[Federal Register Volume 65, Number 112 (Friday, June 9, 2000)]
[Rules and Regulations]
[Pages 36768-36770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14242]



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Part III





Office of Management and Budget





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48 CFR Part 9903



Cost Accounting Standards Board; Applicability, Thresholds and Waiver 
of Cost Accounting Standards Coverage; Final Rule

  Federal Register / Vol. 65, No. 112 / Friday, June 9, 2000 / Rules 
and Regulations  

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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

48 CFR Part 9903


Cost Accounting Standards Board; Applicability, Thresholds and 
Waiver of Cost Accounting Standards Coverage

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

ACTION: Final rule.

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SUMMARY: The Office of Federal Procurement Policy, Cost Accounting 
Standards Board, is revising applicability, thresholds and procedures 
for the application of the Cost Accounting Standards (CAS) to 
negotiated government contracts. This rulemaking is authorized pursuant 
to Section 26 of the Office of Federal Procurement Policy Act. The 
Board is taking final action on this topic in order to adjust CAS 
applicability requirements and dollar thresholds in accordance with the 
provisions of the National Defense Authorization Act for Fiscal Year 
2000.

DATES: This final rule is effective June 9, 2000.

FOR FURTHER INFORMATION CONTACT: Richard C. Loeb, Executive Secretary, 
Cost Accounting Standards Board (telephone: 202-395-3254).

SUPPLEMENTARY INFORMATION

A. Background

    On February 7, 2000, the Cost Accounting Standards Board issued an 
interim rule with request for comment, 65 FR 5990. That rule, 
implemented Sec. 802 of the National Defense Authorization Act for 
Fiscal Year 2000, Pub. L. 106-65, ``Streamlined Applicability of Cost 
Accounting Standards.'' This final rule implements the provisions of 
Sec. 802 and provides responses to public comments received on the 
interim CAS Board rule. Many of the public comments received by the 
Board addressed issues that were beyond the scope of Sec. 802. The 
Board is limiting its revisions in this final rule to the items 
specified in Sec. 802.

B. Summary of Amendments

    ``Trigger contract'': 48 CFR 9903.201-1(b) is amended by adding a 
new subparagraph (7) that exempts contracts and subcontracts from CAS 
coverage, provided that the business unit of the contractor or 
subcontractor is currently performing one or more CAS-covered contracts 
or subcontracts of $7.5 million or more.
    ``Firm-fixed price contract exemption'': The Board is implementing 
this statutory exemption by amending 48 CFR 9903.201-1(b) to revise 
subparagraph (15) to exempt from CAS coverage, firm-fixed-price 
contracts and subcontracts awarded on the basis of adequate price 
competition without submission of cost or pricing data. The Board is 
using the term ``cost or pricing data'' rather than ``certified'' cost 
or pricing data in order to conform to the statutory requirements of 10 
U.S.C. Sec. 2306(h)(1) and 41 U.S.C. Sec. 254(b), which defines ``Cost 
or pricing data'' as data that requires certification.
    ``Types of CAS coverage'': 48 CFR 9903.201-2(a) is amended by 
revising the dollar threshold for ``full CAS coverage'' from $25 
million to $50 million, and deleting the requirement that to be subject 
to ``full CAS coverage'', that a contractor or subcontractor have 
received at least one contract or subcontract that exceeded $1 million 
(the previous ``trigger contract'' amount for initiation of ``full CAS 
coverage''). 48 CFR 9903.201-2(b) is amended by revising the definition 
of ``modified CAS coverage'' to indicate that such coverage applies to 
covered contracts and subcontracts where the total value of CAS-covered 
contracts and subcontracts received by a business unit is less than $50 
million. Conforming amendments have also been made to the solicitation 
provisions and contract clauses appearing at 9903.201-3 and 9903.201-4, 
respectively.
    ``Waiver'': 48 CFR 9903.201-5 is amended by revising this section 
to provide for agency CAS waiver authority under certain circumstances. 
``Disclosure requirements'': 48 CFR 9903.202-1(b) is amended by 
revising the dollar amount for disclosure from $25 million to $50 
million, and deleting the requirement that a contractor or 
subcontractor have received at least one contract in excess of $1 
million.

