[Federal Register Volume 60, Number 79 (Tuesday, April 25, 1995)]
[Proposed Rules]
[Pages 20252-20253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10071]



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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

48 CFR Part 9903


Cost Accounting Standards Board; Changes in Cost Accounting 
Practices

AGENCY: Cost Accounting Standards Board, Office of Federal Procurement 
Policy, OMB.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Cost Accounting Standards Board (CASB) invites coverage 
comments on proposed amendments to the regulatory provisions contained 
in Chapter 99 of Title 48. The proposed amendments would revise the 
current definitions and illustrations governing changes in cost 
accounting practices. Also proposed is the addition of a new Subpart to 
clarify the process for determining and resolving the cost impact on 
covered contract prices and/or contract costs when a contractor makes a 
change to its cost accounting practices, fails to comply with a Cost 
Accounting Standard (CAS) or fails to consistently follow its 
established cost accounting practices.

DATES: Requests for a copy of the proposed amendments must be in 
writing and must be received by June 26, 1995. Comments must be in 
writing and must be received by July 10, 1995.

ADDRESSES: Requests for a copy of the proposed amendments or comments 
pertaining to this Advance Notice of Proposed Rulemaking (ANPRM) should 
be addressed to Mr. Rudolph J. Schuhbauer, Project Director, Cost 
Accounting Standards Board, Office of Federal Procurement Policy, 725 
17th Street, NW, Room 9001, Washington, DC 20503. Attn: CASB Docket No. 
93-01A.

FOR FURTHER INFORMATION CONTACT:
Rudolph J. Schuhbauer, Project Director, Cost Accounting Standards 
Board (telephone 202-395-3254).

SUPPLEMENTARY INFORMATION:

A. Regulatory Process

    The Cost Accounting Standards Board's rules and regulations are 
codified at 48 CFR Chapter 99. Section 26(g)(1) of the Office of 
Federal Procurement Policy Act, 41 U.S.C. Sec. 422(g)(1), requires that 
the Board, prior to the promulgation of any new or revised Cost 
Accounting Standard, complete a prescribed rulemaking process. This 
process consists of the following four steps:
    1. Consult with interested persons concerning the advantages, 
disadvantages and improvements anticipated in the pricing and 
administration of government contracts as a result of a proposed 
Standard.
    2. Promulgate an Advance Notice of Proposed Rulemaking.
    3. Promulgate a Notice of Proposed Rulemaking.
    4. Promulgate a Final Rule.
    This proposal is step two in the four step process.

B. Summary of Proposed Rule

    In response to the Cost Accounting Standards Board's solicitation 
of agenda items, several commenters identified the Board's regulatory 
coverage on ``changes in cost accounting practice'' as a potential 
agenda item. The commenters advised the Board that industry and 
Government officials are interpreting the regulatory coverage 
differently and often disagree on whether a particular change made in a 
contractor's organizational structure did or did not result in a change 
in cost accounting practice. The Board, after review and extended 
discussions of the issues associated with the proposed topic, 
identified Organizational Changes and Changes In Cost Accounting 
Practices as a topic on which a research project should be started.
    On April 9, 1993, the CASB published a notice in the Federal 
Register, 58 FR 18428, requesting public comments from interested 
parties concerning a Staff Discussion Paper on that topic. The purpose 
of the Staff Discussion Paper was to solicit public views concerning 
the advantages, disadvantages and improvements anticipated if the Board 
were to [[Page 20253]] promulgate more explicit provisions on whether 
organizational changes made by contractors do or do not result in cost 
accounting practice changes.
    After consideration of the public comments received, the Board 
concluded that contractors and Federal officials appear to be 
interpreting the Board's rules and regulations governing changes in 
cost accounting practice under CAS-covered contracts differently. 
Furthermore, the contract price and cost adjustment provisions 
governing cost accounting practice changes under CAS-covered contracts 
do not appear to be clearly understood and, consequently, some 
inefficient, uneconomical and possibly inequitable practices may have 
evolved as the contracting parties proceeded to comply with the Board's 
requirements. Therefore, the Board is proposing to amend Chapter 99 by:
    Revising the definitions and illustrations governing cost 
accounting practice changes, for purposes of making it explicit that a 
change in the manner in which costs are grouped and accumulated 
constitutes a change in cost accounting practice and that 
organizational changes must be evaluated on a case-by-case basis in 
order to determine if a change in cost accounting practice has 
occurred.
    Adding a new Subpart 9903.4 to delineate the contract price and 
cost adjustment process to be applied when a contractor changes a cost 
accounting practice, fails to comply with a Standard, or fails to 
consistently follow its established cost accounting practices. The 
proposed coverage is intended to facilitate the resolution of the cost 
impact of such compliant and noncompliant cost accounting practice 
changes under the requirements of existing and future CAS-covered 
contracts. Accordingly, when issued as a final rule, the proposed 
Subpart 9903.4 provisions would apply to all CAS-covered contracts 
requiring adjustment, including those CAS-covered contracts awarded 
prior to the effective date of the final rule.
    The purpose of this ANPRM is to seek broad public comment 
concerning the proposed amendments. In particular, the Board is 
considering the establishment of certain new requirements that it 
believes would clarify and facilitate the overall cost impact process 
governing cost accounting practice changes. Accordingly, the Board 
invites interested parties to specifically comment on the following 
ANPRM provisions:

--Proposed 9903.201-4, in paragraphs (a)(4) of the proposed contract 
clauses, includes new provisions requiring a contractor to agree to 
price adjustments if its CAS-covered subcontractors make required, 
voluntary or desirable changes to their cost accounting practices 
pursuant to the subcontracts' terms and conditions.
--Proposed 9903.201-6(b) establishes new criteria for determining when 
a voluntary change in cost accounting practice may be treated as a 
desirable change.
--Proposed 9903.404(b)(ii)(A) requires CAS-covered contractors to 
notify the Government of and fully disclose cost accounting practice 
changes required to comply with a new or modified Standard 60 days 
prior to the Standard's effective date. This requirement is predicated 
on the Board's decision that final rules will generally be issued 120 
days prior to the effective date of a new or modified Standard.
--Proposed 9903.404(b)(ii)(B) establishes new notification requirements 
for voluntary and desirable changes.
--Proposed 9903.404(b)(vi) provides a new equitable adjustment 
provision for contracts negotiated within 60 days after a contractor 
notifies the Government of a voluntary change that would otherwise be 
subject to a CAS-covered contract's ``no increased cost'' provision.
--Proposed 9903.404(e) provides for the use of a cost impact settlement 
proposal that would permit early resolution of the estimated cost 
impact in lieu of the use of a detailed cost impact proposal.
Richard C. Loeb,
Executive Secretary, Cost Accounting Standards Board.
[FR Doc. 95-10071 Filed 4-24-95; 8:45 am]
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