52.230-4
Disclosure and Consistency of Cost Accounting Practices-Foreign Concerns
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.