C. Paperwork Reduction Act

    The Paperwork Reduction Act, Public Law 96-511, does not apply to 
this rule, because this rule imposes no paperwork burden on offerors, 
affected contractors and subcontractors, or members of the public which 
requires the approval of OMB under 44 U.S.C. Sec. 3501, et seq. The 
purpose of this rule is to implement Pub. L. 106-65.

D. Executive Order 12866 and the Regulatory Flexibility Act

    This rule serves to eliminate certain administrative requirements 
associated with the application and administration of the Cost 
Accounting Standards by covered government contractors and 
subcontractors. The economic impact on contractors and subcontractors 
is therefore expected to be minor. As a result, the Board has 
determined that this is not a ``major rule'' under the provisions of 
Executive Order 12866, and that a regulatory impact analysis is not 
required. Furthermore, this rule will not have a significant effect on 
a substantial number of small entities because small businesses are 
exempt from the application of the Cost Accounting Standards. 
Therefore, this rule does not require a regulatory flexibility analysis 
under the Regulatory Flexibility Act of 1980.

E. Public Comments

    This final rule is based upon the Board's interim rule that was 
issued on February 7, 2000, 65 FR 5990. Thirteen public comments were 
received, including eleven timely comments and two late comments. The 
major comments received and the Board's actions taken in response 
thereto are summarized below:
    Comment: Eight commenters generally supported the interim rule.
    Response: The Board noted these supportive comments.
    Comment: Four commenters opposed the rule, stating their belief 
that it provides too many opportunities for contractors to avoid CAS 
coverage, leaving the Government exposed to undue risk, primarily by 
permitting the use of inconsistent or inappropriate accounting 
conventions.
    Response: The Board noted the commenters concerns. However, this 
rule is designed to implement the requirements of Sec. 802 of the 
National Defense Authorization Act for Fiscal Year 2000, Pub. L. 106-
65. In this respect, the Board believes that it is faithfully 
implementing the requirements of that law.
    Comment: Seven commenters recommended that the Board retain the 
language of the previous CAS exemption found at 48 CFR 9903.201-
1(b)(15), while adding the revised language found in the interim rule 
at 9903.201-1(b)(15), to constitute a new CAS exemption. These 
commenters believe that CAS should not apply regardless of whether a 
TINA waiver or exemption was granted.
    Conversely, four commenters stated that they believed that the 
revised language at 9903.201-1(b)(15) represented a compromise, 
inasmuch as the statutory language at Sec. 802 appears to be designed 
to avoid encouraging contractors to seek TINA

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waivers merely in order to be exempted from CAS requirements.
    Response: Based on the legal, legislative and administrative 
history of this issue (including agency CAS waiver reporting 
requirements), the Board believes that it is adhering to the statutory 
intent of Sec. 802. As such, the language contained in the interim rule 
with respect to 9903.201-1(b)(15) is being adopted in this final rule.
    Comment: Seven commenters recommended revisions to the language at 
9903.201-1(b)(7) to define the term ``currently performing''. Four of 
the seven commenters recommended a definition(s) that would have the 
effect of exempting more contracts from CAS coverage; while three 
commenters recommended definition(s) that would have the effect of 
including more contracts within the scope of CAS coverage.
    Response: The Board believes that the term ``currently performing'' 
is more than adequately defined in the Board's rules at 48 CFR 
9903.301. ``Currently performing'', as used in the Board's rules, means 
that a contractor has been awarded a CAS-covered contract, but has not 
yet received notification of final acceptance of all supplies, services 
and data deliverable under the contract (including options). The Board 
would draw the commenters attention to the existence of this long-
standing definition.
    Comment: The Board also received a number of comments regarding 
additional CAS exemptions, waivers, dollar threshold and applicability 
changes, and other regulatory matters that would have the general 
effect of further reducing CAS applicability to contracts and 
subcontracts. In addition, one commenter opposed the delegation of any 
CAS waiver authority to the procuring agencies.
    Response: While the Board has considered all the comments it has 
received, it is specifically limiting the scope of this rulemaking to 
those items required to be addressed by Sec. 802 of Pub. L. 106-65.

