[Federal Register Volume 81, Number 133 (Tuesday, July 12, 2016)]
[Notices]
[Pages 45160-45164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16382]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

[OMB Control No. 9000-0129; Docket 2016-0053; Sequence 8]


Submission for OMB Review; Cost Accounting Standards 
Administration

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

ACTION: Notice of request for extension of an existing OMB clearance.

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SUMMARY: Under the provisions of the Paperwork Reduction Act, the 
Regulatory Secretariat Division will be submitting to the Office of 
Management and Budget (OMB) a request to review and approve an 
extension of a previously approved information collection requirement 
concerning cost accounting standards administration. A notice was 
published in the Federal Register at 81 FR 7343 on February 11, 2016. 
One letter containing numerous comments was received.

DATES: Submit comments on or before August 11, 2016.

ADDRESSES: Submit comments regarding this burden estimate or any other 
aspect of this collection of information, including suggestions for 
reducing this burden to: Office of Information and Regulatory Affairs 
of OMB, Attention: Desk Officer for GSA, Room 10236, NEOB, Washington, 
DC 20503. Additionally submit a copy to GSA by any of the following 
methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching the OMB 
control number. Select the link ``Submit a Comment'' that corresponds 
with ``Information Collection 9000-0129, Cost Accounting Standards 
Administration''. Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``Information Collection 9000-0129, Cost Accounting Standards 
Administration'' on your attached document.
     Mail: General Services Administration, Regulatory 
Secretariat Division (MVCB), 1800 F Street, NW., Washington, DC 20405. 
ATTN: Ms. Flowers/IC 9000-0129, Cost Accounting Standards 
Administration.
    Instructions: Please submit comments only and cite Information 
Collection 9000-0129, Cost Accounting Standards Administration, in all 
correspondence related to this collection. Comments received generally 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Kathlyn Hopkins, Procurement 
Analyst, Office of Acquisition Policy, GSA, 202-969-7226, or email 
[email protected].

SUPPLEMENTARY INFORMATION:

A. Purpose

    FAR Subpart 30.6 and the provision at 52.230-6 include pertinent 
rules and regulations related to the Cost Accounting Standards (CAS), 
along with administrative policies and procedures. These require 
companies performing CAS-covered contracts to submit notifications and 
descriptions of certain cost accounting practice changes, including 
revisions to their Disclosure Statements, if applicable. The frequency 
of this collection is variable, as detailed below.
    FAR 52.230-6 requires contractors to submit to the cognizant 
Contracting Officer a description of any cost accounting practice 
change, the total potential impact of the change on contracts 
containing a CAS provision, a general dollar magnitude or detailed 
cost-impact proposal of the change which identifies the potential shift 
of costs among CAS-covered contracts by contract type (i.e., firm 
fixed-price, incentive cost-plus-fixed-fee, etc.) and other contractor 
business activity.

[[Page 45161]]

