[Federal Register Volume 70, Number 237 (Monday, December 12, 2005)]
[Proposed Rules]
[Pages 73423-73426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-23647]


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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

48 CFR Parts 9901 and 9903


Cost Accounting Standards Board (CAS) Changes to Acquisition 
Thresholds

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

ACTION: Proposed rule with request for comment.

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SUMMARY: The Cost Accounting Standards (CAS) Board is proposing to 
adjust the CAS application and full coverage thresholds for inflation 
in accordance with section 807 of the Ronald W. Reagan National Defense 
Authorization Act for Fiscal Year 2005 (Pub. L. 108-375).

DATES: Comments upon this proposed rule must be in writing and must be 
received by February 10, 2006.

ADDRESSES: Due to delays in OMB's receipt and processing of mail, 
respondents are strongly encouraged to submit comments electronically 
to ensure timely receipt. Electronic comments may be submitted to 
[email protected]. Please put the full body of your comments in the 
text of the electronic message and also as an attachment readable in 
either MS Word or Corel WordPerfect. Please include your name, title, 
organization, postal address, telephone number, and e-mail address in 
the text of the message. Comments may also be submitted via facsimile 
to (202) 395-5105.

FOR FURTHER INFORMATION CONTACT: David J. Capitano, Cost Accounting 
Standards Board (telephone: 703-847-7486).

SUPPLEMENTARY INFORMATION:

A. Background

Analysis of Statutory Acquisition-Related Thresholds

    Section 807 provides for adjustment every 5 years of acquisition-
related thresholds, except for thresholds set by the Davis-Bacon Act, 
Service Contract Act, and trade agreements. The statute requires that 
the adjustment be based on inflation, using the Consumer Price Index 
(CPI) for all-urban consumers. Acquisition-related thresholds in 
statutes that were in effect on October 1, 2000, are subject to 5 years 
of inflation. For purposes of this proposed rule, the calculation of 
escalation is based on the CPI from December 1999 to December 2004 (the 
most recent available data), which currently computes at 1.1307, as 
determined by the Federal Acquisition Regulatory (FAR) Council.
    Once the escalation factor is applied to the acquisition-related 
threshold, the law requires rounding of the calculated threshold as 
follows:

< $10,000.............................  Nearest $500
$10,000-<$100,000.....................  Nearest $5,000
$100,000-<$1,000,000..................  Nearest $50,000
$1,000,000 or more....................  Nearest $500,000
 

    Applying the 1.1307 factor and the rounding criteria described 
above, the CAS thresholds have been revised as follows:
    (a) For contract applicability, from $500,000 to $550,000;
    (b) For applicability to a business unit, from $7.5 million to $8.5 
million;
    (c) For waiver authority, from $15 million to $17 million;
    (d) For full coverage, from $50 million to $56.5 million;
    (e) For disclosure statement submissions by a company (other than 
educational institutions), from $50 million to $56.5 million;
    (f) For disclosure statement submissions by a segment of a company, 
from $10 million to $11.5 million; and
    (g) For disclosure statement submissions by an educational 
institutions, from $25 million to $28.3 million.

B. Paperwork Reduction Act

    The Paperwork Reduction Act, Public Law 96-511, does not apply to 
this rulemaking, because this rule imposes

[[Page 73424]]

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. 3501, et seq.

C. Executive Order 12866 and the Regulatory Flexibility Act

    The economic impact of this rule on contractors and subcontractors 
is expected to be minor. As a result, the Board has determined that 
this rule is not significant under the provisions of Executive Order 
12866, and that a regulatory impact analysis will not be required. 
Furthermore, this rule will not have a significant impact on a 
substantial number of small businesses 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.

D. Public Comments

    Interested persons are invited to participate by submitting data, 
views or arguments with respect to this proposed rule. All comments 
must be in writing and submitted to the address indicated in the 
ADDRESSES section.

List of Subjects in 48 CFR Part 9903

    Accounting, Government procurement.

