Tuesday, October 8, 2019

How Much Time Does it Take to Comply with CAS Administration Requirements?

Contractors that must comply with CAS (Cost Accounting Standards) are required to submit notifications and descriptions of certain cost accounting practice changes, including revisions to their Disclosure Statements if they're required to have Disclosure Statements (see FAR 52.230-6, Administration of Cost Accounting Standards). In addition, contractors are required to submit a cost impact statement assessing the impact of accounting changes on Government contracts.

Cost accounting changes are usually implemented to improve the allocation of costs to final cost objectives. An example is where a contractor changes the manner in which it charges IT costs from inclusion in the G&A (General and Administrative) pool to a base that includes non-production headcount on the theory that non-production headcount are the predominate users of IT systems and support.

As any CAS-covered contractor can attest to, the resources required to comply with the CAS administration contract clause is significant. How significant you ask? Well, the Government estimates that collectively contractors spend 314,475 hours per year to comply. That works out to 175 hours for each of the 600 CAS covered contractors required to comply, or roughly, a month's worth of labor for each contractor.

Is this money well spent? In most cases, some or most of the funds required to prepare these notifications are simply passed on to the Government anyway. So the real question is whether the Government is getting a level of benefit commensurate with the extra cost of compliance. We know from experience, that many of these notifications, once received by the contracting officer, end up in the dead-letter file - no Government action is ever taken.

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