B. Discussion and Analysis

    One respondent submitted public comments on the extension of the 
previously approved information collection. The respondent offered 
numerous comments, which are organized topically and analyzed below:
    Comment #1 on burdens, number of DoD respondents: The respondent 
posited that the Government's estimate of 740 respondents [working 
under CAS-covered contracts] for the Department of Defense (DoD) was 
overstated, given that the estimate reflected the number of unique DUNS 
numbers. The respondent stated that the number of respondents should be 
lower, as 740 unique DUNS numbers would equate to approximately 500 
contractor Business Units and Segments, plus approximately 150 
contractor Home Offices, resulting in an estimate of 650 DoD 
respondents.
    Response: The Government estimate was based on data from the 
Defense Contract Audit Agency's (DCAA) Management Information System, 
which shows 740 active contractors (615 with full CAS coverage, 125 
with modified CAS coverage). (See also Comment #2, which addresses 
respondents not overseen by DCAA.) Given the increased granularity the 
respondent provided vis-[agrave]-vis Business Units, Segments, and 
contractor Home Offices, the Government has incorporated the 650 figure 
in its revised estimate of the number of DoD respondents.
    Comment #2 on burdens, number of civilian agency respondents: The 
respondent stated that the initial Government estimate of 100 
additional contractors under civilian-agency cognizance was 
significantly understated. Based on informal data gathering, the 
respondent estimated that non-DCAA entities were serving as the 
Cognizant Federal Agency for a total of 400 additional Business Units, 
Segments, and Home Offices.
    Response: The Government estimate of the number of respondents 
working under CAS-covered contracts not overseen by DCAA was based on 
expert judgment, indicating that DCAA has cognizance over nearly 90% of 
the CAS-covered contractors, and noting that some contractors overseen 
by DCAA also have civilian agency contracts. Considering the 
respondent's estimate of 400 additional contractors with CAS-covered 
contracts, the Government extracted a random sample from five years of 
Federal Procurement Data System (FPDS) records on potentially CAS-
covered contractors. Of that sample, 70% were identified as DoD 
contractors and 30% were identified as civilian-agency contractors. The 
subset of civilian-agency contractors and the list of DCAA-overseen 
contractors overlapped only slightly (2% of the civilian-agency 
contractors in the random sample were overseen by DCAA). Therefore, 
starting with the 650 DoD respondents, as accepted via the response to 
Comment #1 above (which equates to 72% of the total), the Government 
estimates that the total number of respondents is 903, leaving 253 
under other-than-DCAA cognizance.
    Comment #3 on burdens, number of responses: Defining a ``response'' 
to mean a contractor's formal written submission to the Government 
pursuant to the terms of FAR 52.230-6, the respondent noted that the 
clause requires the following significant types of responses: (a) 
Advance notifications or requests for retroactive application of cost 
accounting practice changes (FAR 52.230-6(b)); (b) Revised Cost 
Accounting Standards Board (CASB) Disclosure Statements (FAR 52.230-
6(b)), including transmittal letter, revision summary; (c) Adequacy 
review/walkthrough and support; (d) General Dollar Magnitude (GDM) 
proposals (FAR 52.230-6(c)(1)), including periodic updates as may be 
requested by the Government, Audit walkthroughs, data requests, and 
other audit support, Responses to audit reports, Negotiations; (e) 
