) Board, which was published in the 
Federal Register at 58 FR 58798, November 4, 1993, and which revised 
the CAS applicability criteria, thresholds, and procedures for 
Government contractors. This document also amends the interim rule 
published in the Federal Register at 57 FR 39586, August 31, 1992. This 
regulatory action was not subject to Office of Management and Budget 
review under Executive Order 12866, dated September 30, 1993.

EFFECTIVE DATE: February 27, 1994, except for amendments to the 
following sections, which are effective November 4, 1993: 30.201-4 
(b)(1) and (b)(2), 30.601(b), 52.230-1 ``Note'' statement, (c)(1) and 
(c)(3), (c)(4) ``Caution'' statement, and 52.230-3.

FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson at (202) 501-3221 in 
reference to this FAR case. For general information, contact the FAR 
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-23, FAR case 93-27.

SUPPLEMENTARY INFORMATION:

A. Background

    On November 4, 1993, the Office of Federal Procurement Policy, Cost 
Accounting Standards (CAS) Board, issued a final rule revising 48 CFR 
Chapter 99 concerning the applicability criteria, thresholds, and 
procedures for the application of the CAS to negotiated Government 
contracts. The Board's final rule was effective upon publication in the 
Federal Register at 58 FR 58798, November 4, 1993. The Board's action 
adjusted the CAS applicability requirements and dollar thresholds to 
levels reflecting experience with price inflation since the thresholds 
were last promulgated by the previous Board on September 12, 1977. The 
Board also changed the criteria for determining which Standards apply 
at different threshold levels, the concept of what constitutes modified 
coverage, and the criteria that trigger full CAS coverage.
    This final rule revises FAR 30.201-4 and the clauses at 52.230-1, 
and 52.230-3, as well as the FAR looseleaf edition of Appendix B, to 
incorporate the CAS Board's final rule published in 48 CFR Chapter 99. 
Major changes include establishing a $25 million threshold for full CAS 
coverage, along with $1 million ``trigger contract'' mechanism; 
revising modified CAS coverage by expanding it to include CAS 405, 
Accounting for Unallowable Costs, and CAS 406, Cost Accounting 
Standard--Cost Accounting Period; eliminating the alternative ``10 
percent or more'' Government sales criterion for full coverage; and 
broadening the CAS exemption criteria in instances where the agency has 
waived the requirement for submission of certified cost or pricing 
data. The FAR is also revised to incorporate revisions to disclosure 
requirements for business segments which are otherwise subject to 
modified CAS coverage but which are required to disclose their cost 
accounting practices (normally a requirement only for full CAS 
coverage) because they are affiliated with other business segments 
which are subject to full CAS coverage. The CAS rules now provide that 
the business segment has to file a disclosure statement only if, in its 
most recently completed cost accounting period, that segment's CAS-
covered awards are 30 percent or more of total segment sales for the 
period and total $10 million or more.

B. Regulatory Flexibility Act

    The revisions in this final FAR rule will eliminate certain 
requirements associated with the administration of the Cost Accounting 
Standards. This rule does not have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act (5 U.S.C. 601, et seq.) because small 
businesses are exempt from the application of the Cost Accounting 
Standards. A Regulatory Flexibility Analysis has, therefore, not been 
performed.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because this rule does 
not impose any reporting or recordkeeping requirements which require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501, et seq.

D. Public Comments

    Public comments on this final FAR rule are not solicited because 
the policies and procedures contained in these amendments have already 
been publicized in the Federal Register by the Office of Federal 
Procurement Policy, Cost Accounting Standards Board's Notice of 
Proposed Rulemaking, made available for public comment in the Federal 
Register at 58 FR 18363, April 9, 1993. The FAR final rule simply 
mirrors the final rule published by the CAS Board in the Federal 
Register at 58 FR 58798, November 4, 1993.

List of Subjects in 48 CFR Parts 30 and 52

    Government procurement.

    Dated: December 7, 1994.
Albert A. Vicchiolla,
Director, Office of Federal Acquisition Policy.

Words of Issuance

Interim Rule Adopted As Final With Changes

    For reasons set out in the preambles of FAR cases 92-18 and 93-27, 
48 CFR Parts 28, 30, 32, 42, 44, and 52 are amended as set forth below.
    1. The authority citation for 48 CFR parts 28, 30, 32, 42, 44 and 
52 continues to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 28--BONDS AND INSURANCE

    2. Section 28.301 is amended by revising paragraph (a)(1) as 
follows:


28.301  Policy.

* * * * *
    (a)(1) The Government requires any contractor subject to Cost 
Accounting Standard (CAS) 416 (48 CFR 9004.416 (appendix B, FAR loose-
leaf edition)) to obtain insurance, by purchase or self-coverage, for 
the perils to which the contractor is exposed, except when (i) the 
Government, by providing in the contract in accordance with law, agrees 
to indemnify the contractor under specified circumstances or (ii) the 
contract specifically relieves the contractor of liability for loss of 
or damage to Government property.
* * * * *

PART 30--COST ACCOUNTING STANDARDS ADMINISTRATION

    3. Section 30.201-4 is amended in paragraph (b)(1) by removing 
``$10 million'' and inserting ``$25 million'' in its place; and by 
revising paragraphs (b)(2) and (d)(2) to read as follows:


30.201-4  Contract clauses.

