Type of CAS Notoce and Contract Clauses

         1.         Solicitatio Notice

Any solicitations for a proposed contrac subject to Cost Accounting Standards will contain a notice prescribed by the CASB. The notice is entitled Cost Accounting Standar Notice and Certification. The notice allows a potential contractor (offeror) to do three things, if they apply to the proposed contract:

·         Certify the status of its Disclousure Statement

·         Elect modified CAS coverage when appropriate

·         Certify whether the proposed contract would require a change in existing cost accounting practices.

         2.         Types of CAS Contract Clauses

There are two type of Cost Accounting Standards clauses for nonexempt contract:  a normal contract clause (called the Cost Accounting Standards clause) and a modified contract clause (clled the Disclosure and Consistency of Cost Accounting Prectices clause). In addition to these clauses that relate to CAS coverage, an additional clause, Administration of Cost Accounting Standard, cover the significant administrative aspects related to CAS during contract performace. EACh is summarized in the following sections.

                                a            Normal CAS Clause (Full Coverage)

Unless a contractor or a contract is exempt from Cost Accounting Standards or is eligible for the modified CAS coverage, a contract clause entitled “Cost Accounting Standard” must be inserted in contracts. In summary form, this contract clause requires a contractor to:

1)      Submit in wiritng, by using the Disclosure Statement, a description of its cost accounting practices.

2)      Apply those disclosed cost accounting practices on all other contracts and subcontracts that contain the CAS clause.

3)      Follow consistently its disclosed cost accouting practices in accumulating and reporting contract performance cost data on all covered contracts.

4)      Comply with all Cost Accounting Standards, including any modification and interpretation , in effect at the time of contract award or, if the contractor submitted cost or pricing data, on the date of final agreement on price.

5)      Comply with all Cost Accounting Standards and modification that become applicable to a prime contract or subcontract after award.

6)      Agree to an equirable adjustment if the contract cost is affected by a change to the contractor’s established cost accounting practices as required by a Cost Accounting practices as required by a Cost Accounting Standard

7)      Negotiate the terms and conditions undr which a proposed change to the contractor ‘s disclosed or established cost accounting practices may be made. (The adoption of the change cannot increase costs paid by the Unites states.

8)      Negotaite an equitable adjustment for any desirable changes in cost accounting practices in which the government and the contractor agree to the change.

9)      Agree to a contract price or cost allowance djustment for contractor’s, or its subcontractor’s failure to comply with any applicable Cost Accounting Standard or to follow the Disclousure Statement, if that failire results in increased cost paid by the government.

10)  Agree that if the parties do not agree that the contractor or its subcontractor are in non compliance, or disagree ove any adjustment, such failure to agree shall be a dispute according to the disputes clause of the contract

11)  Permit authorized representatives of the head of the relavant agency or the Comptroller General to examine and make copies of any record related to compliance with Cost Accounting Standards.

12)  Flow down the substance of the CAS clause-except reference to the disputes clause where appropriate-m to applicable subcontracts, and require the inclusion of the CAS clause in all other nonexempt subcontracts at any tier.

                                b            Modified Contract Clause

As discussed in chapter 3, a modified CAS clause is available to any contractor if certain conditions exist.

The modifified CAS clause substantially reduces the contractor’ obligastions to comply with CASB rules, regulations, and Cost Accounting Standards. Under the modified clause ], the only standards a contarctor must comply with are CA 401 (see chapter 10), CAS 402 (see Chapter 11, CAS 405 (see Chapter 14, and Cas 406 (see Chapter 15). The contractor must stil comply, however, with the Disclosure Statement requirements.

The modified CAS clause is official known as “Disclosure and Consistency of Cost Accounting Prectices.” In summary form, this contract clause requires a contractor to:

1)      Comply with Cost Accounting Standards 401, “Consitency in Estimating, Accumulating and Reporting Costs,” 402, “Consistency in Allocating Cost Incurred for the Sama Purpose,” 405, Accounting for Unallowable Cost,” and 406 “Cost Accounting Period.”

2)      Submit in writing, by using the Disclosure Statement, a description of its cost accounting practices.

3)      Follow consistently its disclosed cost accounting practices on all covered contracts.

4)      Negotiate the terms and condition under which a change, purposed by either the contractor or the government, to the disclosed or the government, to the disclosed or established cost accounting practices may be made.

5)      Negotiate an equitable adjustment for any voluntary changes in cost accounting practices in which the government and the contractor agree to the change.

6)      Agree to a contract price or cost allowance adjustment for the contractor’s, or subcontractor’s, failure to comply with all applicable Cost Accounting Standards or to follow the Disclosure Statement, when such failure results in increased cost paid by government.

7)      Agree that if the parties do not agree that the contractor or its subcontractor ae in noncompliance, or disagree over any adjustment, such failure to agree shall be a dispute within the meaning of the disputes clause of the contract.

8)      Permit authorized representatives of the head of the relavant agency or of the Comptroller General to examine and copy records related to compliance with Cost Accounting Standards.

9)      Flow down the substance of the appropriate CAS clause-except, where appropriate, reference to the dispute clause- to applicable subcontracts and require the inclusion of the appropriate CAS clause in all other nonexempt subcontracts at any tier.

                                 c            CAS Administration Clause

It is inserted into any CAS covered contract regardless of the type of coverage designated. In summary form, the clause requires the contractor to:

1)      Submit a description of any cost accounting practice change, the total potential impact of the change on contract containing a CAS clause, and a general dollar magnitude of the change which identifies the potential shift of cost between CAS covered contracts by contract type and other contractor business activity.

2)      Submit the same information within  60 days (or such other date as may be mutually agree to) after the date of agreement with the initial determination of noncompliance in event of contractor disagreement with the initial finding of noncompliance.

3)      Prepare and submit a cost impact proposal in the form and manner specified by the contracting officer within 60 days (or such other date as may be mutually agreed to) after the date of determination of the adequacy and compliance of a change.

4)      Agree to appropriate contract and subcontract amend ment to reflect adjustment establishing by the cost impact proposal.

5)      Flo down the substance of this clause to applicable subcontracts.

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