Detailed Cost Impact (DCI) proposals (FAR 52.230-6(c)(2)), including 
periodic updates as may be requested by the Government; audit 
walkthroughs, data requests, and other audit support; responses to 
audit reports; negotiations; (f) Requests for Desirable Changes (FAR 
52.230-6(c)(3)&(4)), including requests for additional data and 
requests for additional analysis.
    Discussions among the organizations represented by the respondent 
indicate that items (a), (b) and (c), as listed above, are produced 
annually. Many noted that DoD often requests item (e), which would 
bring the number of responses to four annually. Some noted that they 
have experienced as many as six to eight responses annually, but this 
was not common. Still, the respondent's assessment suggests the 
Government's initial estimate of 2.27 responses per respondent per year 
was low, and recommended an estimate of 3.5 responses per year.
    Response: Based upon the data collected from the organizations 
(primarily DoD contractors) for whom the respondent is speaking, the 
number of responses should fall between 3 and 4 annually. Based upon 
expert assessment of all Government contractors with CAS-covered 
contracts, the number of responses should fall between 2 and 2.5 
annually. Given that there are more DoD contractors with CAS-covered 
contracts, the revised Government estimate uses a blend of the two 
assessments: 3 responses annually per respondent.
    Comment #4 on burdens, average hours per response: The respondent 
acknowledged that, of the three factors bearing upon the Government's 
estimate, this factor is the most difficult to reckon. Of the types of 
responses listed above, some are more time-intensive than others. 
Notifications and Disclosure Statement revisions, although cumbersome, 
require much less time than GDM, DCI, and Desirable Change proposals. 
Some circumstances that significantly influence burden per response 
include: (a) The type of cost accounting practice change (i.e., 
required, unilateral, correction of noncompliance); (b) the nature of 
the change (e.g., change in direct vs. indirect, changes in the 
composition of cost pools, change in the nature or composition of 
allocation bases, changes in how costs are measured, etc.); (c) the 
number of changes that become effective; (d) where the change occurs 
(within a Business Unit/Segment, at the Home office--thereby impacting 
all associated segments); (e) number of proposal updates requested by 
the Government after initial submission; (f) time between initial 
submission and audit; and (g) the timing, duration, depth, and quality 
of audit.
    The respondent reported that 175 hours may understate the effort 
necessary to prepare certain types of responses (e.g., GDMs, DCIs), but 
acknowledged that notifications and Disclosure Statement revisions 
generally took less time to prepare. Although the respondent suggested 
that the Government's estimate of hours per response was low, there was 
insufficient quantitative basis to recommend an alternative estimate.
    Response: The 175-hour estimate is representative of the average 
level of effort for the most commonly needed artifacts, according to a 
Government subject matter expert.
    All in all, the initial Government estimate was increased in two 
areas: (1) Number of respondents, and (2) number of annual responses 
per respondent. The number of hours per response remained the same.
    The respondent offered several recommendations aimed at reducing 
the number of responses and the average hours per response, while also 
reducing the Government's burdens without any increase in financial 
risk. While the respondent generally affirmed the

