30.603-2 Unilateral and desirable changes
Source: FAR 30.603-2 on acquisition.gov
Contractors must notify and justify any unilateral cost accounting changes, with the government protected from increased costs and strict compliance required for approval and implementation.
Overview
FAR 30.603-2 outlines the rules and procedures for contractors making changes to their disclosed or established cost accounting practices, distinguishing between unilateral and desirable changes. Unilateral changes are those initiated by the contractor without government agreement, and the government will not pay any increased costs resulting from such changes. Desirable changes are those deemed beneficial and not detrimental to the government, and require approval from the Cognizant Federal Agency Official (CFAO). The regulation also details notification, proposal, and retroactive change requirements, as well as special provisions for changes due to external restructuring activities.
Key Rules
- Unilateral Changes
- Contractors may make unilateral changes to cost accounting practices, but the government is protected from any aggregate increased costs. The CFAO must ensure adjustments do not result in over-recovery by the contractor.
- Desirable Changes
- The CFAO must determine if a change is desirable and not detrimental before it is treated as such; otherwise, it remains a unilateral change. Factors include compliance, cost savings, and funding availability.
- Notice and Proposal Preparation
- Contractors must notify the CFAO at least 60 days before implementing a unilateral change and provide rationale for claims of immaterial cost impact. Failure to notify may be treated as noncompliance.
- Retroactive Changes
- Requests for retroactive unilateral changes require supporting rationale and cannot be approved for dates before the start of the contractor’s fiscal year in which the request is made.
- External Restructuring Activities
- Cost accounting changes due to external restructuring under 10 U.S.C. 3761 are exempt from price/cost adjustment requirements but must still meet disclosure requirements.
Responsibilities
- Contracting Officers/CFAOs: Must review, approve, and ensure government interests are protected in cost adjustments and desirable change determinations.
- Contractors: Must notify, justify, and document changes, and comply with all disclosure and timing requirements.
- Agencies: Oversee compliance and process noncompliance if notification or consistency requirements are not met.
Practical Implications
- Ensures government is not financially disadvantaged by contractor-initiated changes.
- Requires clear communication and documentation for all cost accounting practice changes.
- Noncompliance can result in penalties or contract issues, making timely and accurate notification critical.
(a) Unilateral changes.
(1) The contractor may unilaterally change its disclosed or established cost accounting practices, but the Government shall not pay any increased cost, in the aggregate, as a result of the unilateral change.
(2) Prior to making any contract price or cost adjustments under the applicable paragraph (s) addressing a unilateral change at 52.230-2, 52.230-3, or 52.230-5, the CFAO shall determine that-
(i) The contemplated contract price or cost adjustments will protect the Government from the payment of the estimated increased costs, in the aggregate; and
(ii) The net effect of the contemplated adjustments will not result in the recovery of more than the increased costs to the Government, in the aggregate.
(b) Desirable changes.
(1) Prior to taking action under the applicable paragraph (s) addressing a desirable change at 52.230-2, 52.230-3, or 52.230-5, the CFAO shall determine the change is a desirable change and not detrimental to the interests of the Government.
(2) Until the CFAO has determined a change to a cost accounting practice is a desirable change, the change is a unilateral change.
(3) Some factors to consider in determining if a change is desirable include, but are not limited to, whether-
(i) The contractor must change the cost accounting practices it uses for Government contract and subcontract costing purposes to remain in compliance with the provisions of part 31;
(ii) The contractor is initiating management actions directly associated with the change that will result in cost savings for segments with CAS-covered contracts and subcontracts over a period for which forward pricing rates are developed or 5 years, whichever is shorter, and the cost savings are reflected in the forward pricing rates; and
(iii) Funds are available if the determination would necessitate an upward adjustment of contract cost or price.
(c) Notice and proposal preparation.
(1) When a contractor makes a unilateral change, the clause at 52.230-6, Administration of Cost Accounting Standards, requires the contractor to-
(i) Submit a description of the change to the CFAO not less than 60 days (or other mutually agreeable date) before implementation of the change; and
(ii) Submit rationale to support any contractor written statement that the cost impact of the change is immaterial.
(2) If a contractor implements the change in cost accounting practice without submitting the notice as required in paragraph (c)(1) of this subsection, the CFAO may determine the change a failure to follow a cost accounting practice consistently and process it as a noncompliance in accordance with 30.605.
(d) Retroactive changes.
(1) If a contractor requests that a unilateral change be retroactive, the contractor shall submit supporting rationale.
(2) The CFAO shall promptly evaluate the contractor’s request and shall, as soon as practical, notify the contractor in writing whether the request is or is not approved.
(3) The CFAO shall not approve a date for the retroactive change that is before the beginning of the contractor’s fiscal year in which the request is made.
(e) Contractor accounting changes due to external restructuring activities. The requirements for contract price and cost adjustments do not apply to compliant cost accounting practice changes that are directly associated with external restructuring activities that are subject to and meet the requirements of https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title10-section3761&num=0&edition=prelim" target="_blank">10 U.S.C. 3761. However, the disclosure requirements in 52.230-6(b) shall be followed.