Joshua B. Bolten,
Director.
    For the reasons set forth in this preamble, chapter 99 of title 48 
of the Code of Federal Regulations is proposed to be amended as set 
forth below:

PART 9901--RULES AND PROCEDURES

    1. The authority citation for part 9901 is revised to read as 
follows:

    Authority: 41 U.S.C. 422(f).

    2. Revise section 9901.306 to read as follows:


Sec.  9901.306  Standards applicability.

    Cost Accounting Standards promulgated by the Board shall be 
mandatory for use by all executive agencies and by contractors and 
subcontractors in estimating, accumulating, and reporting costs in 
connection with pricing and administration of, and settlement of 
disputes concerning, all negotiated prime contract and subcontract 
procurements with the United States Government in excess of $550,000, 
other than contracts or subcontracts that have been exempted by the 
Board's regulations.

PART 9903--CONTRACT COVERAGE

    3. The authority citation for part 9903 continues to read as 
follows:

    Authority: 41 U.S.C. 422(f).

Subpart 9903.2--CAS Program Requirements

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


Sec.  9903.201-1  CAS applicability.

* * * * *
    (b) * * *
    (2) Negotiated contracts and subcontracts not in excess of 
$550,000. For purposes of this paragraph (b)(2) an order issued by one 
segment to another segment shall be treated as a subcontract.
* * * * *
    (7) Contracts or subcontracts of less than $8.5 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 $8.5 million or greater.
* * * * *
    5. Section 9903-201-2 is amended by revising paragraphs (a)(1) and 
(2), (b)(1) and (2), and (c)(3) and (5) to read as follows:


Sec.  9903.201-2  Types of CAS coverage.

    (a) * * *
    (1) Receive a single CAS-covered contract award of $56.5 million or 
more;
    (2) Receive $56.5 million or more in net CAS-covered awards during 
its preceding 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 if less than 
$56.5 million awarded to a business unit that received less than $56.5 
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 
exceptions: if the business unit receives a single CAS-covered contract 
award of $56.5 million or more, the 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.
* * * * *
    (c) * * *
    (3) Applicable Standards. Coverage for educational institutions 
requires that the business unit comply with all of the CAS specified in 
part 9905 that are in effect on the date of the contract award and with 
any CAS that become applicable because of later award of a CAS-covered 
contract. This coverage applies to business units that receive 
negotiated contracts in excess of $550,000, except for CAS-covered 
contracts awarded to FFRDCs operated by an educational institution.
* * * * *
    (5) Contract Clauses. The contract clause at 9903.201-4(e) shall be 
incorporated in each negotiated contract and subcontract awarded to an 
educational institution when the negotiated contract or subcontract 
price exceeds $550,000. For CAS-covered contracts awarded to an FFRDC 
operated by an educational institution, however, the full or modified 
CAS contract clause specified at 9903.201-4(a) or (c), as applicable, 
shall be incorporated.
* * * * *
    6. Section 9903-201-3 is amended by revising the clause heading; by 
revising paragraphs (a) and (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:


Sec.  9903.201-3  Solicitation provisions.

* * * * *

Cost Accounting Standards Notices and Certification (October 2005)

* * * * *

I. Disclosure Statement--Cost Accounting Practices and 
Certification

    (a) Any contract in excess of $550,000 resulting from this 
solicitation, except for those contracts which are exempt as 
specified in 9903.201-1.
* * * * *
    (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 $56.5 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

[[Page 73425]]

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 $56.5 
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 Contract 
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 immediately preceding the period in which 
this proposal was submitted, the offeror received less than $56.5 
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 $56.5 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 $56.5 
million or more.
* * * * *
    7. Section 9903.201-4 is amended by revising:
    A. The clause heading in paragraph (a)(2);
    B. Paragraph (d) of the clause in paragraph (a);
    C. Paragraph (c)(1);
    D. The clause heading in paragraph (c)(2);
    E. Paragraph (d)(2) of the clause in paragraph (c);
    F. The clause heading in paragraph (e)(2); and
    G. Paragraph (d) introductory text and (d)(2) of the clause in 
paragraph (e).
    The revisions read as follows:


9903.201-4  Contract clauses.