[[Page 45162]]

necessity of collecting this information, comments were received on 
ways to improve the quality, utility, and clarity of the information 
collection, including the use of information technology to ease the 
collection burden, as detailed below.
    Comment A, 60-day advance notice of cost accounting practice 
changes (FAR 52.230-6(b)). Cost accounting practice changes are not 
subject to the Government's prospective review and approval (see FAR 
30.603-2(a)(1)). The Government reviews the adequacy of new cost 
accounting practices and evaluates them for compliance with the 
Standards. Because there is no approval process, the FAR 52.230-6(b) 
advance notification (60 days) requirement lacks practical utility.
    To the extent the Government needs to know about a contractor's 
cost accounting practices for contract price negotiations, the Truth in 
Negotiations Act (TINA) requires contractors to maintain a current, 
accurate, and complete Disclosure Statement because it is ``cost or 
pricing data.'' TINA provides remedies for defective data if the 
Government relies on a non-current cost accounting disclosure to its 
detriment.
    Additionally, if TINA does not apply to a negotiated award (as is 
the case with competitively awarded cost-type contracts) but the 
Government nevertheless relies to its detriment on a contractor's non-
current cost accounting disclosures, then FAR 30.603-2(c)(2) allows the 
Government to assert a CAS 401 non-compliance. FAR 52.230-6(g) 
prescribes the process for resolving non-compliances.
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the Cost Accounting Standards Board on the 
matter, which falls outside the scope of the current information 
collection. There are no changes to the burden estimates based on this 
comment.
    Comment B, Retroactive cost accounting practice changes (FAR 
52.230-6(b)(3)). Retroactive cost accounting practice changes (only 
within a contractor's current fiscal year) are subject to Government 
review and approval (see FAR 30.603-2(d)). This requirement has no 
practical utility because the process to measure the cost impact of 
cost accounting practice changes includes all ``affected'' CAS-covered 
contracts regardless of whether a change is prospective, retroactive, 
or both. Additionally, it makes no sense that retroactive unilateral 
cost accounting changes require Government approval but prospective 
changes and corrections of non-compliances do not. Moreover, if a 
contractor priced and negotiated a CAS-covered contract using a cost 
accounting practice that it contemplated changing (and ultimately did 
change) retroactively during the fiscal year, then the remedies 
provided by CAS and TINA are the same--a price/cost reduction. Thus, 
the existence of a Government approval process has no bearing on these 
statutory remedies.
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the Cost Accounting Standards Board on the 
matter, which falls outside the scope of the current information 
collection. There are no changes to the burden estimates based on this 
comment.
    Comment C, Estimates of future cost impacts in GDM and DCI 
proposals (FAR 52.230-6(f)). Estimating the cost impact of cost 
accounting practice changes on affected CAS-covered contracts for 
future periods aligns with the CAS prohibition against the Government 
paying ``increased costs in the aggregate'' relative to certain types 
of changes. However, these estimates are difficult and time consuming, 
and this seemingly logical requirement has little or no practical 
utility because the Government rarely resolves cost impact proposals 
until most (or all) actual costs have been incurred. The respondent 
speculated that this situation occurs for two primary reasons: (1) 
Estimates are notoriously difficult for the Government to evaluate and 
negotiate, and (2) the Government lacks the resources (and a regulatory 
mandate) to resolve cost impact proposals timely. Making the utility of 
these forward-looking estimates even less practical, the respondent 
reported that the Government routinely requests updates to previously-
submitted GDMs and DCIs until nearly all estimates have become actuals 
due to the passage of time.
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the CASB on the matter, which falls outside the 
scope of the current information collection. There are no changes to 
the burden estimates based on this comment.
    Comment D, Streamlining the notification protocol. The respondent, 
while maintaining that the current protocol for notifying the 
Government of cost accounting practice changes lacks practical utility, 
agreed that contractors must notify the Government about changes in 
cost accounting practices. The respondent maintained that contractors 
should be free to change accounting practices prospectively, 
retroactively within the current accounting period, and retroactively 
as needed to correct a noncompliance, stressing that advance notice is 
wholly unnecessary, and suggesting the below protocol that would reduce 
the annual burden on both contractors and the Government:
    1. Contractors must notify the Government of prospective cost 
accounting practice changes on or before the effective date of the 
change. For retroactive changes within the cost accounting period and 
corrections of non-compliances, contractors must provide notice on or 
before the effective date of the change. Modification of the current 
notification format or the evaluation of cost impacts (including 
materiality) is not needed.
    2. Contractors also summarize all changes effective or implemented 
within the cost accounting period in their annual Final Indirect Cost 
Rate Proposals. This is an existing requirement for most Respondents 
pursuant to FAR 52.216-7(d)(2)(iii)(M). For contractors who do not 
perform contracts containing FAR 52.216-7, add a requirement at FAR 
52.230-6 that contractors nevertheless must report all cost accounting 
practice changes annually, not later than 6 months after the 
contractor's cost accounting period ends.
    3. For cost accounting practice changes that occur during the cost 
accounting period, contractors must update their CASB Disclosure 
Statements at least once annually (within 90 days after the end of the 
cost accounting period), or no later than the first Certificate of 
Current Cost or Pricing Data after the changes become effective (often 
be in connection with Forward Pricing Rate Proposals). Non-disclosure 
of cost accounting practice changes at the time of a price negotiation 
based on Cost Analysis (see FAR 15.404-1(c)) may constitute a CAS 401 
non-compliance at the contracting officer's discretion.
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the CASB on the matter, which falls outside the 
scope of the current information collection. There are no changes to 
the burden estimates based on this comment.
    Comment E, Option (or preference) for evaluating and negotiating 
cost impacts in arrears. The current regulatory protocol for measuring 
and resolving cost impacts implicitly prefers promptness after 
notification. But as noted above, actual practice essentially negates 
the utility of this approach. The respondent welcomes the prompt 
resolution of cost accounting practice changes in return for the 
significant burden of preparing forward-looking