List of Subjects in 48 CFR Part 9903

    Cost accounting standards, Government procurement.

Nelson F. Gibbs,
Executive Director, Cost Accounting Standards Board.

    For the reasons set forth in this preamble, chapter 99 of title 48 
of the Code of Federal Regulations is amended as set forth below:
    1. The authority citation for part 9903 of chapter 99 of title 48 
continues to read as follows:

    Authority: Pub. L. 100-679, 102 Stat 4056, 41 U.S.C. 422.


9903.201  [Amended]

    2. Section 9903.201-1 is amended by revising paragraph (b)(7) and 
revising paragraph (b)(15) to read as follows:


9903.201-1  CAS applicability.

* * * * *
    (b) * * *
    (7) Contracts or subcontracts of less than $7.5 million, provided 
that, at the time of award, the business unit of the contractor or 
subcontractor is not currently performing any CAS-covered contracts or 
subcontracts valued at $7.5 million or greater.
* * * * *
    (15) Firm-fixed-price contracts or subcontracts awarded on the 
basis of adequate price competition without submission of cost or 
pricing data.

    3. Section 9903.201-2 is amended by revising paragraphs (a)(1) and 
(2) and (b)(1) and (2) to read as follows:


9903.201-2  Types of CAS coverage.

    (a) * * *
    (1) Receive a single CAS-covered contract award of $50 million or 
more; or
    (2) Received $50 million or more in net CAS-covered awards during 
its preceding cost accounting period.
    (b) Modified coverage. (1) Modified CAS coverage requires only that 
the contractor comply with Standard 9904.401, Consistency in 
Estimating, Accumulating, and Reporting Costs, Standard 9904.402, 
Consistency in Allocating Costs Incurred for the Same Purpose, Standard 
9904.405, Accounting for Unallowable Costs and Standard 9904.406, Cost 
Accounting Standard--Cost Accounting Period. Modified, rather, than 
full, CAS coverage may be applied to a covered contract of less than 
$50 million awarded to a business unit that received less than $50 
million in net CAS-covered awards in the immediately preceding cost 
accounting period.
    (2) If any one contract is awarded with modified CAS coverage, all 
CAS-covered contracts awarded to that business unit during that cost 
accounting period must also have modified coverage with the following 
exception: if the business unit receives a single CAS-covered contract 
award of $50 million or more, that contract must be subject to full CAS 
coverage. Thereafter, any covered contract awarded in the same cost 
accounting period must also be subject to full CAS coverage.
* * * * *

    4. Section 9903.201-3 is amended by revising the clause heading; by 
revising paragraph (c)(3) in Part I of the clause, by revising the 
CAUTION paragraph following paragraph (c)(4) in Part I of the clause; 
and by revising Part II of the clause, to read as follows:


9903.201-3  Solicitation provisions.

* * * * *
Cost Accounting Standards Notices and Certification (April 2000)
* * * * *

I. Disclosure Statement--Cost Accounting Practices and Certification

* * * * *
    (c) * * *
    (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 $50 million or more 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.
    (4) * * *
    Caution: Offerors currently required to disclose because they were 
awarded a CAS-covered prime contract or subcontract of $50 million or 
more in the current cost accounting period may not claim this exemption 
(4). Further, the exemption applies only in connection with proposals 
submitted before expiration of the 90-day period following the cost 
accounting period in which the monetary exemption was exceeded.

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

    If the offeror is eligible to use the modified provisions of 
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.
    The offeror hereby claims an exemption from the Cost 
Accounting Standards clause under the provisions of 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

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immediately preceding the period in which this proposal was submitted, 
the offeror received less than $50 million in awards of CAS-covered 
prime contracts and subcontracts. 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 $50 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 $50 million or 
more.
* * * * *
    5. Section 9903.201-4 is amended by revising paragraph (c)(1) to 
read as follows:


9903.201-4  Contract clauses.

