52.230-4 Disclosure and Consistency of Cost Accounting Practices-Foreign Concerns
Source: FAR 52.230-4 on acquisition.gov
Foreign contractors on CAS-covered contracts must disclose, consistently apply, and, if necessary, update their cost accounting practices, with strict remedies for noncompliance and mandatory flowdown to certain subcontracts.
Overview
FAR 52.230-4 requires foreign concerns awarded Cost Accounting Standards (CAS)-covered contracts to disclose and consistently apply their cost accounting practices. The clause mandates compliance with specific CAS rules, written disclosure of cost practices for certain business units, and consistent application of those practices. It also outlines procedures for changing cost accounting practices, equitable adjustments for changes, and remedies for noncompliance, including recovery of increased costs and interest. The clause requires contractors to allow government access to relevant records and to flow down the substance of this clause to certain negotiated subcontracts, with specific exceptions and thresholds.
Key Rules
- CAS Compliance and Disclosure
- Contractors must comply with CAS 401 and 402, and, if required, submit a written Disclosure Statement of their cost accounting practices.
- Consistency and Changes in Practices
- Contractors must follow their disclosed practices consistently; changes require negotiation and must be applied prospectively, with amendments to the Disclosure Statement as needed.
- Equitable Adjustments
- If a change in practice is agreed upon and found desirable, an equitable adjustment is negotiated; no agreement can increase government costs without the required finding.
- Remedies for Noncompliance
- Contractors must agree to price or cost adjustments (plus interest) if noncompliance increases government costs.
- Disputes
- Disagreements over compliance or cost adjustments are handled under the Contract Disputes Act.
- Government Access
- Contractors must permit government representatives to examine relevant records.
- Subcontract Flowdown
- The clause must be included in certain negotiated subcontracts above the CAS threshold, with exceptions for exempt subcontracts or those subject to other CAS coverage.
Responsibilities
- Contracting Officers: Ensure inclusion of the clause in applicable contracts and subcontracts, verify compliance, and negotiate changes or adjustments as needed.
- Contractors: Disclose and consistently apply cost accounting practices, negotiate changes, allow government access to records, and flow down the clause to qualifying subcontracts.
- Agencies: Oversee compliance, enforce remedies for noncompliance, and resolve disputes.
Practical Implications
- This clause ensures transparency and consistency in cost accounting for foreign concerns, protecting the government from increased costs due to inconsistent or undisclosed practices. Contractors must maintain robust documentation and be prepared for audits. Failure to comply can result in financial penalties and contract disputes.
As prescribed in 30.201-4(c)(1), insert the following clause:
Disclosure and Consistency of Cost Accounting Practices-Foreign Concerns (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; and 48 CFR 9904.402, Consistency in Allocating Costs Incurred for the Same Purpose, in effect on the date of award of this contract, as indicated in 48 CFR 9904.
(2) (Cost Accounting Standard (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 48 CFR 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 U.S. Government.
(3)
(i) Follow consistently the Contractor’s cost accounting practices. A change to such practices may be proposed, however, by either the U.S. 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 U.S. 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 U.S. Government.
(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 U.S. Government. Such adjustment shall provide for recovery of the increased costs to the U.S. Government, 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)) for such period, from the time the payment by the U.S. Government 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 48 CFR 9904 and as to any cost adjustment demanded by the U.S. Government, 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 U.S. 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 prescribed in Federal Acquisition Regulation (FAR) 30.201-4 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)