[[Page 45163]]

cost impact estimates. However, if the Government is either unwilling 
or unable to resolve cost impacts promptly, the parties would both 
benefit from either a preference for, or an explicit election of, 
resolving cost impacts in arrears. For example:
    1. Allow contractors to prepare cost impact proposals annually, to 
include all cost accounting practice changes summarized on Schedule M 
of each Respondent's Final Indirect Cost Rate Proposal. Cost impact 
proposals (either GDM or DCI, at the Government's request) would be due 
within nine months (or other mutually agreeable period) after the end 
of each cost accounting period (if changes occurred).
    2. Modify the current cost impact protocol to establish an explicit 
period (e.g., 180 days) for the Government to evaluate and negotiate 
after the initial receipt of a contractor's GDM or DCI proposal. If the 
Government does not act during this period, the cost impact proposal 
automatically becomes subject to negotiation in arrears (i.e., once 
substantially all costs have been incurred on affected contracts). This 
requirement would significantly reduce contractors' burden with 
periodically updating their proposals, as well as the Government's 
burden of auditing estimates that become stale as time passes.
    3. Allow the Government and the contractor to elect to resolve cost 
impacts in arrears.
    4. Contractors and the Government can use, without significant 
modification, the existing annual Final Indirect Cost Rate Proposal 
process (FAR 52.216-7(d)) to track both cost accounting practice 
changes and CAS-covered contracts affected by the change(s). 
Contractors who do not submit annual Final Indirect Cost Rate Proposals 
will nevertheless be required to report changes annually (see 
recommendation above).
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the CASB on the matter, which falls outside the 
scope of the current information collection. There are no changes to 
the burden estimates based on this comment.
    Comment F, Streamlining the cost impact resolution protocol at FAR 
30.606(a)(3). Of all changes made to FAR Part 30 in 2005, the 
prohibitions against ``combining'' the impacts of certain changes 
established at FAR 30.606(a)(3)(i)&(ii) not only add significant burden 
on contractors, but also create significant inequity. When contractors 
make multiple simultaneous cost accounting practice changes (very 
common), these cumbersome and onerous rules require contractors to 
measure each change separately. Therefore, a single GDM or DCI proposal 
becomes multiple proposals--one for each change. This is unnecessary 
given that the spirit of the statutory CAS cost impact process is 
merely to prevent the Government from paying increased costs in the 
aggregate.
    In this regard, for both unilateral changes and corrections of non-
compliances, the CAS administration regulations at CFR 9903.201-
1(b)&(d) provide that (1) the Contracting Officer shall make a finding 
that the contemplated contract price and cost adjustments will protect 
the United States from payment of increased costs, in the aggregate and 
(2) that the net effect of the adjustments being made does not result 
in the recovery of more than the estimated amount of such increased 
costs. The distinctions created in FAR 30.606(a)(3) are inconsistent 
with these CAS regulations, create significant unnecessary burden for 
both parties, and cause significant negotiation challenges as the 
Government often attempts to recover more than increased costs in the 
aggregate as contemplated by the CAS regulations. To relieve the 
unnecessary burden FAR 30.606(a)(3) places on preparing and evaluating 
GDM and DCI proposals, and to foster equitable resolutions, the 
respondent recommended:
    1. Allow required changes, unilateral changes, and desirable 
changes to be combined.
    2. Allow prospective corrections of non-compliances to be combined 
with other types of changes if made simultaneously. (The respondent 
noted that retroactive corrections of noncompliances that impact prior 
cost accounting periods cannot be combined with other types of changes, 
since because unilateral changes can only be made retroactively to the 
beginning of the current cost accounting period.) This topic is 
discussed in a recent Armed Services Board of Contract Appeals matter. 
In the Appeal of Raytheon (ASBCA Nos. 57801, 57803, 58068), the Board 
provides a history of how combinations were once permitted.
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the CASB on the matter, which falls outside the 
scope of the current information collection. There are no changes to 
the burden estimates based on this comment.
    Comment G, Eliminating the Government's ability to double-recover 
costs under FAR 30.604(h). The current construct of FAR 30.604(h) 
defines an ``increased cost to the Government'' as either:
    An increase in costs allocated to cost-reimbursable contracts, or a 
decrease in costs allocated to fixed price contracts. ``Increased cost 
in the aggregate'' is determined by adding these two amounts.
    While this provision seems to make sense at first glance, practical 
experience often yields inequitable results. For example, if a 
contractor changes a cost accounting practice that shifts $10 away from 
a fixed price contract (i.e., costs decrease) and onto a cost-
reimbursable contract (i.e., costs increase), the regulatory regime at 
FAR 30.604(h) concludes that ``increased costs in the aggregate'' is 
$20. Of course, this is simply not true; $10 has not magically become 
$20 and regulations that create this kind windfall to the Government 
should be modified to curtail it. In the Appeal of Raytheon (ASBCA Nos. 
57801, 57803, 58068), the Board agreed that this regulatory construct 
may create a windfall for the Government. Addressing this inequity will 
reduce the burden on contractors and the Government by improving the 
speed at which cost impacts are negotiated. Many cost impacts languish 
unsettled because doing nothing seems more reasonable than proceeding 
under the rules. To resolve this logjam, we recommend adding a simple 
provision to FAR 30.604(h), the essence of which is from CFR 9903.201-
1(b), that states ``The CFAO is responsible for (1) ensuring the cost 
impact calculation will protect the United States from payment of 
increased costs in the aggregate and (2) that the net effect of any 
contract price or cost adjustments does not result in the recovery of 
more than the estimated amount of such increased costs. Care must be 
taken to ensure costs are not double-recovered through both contract 
price adjustments and cost limitations.''
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the CASB on the matter, which falls outside the 
scope of the current information collection. There are no changes to 
the burden estimates based on this comment.
    Comment H, Converting the current Disclosure Statement from paper 
to an electronic, secure database. The respondent's final 
recommendation was that the Government provide a centralized, secure, 
on-line means of disclosing cost accounting practices. This could be 
done similarly to, or in conjunction with, the Government's centralized 
System for Award Management (SAM). Taking this important step would 
greatly improve

