Georgia Tech Procurement Assistance Center

COFC issues decision on Cost Accounting Standards and ‘offsetting’

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The Boeing Company v. United States, Civil No. 17-1969C (May 29, 2019) reveals the Court of Federal Claims’ (COFC) interpretation of the Cost Accounting Standards (CAS) statute as primarily benefiting the government, and directs contractors challenging the Federal Acquisition Regulation (FAR) 30.606(a)(3)(ii) prohibition on offsetting the impact of simultaneous cost accounting practice changes to raise those challenges in a pre-award protest or risk waiver.  Importantly, the court’s decision could have broad implications, requiring contractors to protest the applicability and interpretation of any extra-contractual FAR provisions—not just those involving the CAS statute—that expound upon a FAR Part 52 contract clause.

Adopting a novel theory rooted in the US Constitution, The Boeing Company (Boeing) filed an action under the Contract Disputes Act (CDA) alleging that the FAR 30.606 offset prohibition is an “illegal exaction” in violation of the CAS statute, which specifically prohibits windfalls to the government resulting from changes to a contractor’s cost accounting practices.  Boeing also claimed that FAR 30.606 was “extra-contractual” and therefore, should not preclude Boeing from offsetting changes that increase costs to the government from those that decrease costs.  The COFC dismissed Boeing’s constitutional claim for lack of subject matter jurisdiction and concluded that Boeing had effectively waived its contract claims upon failing to raise them in a pre-award protest or during negotiations with the government.

Continue reading at:  Arnold & Porter

Defense contractors to face new cost accounting oversight with creation of Defense Cost Accounting Standards Board

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Section 820 of the National Defense Authorization Act for Fiscal Year 2017 (NDAA) establishes a new Defense Cost Accounting Standards Board (D-CASB) to oversee the application of the cost accounting standards (CAS) to defense contracts.

The amendments made by Section 820 shall take effect on October 1, 2018.

Originally issued between 1970 and 1980 by the Cost Accounting Standards Board (CASB), the CAS are a series of accounting standards “designed to achieve uniformity and consistency” in the measurement of costs, the assignment of costs to cost accounting periods, and the allocation of costs to government contracts. 48 C.F.R. § 9901.302(b).

When first proposing what is now Section 820 of the NDAA, the Senate Armed Services Committee expressed its concern that the current CAS “favor incumbent defense contractors and limit competition by serving as a barrier to participation by non-traditional, small business, and commercial contractors.”

The Committee also viewed the CASB with disapproval, noting how the CASB does not currently have a quorum and has not met in over three years. Thus, the Committee doubted that “any credible reform will emanate out of [the CASB] in the future,” and opted to favor instead a new D-CASB that “will be better suited to meet national security needs.”

Keep reading this article at: https://www.governmentcontractslawblog.com/2017/04/articles/department-of-defense/cost-accounting-standards-board/

Implications of the changing cost and pricing data thresholds for prime contractors and subcontractors

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Government contractors should explore updates to their purchasing system policies and procedures regarding subcontracts subject to Truthful Cost or Pricing Data (TCPD) and Cost Accounting Standards (CAS) requirements based on the upcoming effective date for the increased threshold for obtaining certified cost or pricing data.

Specifically, Section 811 of the National Defense Authorization Act for Fiscal Year 2018 (Pub. L. No. 115-91, 131 Stat. 1283) (FY 2018 NDAA), amends 10 USC § 2306a and 41 USC § 3502, increasing the threshold for obtaining certified cost or pricing data to US$2 million. Inevitably, this increased threshold impacts subcontracting, particularly under contractor purchasing systems that are subject to the Department of Defense (DOD) Business Systems Rule.

A recent memorandum issued by Shay D. Assad, Director of Defense Pricing/Defense Procurement and Acquisition Policy (DP/DPAP), which we addressed in a prior advisory, directs DOD contracting officers that, effective July 1, 2018, they shall use US$2 million as the threshold for obtaining certified cost and pricing data “in lieu of the threshold . . . at [FAR] 15.403-4.” Notably, while this class deviation provides direction to DOD contracting officers, it does not change the “current threshold” in FAR 15.403-4. Accordingly, absent a contract specifying a different threshold, prime contractors must wait until the threshold in FAR 15.403-4 is updated to implement the US$2 million threshold before they may safely use it for subcontracts and modifications that are not otherwise exempt.

Under FAR 52.215-12 and 52.215-13, a prime contractor’s obligation is to require a subcontractor to submit certified cst or pricing data when the expected value of the pricing action will exceed the threshold in FAR 15.403-4 and an exception does not apply. FAR 15.403-4(a)(1) states that certified cost or pricing data are required before the award or modification of subcontracts “expected to exceed the current threshold or, in the case of existing contracts, the threshold specified in the contract.” The same paragraph currently provides that “[t]he threshold for obtaining certified cost or pricing data is US$750,000,” and has not yet been updated to reflect the increased threshold.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=704542

NDAA makes significant changes to cost accounting standards

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Section 820 of the National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-238, 130 Stat. 2000 (NDAA), makes three significant changes to the federal government’s future use of cost accounting standards (CAS).

  • First, it empowers contractors to avoid Defense Contract Audit Agency (DCAA) audits by employing private auditors to audit their rates.
  • Next, it creates a new and independent Defense Cost Accounting Standards (DCAS) Board to oversee cost accounting standards across the Department of Defense (DoD).
  • Finally, it provides direction to the federal government’s existing CAS Board.

For details, keep reading this article at: https://www.insidegovernmentcontracts.com/2017/03/2017-ndaas-impact-on-audits-and-cost-accounting-standards/

 

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