* * * * *
    (b) * * *
    (2) The clause at 52.230-3 requires the contractor to comply with 
48 CFR chapter 99 (Appendix B, FAR loose-leaf edition), subparts 
9904.401, 9904.402, 9904.405, and 9904.406, to disclose (if it meets 
certain requirements) actual cost accounting practices, and to follow 
consistently its established cost accounting practices.
* * * * *
    (d) * * *
    (2) The clause at 52.230-5 specifies rules for administering CAS 
requirements and procedures to be followed in cases of failure to 
comply.


30.601  [Amended]

    4. Section 30.601(b) is amended by removing the first use of the 
word ``of'' and inserting ``after'' in its place.


30.602-1  [Amended]

    5. Section 30.602-1(c)(1) is amended in the second sentence by 
removing the word ``offices'' and inserting ``officers'' in its place.
    6. Section 30.602-2(a)(4) is amended by adding a new sentence after 
the first to read as follows:


30.602-2  Noncompliance with CAS requirements.

    * * * * *
    (4) * * * If the ACO determines that the contractor's practices are 
in noncompliance, a written explanation shall be provided as to why the 
ACO disagrees with the contractor's rationale.
* * * * *
    7. Section 30.602-3(a) is revised to read as follows:


30.602-3  Voluntary changes.

    (a) General. (1) The contractor may voluntarily change its 
disclosed or established cost accounting practices.
    (2) The contract price may be adjusted for voluntary changes. 
However, increased costs resulting from a voluntary change may be 
allowed only if the ACO determines that the change is desirable and not 
detrimental to the interest of the Government.
* * * * *

PART 32--CONTRACT FINANCING

    8. Section 32.503-7 is amended by revising the introductory 
paragraph to read as follows:


32.503-7  Limitations on general and administrative expenses (G&A) for 
progress payments.

    If the contractor established an inventory suspense account under 
Appendix A of Cost Accounting Standard (CAS) 410, Allocation of 
Business Unit General and Administrative Expenses to Final Cost 
Objectives (48 CFR 9904.410 (appendix B, FAR loose-leaf edition)), and 
the account is $5 million or more, the following limitations shall 
apply to progress payments:
* * * * *

PART 42--CONTRACT ADMINISTRATION

    9. Section 42.203 paragraph (a) is revised to read as follows:


42.203  Retention of contract administration.

    (a) Contracting offices shall retain for administration any 
contract (1) not requiring the performance of contract administration 
functions (see 42.302) at or near contractor facilities, or (2) for 
which retention by the contracting office is prescribed by agency 
acquisition regulations. However, 30.601(a) and (b) require that 
retained contracts to which Cost Accounting Standards (CAS) apply be 
assigned for CAS administration only. Instructions for marking and 
distributing these contracts are provided in 4.201(c).
* * * * *
    10. In section 42.302, the introductory text of paragraph (a)(11) 
and paragraph (a)(11)(iv) are revised to read as follows:


42.302  Contract administration functions.

    (a) * * *
    (11) In connection with Cost Accounting Standards (see part 30 and 
48 CFR chapter 99)--
* * * * *
    (iv) Negotiate price adjustments and execute supplemental 
agreements under the Cost Accounting Standards clauses at 52.230-2, 
52.230-3, and 52.230-5.
* * * * *

PART 44--SUBCONTRACTING POLICIES AND PROCEDURES

    11. and 12. Section 44.305-3 paragraph (a)(2) is revised to read as 
follows:


44.305-3  Withholding or withdrawing approval.

    (a) * * *
    (2) Implementation of cost accounting standards (see 48 CFR chapter 
99 (Appendix B, FAR loose-leaf edition);
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    13. Section 52.230-1 is amended in the provision by:
    (a) Revising the provision date to read ``(NOV 1993)'';
    (b) Removing in the provision's Note the word ``four'' and 
inserting ``three'' in its place, and by removing the Roman numeral 
``IV'' and inserting ``III'' in its place;
    (c) Revising paragraphs (c)(1) and (3);
    (d) Removing in the CAUTION statement in paragraph (c)(4) ``$10 
million'' and inserting ``$25 million'' in its place; and
    (e) Removing part II and redesignating parts III and IV as II and 
III, respectively, and revising the newly designated part II.
    The revised text reads as follows:


52.230-1  Cost Accounting Standards Notices and Certification.