[[Page 45164]]

the contractor disclosure process and reduce burden for both 
contractors and the Government in the following ways:
    1. No more cumbersome Microsoft Word document that takes more time 
to format than to complete;
    2. An electronic database would automatically track all changes 
made by contactors, which would make review easier for both contractors 
and the Government;
    3. Because this system would include the contractor's cognizant 
contracting officer(s), it could automatically notify them of 
Disclosure Statement revisions;
    4. The system could be used for notifications so that even if 
Disclosure Statements have not been updated, the Government is aware of 
all new cost accounting practices;
    5. Government auditors could easily verify the sufficiency of 
contractors' annual disclosure of cost accounting practice changes;
    6. On-line tracking of cost accounting practice changes would 
improve visibility into and status of cost impact proposals and 
resolutions;
    7. Government-wide centralized access would allow PCOs to verify 
the status of Disclosure Statement submissions and adequacy 
determinations.
    Response: The Councils appreciate this analysis and perspective, 
and will consult with the CASB on the matter, which falls outside the 
scope of the current information collection. There are no changes to 
the burden estimates based on this comment.

C. Annual Reporting Burden

    Number of Respondents: 903.
    Responses per Respondent: 3.
    Total Responses: 2709.
    Average Burden Hours per Response: 175.
    Total Burden Hours: 474,075.
    Obtaining Copies of Proposals: Requesters may obtain a copy of the 
information collection documents from the General Services 
Administration, Regulatory Secretariat Division (MVCB), 1800 F Street 
NW., Washington, DC 20405, telephone 202-501-4755. Please cite OMB 
Control Number 9000-0129, Cost Accounting Standards Administration, in 
all correspondence.

William Clark,
Director, Office of Governmentwide Acquisition Policy, Office of 
Acquisition Policy, Office of Governmentwide Policy.
[FR Doc. 2016-16382 Filed 7-11-16; 8:45 am]
 BILLING CODE 6820-EP-P