52.230-3 Disclosure and Consistency of Cost Accounting Practices
Source: FAR 52.230-3 on acquisition.gov
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.
As prescribed in 30.201-4(b)(1), insert the following clause:
Disclosure and Consistency of Cost Accounting Practices (Jun 2020)
(a) The Contractor, in connection with this contract, shall-
(1) Comply with the requirements of 48 CFR 9904.401, Consistency in Estimating, Accumulating, and Reporting Costs; 48 CFR 9904.402, Consistency in Allocating Costs Incurred for the Same Purpose; 48 CFR 9904.405, Accounting for Unallowable Costs; and 48 CFR 9904.406, Cost Accounting Standard-Cost Accounting Period, in effect on the date of award of this contract as indicated in 48 CFR Part 9904.
(2) (CAS-covered Contracts Only) If it is a business unit of a company required to submit a Disclosure Statement, disclose in writing its cost accounting practices as required by 48 CFR 9903.202-1 through 9903.202-5. If the Contractor has notified the Contracting Officer that the Disclosure Statement contains trade secrets and commercial or financial information which is privileged and confidential, the Disclosure Statement shall be protected and shall not be released outside of the Government.
(3)
(i) Follow consistently the Contractor’s cost accounting practices. A change to such practices may be proposed, however, by either the Government or the Contractor, and the Contractor agrees to negotiate with the Contracting Officer the terms and conditions under which a change may be made. After the terms and conditions under which the change is to be made have been agreed to, the change must be applied prospectively to this contract, and the Disclosure Statement, if affected, must be amended accordingly.
(ii) The Contractor shall, when the parties agree to a change to a cost accounting practice and the Contracting Officer has made the finding required in 48 CFR 9903.201-6(c), that the change is desirable and not detrimental to the interests of the Government, negotiate an equitable adjustment as provided in the Changes clause of this contract. In the absence of the required finding, no agreement may be made under this contract clause that will increase costs paid by the United States.
(4) Agree to an adjustment of the contract price or cost allowance, as appropriate, if the Contractor or a subcontractor fails to comply with the applicable CAS or to follow any cost accounting practice, and such failure results in any increased costs paid by the United States. Such adjustment shall provide for recovery of the increased costs to the United States together with interest thereon computed at the annual rate established under section 6621(a)(2) of the Internal Revenue Code of 1986 (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section6621(a)(2)&num=0&edition=prelim" target="_blank">26 U.S.C. 6621(a)(2)), from the time the payment by the United States was made to the time the adjustment is effected.
(b) If the parties fail to agree whether the Contractor has complied with an applicable CAS, rule, or regulation as specified in 48 CFR 9903 and 9904 and as to any cost adjustment demanded by the United States, such failure to agree will constitute a dispute under http://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title41-chapter71&saved=%7CZ3JhbnVsZWlkOlVTQy1wcmVsaW0tdGl0bGU0MC1jaGFwdGVyMzctZnJvbnQ%3D%7C%7C%7C0%7Cfalse%7Cprelim&edition=prelim" target="_blank">41 U.S.C. chapter 71, Contract Disputes.
(c) The Contractor shall permit any authorized representatives of the Government to examine and make copies of any documents, papers, and records relating to compliance with the requirements of this clause.
(d) The Contractor shall include in all negotiated subcontracts, which the Contractor enters into, the substance of this clause, except paragraph (b), and shall require such inclusion in all other subcontracts of any tier, except that-
(1) If the subcontract is awarded to a business unit which pursuant to 48 CFR 9903.201-2 is subject to other types of CAS coverage, the substance of the applicable clause set forth in section 30.201-4 of the Federal Acquisition Regulation (FAR) shall be inserted.
(2) The requirement in this paragraph (d) shall apply only to negotiated subcontracts in excess of the lower CAS threshold specified in FAR 30.201-4(b) on the date of subcontract award.
(3) The requirement shall not apply to negotiated subcontracts otherwise exempt from the requirement to include a CAS clause as specified in 48 CFR 9903.201-1.
(End of clause)