Disclosure and Consistency of Cost Accounting Practices
Contractors on CAS-covered contracts must consistently apply and disclose their cost accounting practices, negotiate any changes with the Government, and flow down these requirements to major subcontracts to ensure compliance and protect the Government from increased costs.
Overview
FAR 52.230-3, Disclosure and Consistency of Cost Accounting Practices, requires contractors on certain CAS-covered contracts to comply with specific Cost Accounting Standards (CAS), disclose their cost accounting practices, and maintain consistency in those practices. The clause mandates adherence to four key CAS standards, written disclosure of cost accounting practices for certain business units, and consistent application of those practices. Changes to cost accounting practices must be negotiated with the Contracting Officer and applied prospectively, with equitable adjustments made only if the change is found to be in the Government's interest. If a contractor or subcontractor fails to comply with CAS or their disclosed practices, resulting in increased costs to the Government, the contract price must be adjusted to recover those costs plus interest. Disputes regarding compliance are subject to the Contract Disputes Act. Contractors must allow Government access to relevant records and flow down the substance of this clause (with some exceptions) to applicable negotiated subcontracts exceeding the CAS threshold.
Key Rules
- Compliance with Specific CAS Standards
- Contractors must comply with CAS 401, 402, 405, and 406 as of the contract award date.
- Disclosure Statement Requirement
- Business units required to submit a Disclosure Statement must do so in writing and may protect confidential information.
- Consistency and Changes in Practices
- Contractors must follow consistent cost accounting practices and negotiate any changes with the Contracting Officer, applying changes prospectively and amending the Disclosure Statement if affected.
- Equitable Adjustments for Changes
- Adjustments are negotiated only if changes are not detrimental to the Government; otherwise, no cost increases are allowed.
- Price Adjustments for Noncompliance
- If noncompliance increases Government costs, the contract price is adjusted to recover those costs plus interest.
- Dispute Resolution
- Disputes over compliance or cost adjustments are handled under the Contract Disputes Act.
- Government Access to Records
- Contractors must permit Government representatives to examine relevant records.
- Flowdown to Subcontracts
- The clause (except paragraph (b)) must be included in negotiated subcontracts above the CAS threshold, with certain exceptions.
Responsibilities
- Contracting Officers: Ensure inclusion of the clause, negotiate changes, determine desirability of changes, and enforce compliance.
- Contractors: Comply with CAS, disclose practices, maintain consistency, negotiate changes, allow access to records, and flow down the clause to subcontracts.
- Agencies: Oversee compliance, resolve disputes, and recover excess costs plus interest if noncompliance occurs.
Practical Implications
- This clause ensures transparency and consistency in cost accounting for CAS-covered contracts, protecting the Government from inconsistent or noncompliant practices that could increase costs. Contractors must be diligent in maintaining and documenting their cost accounting practices, be prepared for Government audits, and ensure proper flowdown to subcontracts. Common pitfalls include failing to update Disclosure Statements after changes, not flowing down the clause, or inadequate documentation for Government review.