* * * * *

Cost Accounting Standards Notices and Certification (Nov 1993)

* * * * *
    (c) Check the appropriate box below:
    {time}  (1) Certificate of Concurrent Submission of Disclosure 
Statement. The offeror hereby certifies that, as a part of the 
offer, copies of the Disclosure Statement have been submitted as 
follows: (i) Original and one copy to the cognizant Administrative 
Contracting Officer (ACO), and (ii) One copy to the cognizant 
contract auditor.
    (Disclosure must be on Form No. CASB DS-1. Forms may be obtained 
from the cognizant ACO or from the loose-leaf version of the Federal 
Acquisition Regulation.)

Date of Disclosure Statement-------------------------------------------

Name and Address of Cognizant ACO where filed--------------------------

The offeror further certifies that practices used in estimating 
costs in pricing this proposal are consistent with the cost 
accounting practices disclosed in the Disclosure Statement.
* * * * *
    {time}  (3) Certificate of Monetary Exemption. The offeror 
hereby certifies that the offeror, together with all divisions, 
subsidiaries, and affiliates under common control, did not receive 
net awards of negotiated prime contracts and subcontracts subject to 
CAS totaling more than $25 million (of which at least one award 
exceeded $1 million) in the cost accounting period immediately 
preceding the period in which this proposal was submitted. The 
offeror further certifies that if such status changes before an 
award resulting from this proposal, the offeror will advise the 
Contracting Officer immediately.
* * * * *

II. Cost Accounting Standards--Eligibility for Modified Contract 
Coverage

    If the offeror is eligible to use the modified provisions of 48 
CFR subpart 9903.201-2(b) and elects to do so, the offeror shall 
indicate by checking the box below. Checking the box below shall 
mean that the resultant contract is subject to the Disclosure and 
Consistency of Cost Accounting Practices clause in lieu of the Cost 
Accounting Standards clause.
    {time}  The offeror hereby claims an exemption from the Cost 
Accounting Standards clause under the provisions of 48 CFR subpart 
9903.201-2(b) and certifies that the offeror is eligible for use of 
the Disclosure and Consistency of Cost Accounting Practices clause 
because during the cost accounting period immediately preceding the 
period in which this proposal was submitted, the offeror received 
less than $25 million in awards of CAS-covered prime contracts and 
subcontracts, or the offeror did not receive a single CAS-covered 
award exceeding $1 million. The offeror further certifies that if 
such status changes before an award resulting from this proposal, 
the offeror will advise the Contracting Officer immediately.
    CAUTION: An offeror may not claim the above eligibility for 
modified contract coverage if this proposal is expected to result in 
the award of a CAS-covered contract of $25 million or more or if, 
during its current cost accounting period, the offeror has been 
awarded a single CAS-covered prime contract or subcontract of $25 
million or more.
* * * * *
    14. Section 52.230-3 is amended in the clause by revising the 
clause date to read ``(NOV 1993)''; and by revising paragraph (a)(1) to 
read as follows:


52.230-3  Disclosure and Consistency of Cost Accounting Practices.

* * * * *

Disclosure and Consistency of Cost Accounting Practices (Nov 1993)

* * * * *
    (a) * * *
    (1) Comply with the requirements of 48 CFR subpart 9904.401, 
Consistency in Estimating, Accumulating, and Reporting Costs; 48 CFR 
subpart 9904.402, Consistency in Allocating Costs Incurred for the 
Same Purpose; 48 CFR subpart 9904.405, Accounting for Unallowable 
Costs; and 48 CFR subpart 9904.406, Cost Accounting Standard--Cost 
Accounting Period, in effect on the date of award of this contract 
as indicated in 48 CFR part 9904.
* * * * *


52.230-5  [Amended]

    15. Section 52.230-5 is amended in the clause by revising the 
clause date to read ``(DEC 1994)''; in the introductory paragraph by 
removing ``(f)'' and inserting ``(g)'' in its place; in paragraph 
(a)(1) by inserting after ``new'' the words ``or modified''; in 
paragraph (b)(1) by removing the words ``each additional'' and 
inserting ``the applicable'' in their place; in paragraph (d) by 
removing the second reference to ``CAS''; and in paragraph (f) by 
removing the word ``contractor's'' and inserting ``contract'' in its 
place.

[FR Doc. 94-30649 Filed 12-27-94; 8:45 am]
BILLING CODE 6820-34-P