36768 Federal Register / Vol. 65, No. 112 / Friday, June 9, 2000 / Rules and Regulations

OFFICE OF MANAGEMENT AND

BUDGET

Office of Federal Procurement Policy

48 CFR Part 9903

Cost Accounting Standards Board;

Applicability, Thresholds and Waiver

of Cost Accounting Standards

Coverage

AGENCY: Cost Accounting Standards

Board, Office of Federal Procurement

Policy, OMB.

ACTION: Final rule.

SUMMARY: The Office of Federal

Procurement Policy, Cost Accounting

Standards Board, is revising

applicability, thresholds and procedures

for the application of the Cost

Accounting Standards (CAS) to

negotiated government contracts. This

rulemaking is authorized pursuant to

Section 26 of the Office of Federal

Procurement Policy Act. The Board is

taking final action on this topic in order

to adjust CAS applicability

requirements and dollar thresholds in

accordance with the provisions of the

National Defense Authorization Act for

Fiscal Year 2000.

DATES: This final rule is effective June

9, 2000.

FOR FURTHER INFORMATION CONTACT:

Richard C. Loeb, Executive Secretary,

Cost Accounting Standards Board

(telephone: 202–395–3254).

SUPPLEMENTARY INFORMATION

A. Background

On February 7, 2000, the Cost

Accounting Standards Board issued an

interim rule with request for comment,

65 FR 5990. That rule, implemented

Sec. 802 of the National Defense

Authorization Act for Fiscal Year 2000,

Pub. L. 106–65, ‘‘Streamlined

Applicability of Cost Accounting

Standards.’’ This final rule implements

the provisions of Sec. 802 and provides

responses to public comments received

on the interim CAS Board rule. Many of

the public comments received by the

Board addressed issues that were

beyond the scope of Sec. 802. The Board

is limiting its revisions in this final rule

to the items specified in Sec. 802.

B. Summary of Amendments

‘‘Trigger contract’’: 48 CFR 9903.201–

1(b) is amended by adding a new

subparagraph (7) that exempts contracts

and subcontracts from CAS coverage,

provided that the business unit of the

contractor or subcontractor is currently

performing one or more CAS-covered

contracts or subcontracts of $7.5 million

or more.

‘‘Firm-fixed price contract

exemption’’: The Board is implementing

this statutory exemption by amending

48 CFR 9903.201–1(b) to revise

subparagraph (15) to exempt from CAS

coverage, firm-fixed-price contracts and

subcontracts awarded on the basis of

adequate price competition without

submission of cost or pricing data. The

Board is using the term ‘‘cost or pricing

data’’ rather than ‘‘certified’’ cost or

pricing data in order to conform to the

statutory requirements of 10 U.S.C.

§ 2306(h)(1) and 41 U.S.C. § 254(b),

which defines ‘‘Cost or pricing data’’ as

data that requires certification.

‘‘Types of CAS coverage’’: 48 CFR

9903.201–2(a) is amended by revising

the dollar threshold for ‘‘full CAS

coverage’’ from $25 million to $50

million, and deleting the requirement

that to be subject to ‘‘full CAS

coverage’’, that a contractor or

subcontractor have received at least one

contract or subcontract that exceeded $1

million (the previous ‘‘trigger contract’’

amount for initiation of ‘‘full CAS

coverage’’). 48 CFR 9903.201–2(b) is

amended by revising the definition of

‘‘modified CAS coverage’’ to indicate

that such coverage applies to covered

contracts and subcontracts where the

total value of CAS-covered contracts

and subcontracts received by a business

unit is less than $50 million.

Conforming amendments have also been

made to the solicitation provisions and

contract clauses appearing at 9903.201–

3 and 9903.201–4, respectively.

‘‘Waiver’’: 48 CFR 9903.201–5 is

amended by revising this section to

provide for agency CAS waiver

authority under certain circumstances.

‘‘Disclosure requirements’’: 48 CFR

9903.202–1(b) is amended by revising

the dollar amount for disclosure from

$25 million to $50 million, and deleting

the requirement that a contractor or

subcontractor have received at least one

contract in excess of $1 million.

C. Paperwork Reduction Act

The Paperwork Reduction Act, Public

Law 96–511, does not apply to this rule,

because this rule imposes no paperwork

burden on offerors, affected contractors

and subcontractors, or members of the

public which requires the approval of

OMB under 44 U.S.C. §3501, et seq. The

purpose of this rule is to implement

Pub. L. 106–65.

D. Executive Order 12866 and the

Regulatory Flexibility Act

This rule serves to eliminate certain

administrative requirements associated

with the application and administration

of the Cost Accounting Standards by

covered government contractors and

subcontractors. The economic impact on

contractors and subcontractors is

therefore expected to be minor. As a

result, the Board has determined that

this is not a ‘‘major rule’’ under the

provisions of Executive Order 12866,

and that a regulatory impact analysis is

not required. Furthermore, this rule will

not have a significant effect on a

substantial number of small entities

because small businesses are exempt

from the application of the Cost

Accounting Standards. Therefore, this

rule does not require a regulatory

flexibility analysis under the Regulatory

Flexibility Act of 1980.

