[Federal Register Volume 72, Number 114 (Thursday, June 14, 2007)]
[Proposed Rules]
[Pages 32829-32830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-11332]



Office of Federal Procurement Policy

48 CFR Part 9903

Cost Accounting Standards Board; Contract Clauses

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

ACTION: Proposed rule with request for comment.


SUMMARY: The Cost Accounting Standards (CAS) Board is proposing to add 
a clause for inclusion in CAS-covered contracts and subcontracts 
awarded to foreign concerns. The Board is taking this action to provide 
a standard clause for use by Government and contractor personnel in 
applying the CAS requirements to contracts and subcontracts awarded to 
foreign concerns.

DATES: Interested parties should submit comments in writing on or 
before August 13, 2007.

ADDRESSES: Due to delays in OMB's receipt and processing of mail, 
respondents are strongly encouraged to submit comments electronically 
to ensure timely receipt. Comments should indicate case number CAS-
2007-01N. 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, Corel 
WordPerfect, or as a pdf. 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. If you must submit via regular mail, please do so at 
Office of Federal Procurement Policy, 725 17th Street, NW., Room 9013, 
Washington, DC 20503, ATTN: Laura Auletta.

Accounting Standards Board, 725 17th Street, NW., Room 9013, 
Washington, DC 20503 (telephone: 202-395-3256).


A. Background

    Prior to November 4, 1993, modified CAS coverage required a 
contractor to comply with only CAS 401 and CAS 402. Similarly, 
9903.201-1(b)(4) required that foreign concerns comply with only CAS 
401 and 402. Thus, prior to November 4, 1993, the contract clause at 
9903.201-4(c) was used for both contracts with modified coverage and 
contracts with foreign concerns.
    However, on November 4, 1993, the Board revised the definition of 
modified coverage to include CAS 405 and 406, so that modified coverage 
currently includes CAS 401, 402, 405, and 406 (see 9903.201-2(b)). In 
conjunction with the revised definition of modified coverage, the Board 
also amended the clause at 9903.201-4(c) to include CAS 405 and 406. 
However, the Board did not change the requirement that foreign concerns 
comply with only CAS 401 and 402. As a result, the contract clause at 
9903.201-4(c) can no longer be used for foreign concerns without 
modification by the parties.
    The Board has developed a clause for use in contracts with foreign 
concerns that will not require modification. Except that it includes 
only CAS 401 and 402, this clause is identical to the clause currently 
applicable to contracts subject to modified coverage. To effect this 
change, the proposed rule would amend 9903.201-4, Contract Clauses, to 
include the new clause at (f), Disclosure and Consistency of Cost 
Accounting Practices--Foreign Concerns.

B. Paperwork Reduction Act

    The Paperwork Reduction Act, Public Law 96-511, does not apply to 
this rulemaking, 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. 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 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, 5 U.S.C. 601, et seq.

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

    Government procurement, Cost Accounting Standards.

Paul A. Denett,
Administrator, Office of Federal Procurement Policy.

    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:


    1. Section 9903.201-4 is proposed to be amended by adding a new 
paragraph (f). The proposed paragraph will read as follows:

9903.201-4  Contract Clauses.

* * * * *
    (f) Disclosure and Consistency of Cost Accounting Practices--
Foreign Concerns.
    (1) The contracting officer shall insert the clause set forth 
below, Disclosure and Consistency of Cost Accounting Practices--Foreign 
Concerns, in negotiated contracts when the contract is with a foreign 
concern and the contract is not otherwise exempt under 9903.201-1 (see 
    (2) The clause below requires the contractor to comply with 
9904.401 and 9904.402, to disclose (if it meets certain requirements) 
actual cost accounting practices, and to follow consistently

[[Page 32830]]

disclosed and established cost accounting practices.
Disclosure and Consistency of Cost Accounting Practices--Foreign 
Concerns (DATE)
    (a) The Contractor, in connection with this contract, shall--
    (1) Comply with the requirements of 9904.401, Consistency in 
Estimating, Accumulating, and Reporting Costs; and 9904.402, 
Consistency in Allocating Costs Incurred for the Same Purpose, in 
effect on the date of award of this contract, as indicated in Part 
    (2) (CAS-covered Contracts Only) If it is a business unit of a 
company required to submit a Disclosure Statement, disclose in writing 
its cost accounting practices as required by 9903.202-1 through 
9903.202-5. If the Contractor has notified the Contracting Officer that 
the Disclosure Statement contains trade secrets and commercial or 
financial information which is privileged and confidential, the 
Disclosure Statement shall be protected and shall not be released 
outside of the Government.
    (3)(i) Follow consistently the Contractor's cost accounting 
practices. A change to such practices may be proposed, however, by 
either the Government or the Contractor, and the Contractor agrees to 
negotiate with the Contracting Officer the terms and conditions under 
which a change may be made. After the terms and conditions under which 
the change is to be made have been agreed to, the change must be 
applied prospectively to this contract, and the Disclosure Statement, 
if affected, must be amended accordingly.
    (ii) The Contractor shall, when the parties agree to a change to a 
cost accounting practice and the Contracting Officer has made the 
finding required in 9903.201-6(c) that the change is desirable and not 
detrimental to the interests of the Government, negotiate an equitable 
adjustment as provided in the Changes clause of this contract. In the 
absence of the required finding, no agreement may be made under this 
contract clause that will increase costs paid by the United States.
    (4) Agree to an adjustment of the contract price or cost allowance, 
as appropriate, if the Contractor or a subcontractor fails to comply 
with the applicable CAS or to follow any cost accounting practice, and 
such failure results in any increased costs paid by the United States. 
Such adjustment shall provide for recovery of the increased costs to 
the United States, together with interest thereon computed at the 
annual rate established under section 6621(a)(2) of the Internal 
Revenue Code of 1986 (26 U.S.C. 6621(a)(2)) for such period, from the 
time the payment by the United States was made to the time the 
adjustment is effected.
    (b) If the parties fail to agree whether the Contractor has 
complied with an applicable CAS rule, or regulation as specified in 
Parts 9903 and 9904 and as to any cost adjustment demanded by the 
United States, such failure to agree will constitute a dispute under 
the Contract Disputes Act (41 U.S.C. 601).
    (c) The Contractor shall permit any authorized representatives of 
the Government to examine and make copies of any documents, papers, and 
records relating to compliance with the requirements of this clause.
    (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, except that--
    (1) 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.
    (2) This requirement shall apply only to negotiated subcontracts in 
excess of $650,000.
    (3) 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)

[FR Doc. E7-11332 Filed 6-13-07; 8:45 am]