Materiality
Materiality determinations for CAS cost impacts must be well-documented, using established criteria, and only material impacts require contract adjustments.
Overview
FAR 30.602 outlines the process for determining materiality in the context of Cost Accounting Standards (CAS) administration. The section specifies that the Cognizant Federal Agency Official (CFAO) must use the criteria in 48 CFR 9903.305 to assess whether a cost impact is material. Materiality determinations can be made before or after a general dollar magnitude proposal is submitted and must be supported by adequate documentation. If the CFAO finds the cost impact to be immaterial, no contract adjustments are made, but the rationale must be documented, and contractors must be informed to correct any noncompliance. If the noncompliance is not corrected and later becomes material, the government reserves the right to adjust contracts. For material cost impacts, the CFAO must follow further procedures outlined in related FAR sections.
Key Rules
- Materiality Criteria
- CFAOs must use 48 CFR 9903.305 to determine materiality.
- Timing and Documentation
- Materiality can be determined before or after a proposal, but must always be documented.
- Immaterial Cost Impact
- No contract adjustments are made, but documentation and contractor notification are required.
- Material Cost Impact
- Follow procedures in FAR 30.603-30.606 for material impacts.
Responsibilities
- Contracting Officers (CFAOs): Must determine materiality using prescribed criteria, document decisions, notify contractors, and follow up on noncompliance.
- Contractors: Must correct noncompliance issues and be aware that future materiality could trigger contract adjustments.
- Agencies: Must ensure proper documentation and oversight of materiality determinations.
Practical Implications
This section ensures that only significant cost impacts trigger contract adjustments, reducing administrative burden for minor issues. Proper documentation and communication are critical, and contractors should proactively address noncompliance to avoid future risks. Failure to correct noncompliance could result in future contract adjustments if the issue becomes material.