CAS Board Published Final Rule on Exemption from CAS

The Cost Accounting Standards Board (CASB) published a final rule yesterday revising the exemption for contracts and subcontracts for the acquisition of commercial items. This final rule clarifies the types of contracts that are exempt from the application of CAS when acquiring commercial items. It becomes effective on August 16, 2018.

The new rule is designed to remove inconsistencies between the list of contract types recognized for use in acquiring commercial items in the CAS administration rules (48 CFR 9903.201-1(b)(6)) with the contract types reflected in FAR (48 CFR 12.207).

For example, FAR 12.207 allows the use of firm fixed price contracts in conjunction with award fee incentives or performance or delivery incentives known as FPI contracts when the award fee or incentive is based solely on factors other than costs. However, the CAS exemption does not expressly recognize FPI contracts on the enumerated list of exempt contracts.

Under the new rule, the CAS Board simply replaced the existing exemption language with a reference to the FAR reference covering contracts available for commercial items.

Old provision: Firm fixed-priced, fixed-price with economic price adjustments (provided that price adjustment is not based on actual costs incurred), time-and-materials, and labor hour contracts and subcontracts for the acquisition of commercial items.

New provision: Contracts and subcontracts authorized in 48 CFR 12.207 for the acquisition of commercial items.

Read more about the new rule including public comments and the Board's responses thereto here.

Seven Years to Insert a Single Word Into a Regulation

Back in October 2011, the Cost Accounting Standards Board (CASB) issued a proposed rule to clarify one of the CAS (Cost Accounting Standards) exemptions provided by FAR 9903.201. Since 2000, this provision has provided an exemption from CAS for Firm-Fixed-Price contracts and subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data. The CASB proposed to add the word "certified" before "cost or pricing data".

At the time the CAS rule was promulgated in 2000, the term cost or pricing data was understood to mean certified cost or pricing data. However, as a result of changes mad to FAR (Federal Acquisition Regulations) in 2010, the term could also be read to mean cost or pricing data without the certification. Since 2000, there have been two categories of cost or pricing data; "certified cost or pricing data" and "data other than certified cost or pricing data".

To avoid confusion and provide clarity to the Government contractor community on its original intent, the CASB proposed to add the word "certified".  to wit, when certified cost or pricing data were not obtained for FFP contracts and subcontracts, the safeguards provided by CAS were likewise not necessary.

When this one-word modification was first proposed, the Space Shuttle was still flying, Osama Bin Laden was still alive, and the US had 15 million fewer people. In the meantime, we've had two Presidential election cycles. Good work guys.

Cost Accounting Standards - Proposed Revision to an Existing Exemption

Certain contracts are exempt from CAS (Cost Accounting Standards). There are ten general categories of exemptions found in 48 CFR 9903.201-1 including contracts awarded based on a sealed bidding process, commercial items, competitive awards and many others. Previously, we discussed the CAS Board's proposal to modify the (b)(15) exemption to include the word "certified" before the phrase cost or pricing data. This was to distinguish awards based on certified cost or pricing data from awards based on "other than cost or pricing data".

Yesterday, the CAS Board published a proposal to modify another exemption, the (b)(6) exemption which currently reads:

Firm fixed-priced, fixed-priced with economic price adjustments (provided that price adjustment is not based on actual costs incurred), time-and-materials, and labor-hour contracts and subcontracts for the acquisition of commercial items.

The proposed rule would eliminate the detailed listing of permissible contract and subcontract types and simply state:

Contracts and subcontracts for the acquisition of commercial items.

Over the years, the permissible contract types for the acquisition of commercial items has expanded. Statutes such as The Federal Acquisition Streamlining Act (FASA) of 1994, the Federal Acquisition Streamlining Act of 1994 (FARA) and the Services Acquisition Reform Act of 2003 (SARA) have added to the number of contract types that can be used for commercial item procurement. The CAS exemption listing permissible contract types is now too restrictive and has not kept pace with these and other statutes.

The current listing of all CAS exemptions can be found here.