30.603-2
Unilateral and desirable changes
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.