CAS 420 - Accounting for Independent Research and Development Costs and Bid and Proposal Costs (IR&D/B&P).
The purpose of CAS 420 is to provide criteria for the accumulation of IR&D and B&P costs and for the allocation of such costs to cost objectives based on the beneficial or causal relationship between such costs and cost objectives.
Except for a couple of minor provisions involving the allocation of IR&D and B&P costs incurred at a home office or a segment on behalf of another segment of the same company, CAS 420 is applicable to all contractors – even those that are exempt from CAS or fall under the “Modified Coverage” provisions (see FAR 31.205-18).
The standard provides definitions for IR&D/B&P. Some disputes between contractors and the Government could be avoided if the parties understood the definitions.
- Independent research and development (IR&D) means the cost of effort which is neither sponsored by a grant, nor required in the performance of a contract, and which falls within any of the following three areas;
Bid and proposal (B&P) costs means the cost incurred in preparing, submitting or supporting any bid or proposal which effort is neither sponsored by a grant, nor required in the performance of a contract.
CAS 420 (and FAR 31.205-18) requires that IR&D/B&P costs be accumulated by project, similar to the way in which contract costs are accumulated. Project costs consists of all allocable costs except business unit G&A. This would include labor, fringe benefits, overhead, as well as materials, subcontracts, and ODCs (other direct costs).
IR&D/B&P cost pools of a home office must be allocated to segments on the basis of the beneficial or causal relationship between the IR&D/B&P costs and the segments reporting to that home office. The IR&D/B&P cost pools of a business unit must be allocated to the final cost objectives of that business unit on the basis of the beneficial or causal relationship between the IR&D/B&P costs and the final cost objectives.
B&P costs incurred in a cost accounting period must not be charged to any other cost accounting period. The same rule applies to IR&D costs except for cases permitted pursuant to provisions of existing laws, regulations, and other controlling factors.
Would you say that under a commercial contract with the Government under FAR 31.2 that even though a commercial organization has few government contracts that their B&P costs for other business meets the CAS and FAR requirement and can be submitted as part of their calculation in developing overal G&A rates? Reviewing and using 48CFR9904.420-40(e) AND FAR 31.201-4(b) and (c), 31.205-18(c),
ReplyDeleteUnder commercial contract pricing (FAR Part 12), contractors do not need to justify their G&A rates. The Government is purchasing items at commercial prices, whatever those are.
ReplyDelete