Thursday, July 5, 2018

Section 809 Panel Issues Report No. 2 - Cost Accounting Standards

The Section 809 Panel (officially the Advisory Panel on Streamlining and Codifying Acquisition Regulations) has issued Vol. 2 of its three volume report. This report builds on the Panel's commitment to making "actionable" recommendations and providing the language necessary to implement those recommendations. Volume 2 contains recommendations addressing the acquisition workforce, commercial source selection, the Cost Accounting Standards Board, and service contracting. Volume 3 is schedule to be released later this year.

We thought that the Panel would recommend that the moribund Cost Accounting Standards Board be abolished. It hasn't done anything significant since 2011. We were wrong. The Panel want to revitalize the Board, move it our from under OFPP (Office of Federal Procurement Policy) and make it an independent board with adequate staffing and funding. The report summarizes:
The Cost Accounting Standards Board (CASB) and cost accounting standards (CAS) need to be restructured to provide necessary guidance and minimize the burden for government and contractors. The CASB should be reinvigorated by extracting it from the Office of Federal Procurement Policy and making it an independent Executive branch organization. The CAS program requirements should be modified to include raising the thresholds for full CAS coverage and the disclosure statement and adding guidance for CAS applicability to hybrid contracts and indefinite delivery contract vehicles.  
The report concludes that the CAS Board's current configuration within OFPP is ineffective at proficing for application of CAS to federal government contracts. CASB has only rarely met in recent y ears, and member positions often go unfilled for long periods. Meanwhile, changes to Government contracting require ongoing updates to the standards and resolution of question s about CAS applicability. Because CASB has not been responsive to these changes, contractors are overly burdened by the need for added layers of compliance to many rules that have not kept pace with new business models. CASB needs to be reinvigorated as an independent organization and removed from OFPP.

How long has this conditions existed? The panel says its been going on for 30 years. "For the past 30 years, CASB has failed to address urgent issues in a timely way." The most pressing problem with the current CASB formulation is the administration of the Board at the OFPP, partly due to a lack of leadership and subject matter expertise. The OFPP administrator position changes frequently and is often vacant, leaving the role in the hands of an acting administrator, most often a career civil servant versed in procurement policy, but without the requisite authority or experience in accounting and contract management to push forward needed CAS reforms (the current OFPP administrator position has been vacant since January 2016).

The Panel made several recommendations including the placement under GSA (rather than OFPP), a permanent staff, independent of any other agency, mandatory meetings, among a few others. The Board should consist of five members; a chair with extensive experience in administering and managing as a senior government official of major CAS-covered contracts, two members from the Government (not auditors or investigators), one member from a government contractor and one member from the accounting profession.

The full report is available here.

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