* * * * *
    (c) Disclosure and Consistency of Cost Accounting Practices. (1) 
The contracting officer shall insert the clause set forth below, 
Disclosure and Consistency of Cost Accounting Practices, in negotiated 
contracts when the contract amount is over $500,000 but less than $50 
million, and the offeror certifies it is eligible for and elects to use 
modified CAS coverage (see 9903.201-2, unless the clause prescribed in 
paragraph (d) of this subsection is used).
* * * * *
    6. Section 9903.201-5 is revised to read as follows:


9903.201-5  Waiver

    (a) The head of an executive agency may waive the applicability of 
the Cost Accounting Standards for a contract or subcontract with a 
value of less than $15 million, if that official determines, in 
writing, that the business unit of the contractor or subcontractor that 
will perform the work--
    (1) Is primarily engaged in the sale of commercial items; and
    (2) Would not otherwise be subject to the Cost Accounting Standards 
under this Chapter.
    (b) The head of an executive agency may waive the applicability of 
the Cost Accounting Standards for a contract or subcontract under 
exceptional circumstances when necessary to meet the needs of the 
agency. A determination to waive the applicability of the Cost 
Accounting Standards by the agency head 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 paragraphs (a) and (b) of this section, to any official below the 
senior policymaking level in the agency.
    (d) The head of each executive agency shall report the waivers 
granted under paragraphs (a) and (b) of this section, for that agency, 
to the Cost Accounting Standards Board, on an annual basis, not later 
than 90 days after the close of the Government's fiscal year.
    (e) Upon request of an agency head or his designee, the Cost 
Accounting Standards Board may waive all or any part of the 
requirements of 9903.201-4(a), Cost Accounting Standards, or 9903.201-
4(c), Disclosure and Consistency of Cost Accounting Practices, with 
respect to a contract subject to the Cost Accounting Standards. Any 
request for a waiver shall describe the proposed contract or 
subcontract for which the waiver is sought and shall contain--
    (1) An unequivocal statement that the proposed contractor or 
subcontractor refuses to accept a contract containing all or a 
specified part of a CAS clause and the specific reason for that 
refusal;
    (2) A statement as to whether the proposed contractor or 
subcontractor has accepted any prime contract or subcontract containing 
a CAS clause;
    (3) The amount of the proposed award and the sum of all awards by 
the agency requesting the waiver to the proposed contractor or 
subcontractor in each of the preceding 3 years;
    (4) A statement that no other source is available to satisfy the 
agency's needs on a timely basis;
    (5) A statement of alternative methods considered for fulfilling 
the need and the agency's reasons for rejecting them;
    (6) A statement of steps being taken by the agency to establish 
other sources of supply for future contracts for the products or 
services for which a waiver is being requested; and
    (7) Any other information that may be useful in evaluating the 
request.
    (f) Except as provided by the Cost Accounting Standards Board, the 
authority in paragraph (e) of this section shall not be delegated.


9903.202  Disclosure requirements.

    7. Section 9903.202-1 is amended by revising paragraphs (b)(1) and 
(2) to read as follows:


9903.202-1  General requirements.

* * * * *
    (b) *  *  *
    (1) Any business unit that is selected to receive a CAS-covered 
contract or subcontract of $50 million or more shall submit a 
Disclosure Statement before award.
    (2) Any company which, together with its segments, received net 
awards of negotiated prime contracts and subcontracts subject to CAS 
totaling $50 million or more in its most recent cost accounting period, 
must submit a Disclosure Statement before award of its first CAS-
covered contract in the immediately following cost accounting period. 
However, if the first CAS-covered contract is received within 90 days 
of the start of the cost accounting period, the contractor is not 
required to file until the end of 90 days.
* * * * *
[FR Doc. 00-14242 Filed 6-8-00; 8:45 am]
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