Cost Accounting Standards
FAR 52.230-2 requires contractors on CAS-covered contracts to disclose, consistently apply, and update their cost accounting practices, with strict remedies for noncompliance and mandatory flowdown to certain subcontracts.
Overview
FAR 52.230-2, Cost Accounting Standards (CAS), establishes the requirements for contractors to disclose, follow, and consistently apply cost accounting practices on CAS-covered contracts, unless exempted. The clause incorporates the provisions of 48 CFR Part 9903 and mandates compliance with all applicable Cost Accounting Standards (CAS) in effect at the time of contract award or price agreement. It also outlines procedures for disclosure, changes in cost accounting practices, equitable adjustments, and remedies for noncompliance, including price adjustments and interest recovery. The clause requires contractors to flow down CAS requirements to certain negotiated subcontracts and to permit government access to relevant records for compliance verification.
Key Rules
- Disclosure Statement Requirement
- Contractors must submit a Disclosure Statement detailing their cost accounting practices for CAS-covered contracts, ensuring consistency across all applicable contracts and subcontracts.
- Consistency in Cost Accounting Practices
- Contractors must consistently follow disclosed cost accounting practices and amend the Disclosure Statement prospectively if changes are made.
- Compliance with CAS
- Contractors must comply with all applicable CAS and any future modifications, applying them prospectively as required.
- Equitable Adjustments for Changes
- Contractors must agree to equitable adjustments if changes in cost accounting practices affect contract costs, with negotiations required for non-mandatory changes.
- Remedies for Noncompliance
- If noncompliance or inconsistent practices result in increased costs to the government, contractors must agree to price adjustments and pay interest on overpayments.
- Dispute Resolution
- Disputes regarding CAS compliance or cost adjustments are handled under the Contract Disputes Act.
- Government Access to Records
- Contractors must allow government representatives to examine records related to CAS compliance.
- Flowdown to Subcontracts
- The substance of the CAS clause must be included in certain negotiated subcontracts above the CAS threshold, except for exempt subcontracts.
Responsibilities
- Contracting Officers: Ensure inclusion of the CAS clause in applicable contracts and monitor compliance.
- Contractors: Disclose and consistently apply cost accounting practices, comply with CAS, amend disclosures as needed, flow down requirements to subcontracts, and allow government access to records.
- Agencies: Oversee contractor compliance, resolve disputes, and recover overpayments with interest if necessary.
Practical Implications
- This clause ensures transparency and consistency in cost accounting for government contracts, protecting the government from overpayment due to inconsistent or noncompliant practices. Contractors must maintain robust accounting systems, timely update disclosures, and ensure proper flowdown to subcontracts. Common pitfalls include failing to update Disclosure Statements, inconsistent application of practices, or inadequate flowdown to subcontracts, all of which can result in financial penalties and disputes.