    (a) * * *
    (2) * * *

Cost Accounting Standards (October 2005)

* * * * *
    (d) The contractor shall include in all negotiated subcontracts 
which the Contractor enters into, the substance of this clause, 
except paragraph (b), and shall require such inclusion in all other 
subcontracts, of any tier, including the obligation to comply with 
all CAS in effect on the subcontractor's award date or if the 
subcontractor has submitted cost or pricing data, on the date of 
final agreement on price as shown on the subcontractor's signed 
Certificate of Current Cost or Pricing Data. If the subcontract is 
awarded to a business unit which pursuant to 9903.201-2 is subject 
to other types of CAS coverage, the substance of the applicable 
clause set forth in 9903.201-4 shall be inserted. This requirement 
shall apply only to negotiated subcontracts in excess of $550,000, 
except that the requirement shall not apply to negotiated 
subcontracts otherwise exempt from the requirement to include a CAS 
clause as specified in 9903.201-1.

(End of Clause)
* * * * *
    (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 $550,000 but less than $56.5 
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).
    (2) * * *

Disclosure and Consistency of Cost Accounting Practices (October 2005)

* * * * *
    (d) * * *
    (2) This requirement shall apply only to negotiated subcontracts 
in excess of $550,000.
* * * * *
    (e) Cost Accounting Standards--Educational Institutions. * * *
    (2) * * *

Cost Accounting Standards--Educational Institution (October 2005)

* * * * *
    (d) The Contractor shall include in all negotiated subcontracts 
which the Contractor enters into, the substance of this clause, 
except paragraph (b), and shall require such inclusion in all other 
subcontracts, of any tier, including the obligation to comply with 
all applicable CAS in effect on the subcontractor's award date or if 
the subcontractor has submitted cost or pricing data, on the date of 
final agreement on price as shown on the subcontractor's signed 
Certificate of Current Cost or Pricing Data, except that:
    (1) * * *
    (2) This requirement shall apply only to negotiated subcontracts 
in excess of $550,000.
* * * * *
    8. Section 9903.201-5 is amended by revising paragraph (a) 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 $17 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.
* * * * *


9903.202  Disclosure requirements.

    9. Section 9903-202-1 is amended by revising (b)(1) and (2); (c); 
and (f)(2)(i), (ii), and (iii) to read as follows:


9903.202-1  General requirements.

* * * * *
    (b) Completed Disclosure Statements are required in the following 
circumstances:
    (1) Any business unit that is selected to receive a CAS-covered 
contract or subcontract of $56.5 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 $56.5 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.
    (c) When a Disclosure Statement is required, a separate Disclosure 
Statement must be submitted for each segment whose costs included in 
the total price of any CAS-covered contract or subcontract exceed 
$550,000, unless:
    (1) The contract or subcontract is of the type or value exempted by 
9903.201-1 or
    (2) In the most recently completed cost accounting period the 
segment's CAS-covered awards are less than 30 percent of total segment 
sales for the period and less than $11.5 million.
* * * * *
    (f) Educational institutions-disclosure requirements.
    (1) * * *
    (2) * * *
    (i) Any business unit of an educational institution that is 
selected to receive a CAS-covered contract or subcontract in excess of 
$550,000 and is part of a college or university location

[[Page 73426]]

listed in Exhibit A of Office of Management and Budget (OMB) Circular 
A-21 shall submit a Disclosure Statement before award. A Disclosure 
Statement is not required, however, if the listed entity can 
demonstrate that the net amount of Federal contract and financial 
assistance awards received during its immediately preceding cost 
accounting period was less than $28.5 million.
    (ii) Any business unit that is selected to receive a CAS-covered 
contract or subcontract of $28.5 million or more shall submit a 
Disclosure Statement before award.
    (iii) Any educational institution which, together with its 
segments, received net awards of negotiated prime contracts and 
subcontracts subject to CAS totaling $28.5 million or more in its most 
recent cost accounting period, of which, at least one award exceeded $1 
million, 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 institution is 
not required to file until the end of 90 days.
* * * * *
[FR Doc. 05-23647 Filed 12-9-05; 8:45 am]
BILLING CODE 3110-01-P