E. Public Comments

This final rule is based upon the

Board’s interim rule that was issued on

February 7, 2000, 65 FR 5990. Thirteen

public comments were received,

including eleven timely comments and

two late comments. The major

comments received and the Board’s

actions taken in response thereto are

summarized below:

Comment: Eight commenters

generally supported the interim rule.

Response: The Board noted these

supportive comments.

Comment: Four commenters opposed

the rule, stating their belief that it

provides too many opportunities for

contractors to avoid CAS coverage,

leaving the Government exposed to

undue risk, primarily by permitting the

use of inconsistent or inappropriate

accounting conventions.

Response: The Board noted the

commenters concerns. However, this

rule is designed to implement the

requirements of Sec. 802 of the National

Defense Authorization Act for Fiscal

Year 2000, Pub. L. 106–65. In this

respect, the Board believes that it is

faithfully implementing the

requirements of that law.

Comment: Seven commenters

recommended that the Board retain the

language of the previous CAS

exemption found at 48 CFR 9903.201–

1(b)(15), while adding the revised

language found in the interim rule at

9903.201–1(b)(15), to constitute a new

CAS exemption. These commenters

believe that CAS should not apply

regardless of whether a TINA waiver or

exemption was granted.

Conversely, four commenters stated

that they believed that the revised

language at 9903.201–1(b)(15)

represented a compromise, inasmuch as

the statutory language at Sec. 802

appears to be designed to avoid

encouraging contractors to seek TINA

Federal Register / Vol. 65, No. 112 / Friday, June 9, 2000 / Rules and Regulations 36769

waivers merely in order to be exempted

from CAS requirements.

Response: Based on the legal,

legislative and administrative history of

this issue (including agency CAS waiver

reporting requirements), the Board

believes that it is adhering to the

statutory intent of Sec. 802. As such, the

language contained in the interim rule

with respect to 9903.201–1(b)(15) is

being adopted in this final rule.

Comment: Seven commenters

recommended revisions to the language

at 9903.201–1(b)(7) to define the term

‘‘currently performing’’. Four of the

seven commenters recommended a

definition(s) that would have the effect

of exempting more contracts from CAS

coverage; while three commenters

recommended definition(s) that would

have the effect of including more

contracts within the scope of CAS

coverage.

Response: The Board believes that the

term ‘‘currently performing’’ is more

than adequately defined in the Board’s

rules at 48 CFR 9903.301. ‘‘Currently

performing’’, as used in the Board’s

rules, means that a contractor has been

awarded a CAS-covered contract, but

has not yet received notification of final

acceptance of all supplies, services and

data deliverable under the contract

(including options). The Board would

draw the commenters attention to the

existence of this long-standing

definition.

Comment: The Board also received a

number of comments regarding

additional CAS exemptions, waivers,

dollar threshold and applicability

changes, and other regulatory matters

that would have the general effect of

further reducing CAS applicability to

contracts and subcontracts. In addition,

one commenter opposed the delegation

of any CAS waiver authority to the

procuring agencies.

Response: While the Board has

considered all the comments it has

received, it is specifically limiting the

scope of this rulemaking to those items

required to be addressed by Sec. 802 of

Pub. L. 106–65.

List of Subjects in 48 CFR Part 9903

Cost accounting standards,

Government procurement.

Nelson F. Gibbs,

Executive Director, Cost Accounting

Standards Board.

For the reasons set forth in this

preamble, chapter 99 of title 48 of the

Code of Federal Regulations is amended

as set forth below:

1. The authority citation for part 9903

of chapter 99 of title 48 continues to

read as follows:

Authority: Pub. L. 100–679, 102 Stat 4056,

41 U.S.C. 422.

9903.201 [Amended]

2. Section 9903.201–1 is amended by

revising paragraph (b)(7) and revising

paragraph (b)(15) to read as follows:

9903.201–1 CAS applicability.

* * * * *

(b) * * *

(7) Contracts or subcontracts of less

than $7.5 million, provided that, at the

time of award, the business unit of the

contractor or subcontractor is not

currently performing any CAS-covered

contracts or subcontracts valued at $7.5

million or greater.

* * * * *

(15) Firm-fixed-price contracts or

subcontracts awarded on the basis of

adequate price competition without

submission of cost or pricing data.

3. Section 9903.201–2 is amended by

revising paragraphs (a)(1) and (2) and

(b)(1) and (2) to read as follows:

9903.201–2 Types of CAS coverage.

(a) * * *

(1) Receive a single CAS-covered

contract award of $50 million or more;

or

(2) Received $50 million or more in

net CAS-covered awards during its

preceding cost accounting period.

(b) Modified coverage. (1) Modified

CAS coverage requires only that the

contractor comply with Standard

9904.401, Consistency in Estimating,

Accumulating, and Reporting Costs,

Standard 9904.402, Consistency in

Allocating Costs Incurred for the Same

Purpose, Standard 9904.405,

Accounting for Unallowable Costs and

Standard 9904.406, Cost Accounting

Standard—Cost Accounting Period.

Modified, rather, than full, CAS

coverage may be applied to a covered

contract of less than $50 million

awarded to a business unit that received

less than $50 million in net CAScovered awards in the immediately

preceding cost accounting period.

(2) If any one contract is awarded

with modified CAS coverage, all CAScovered contracts awarded to that

business unit during that cost

accounting period must also have

modified coverage with the following

exception: if the business unit receives

a single CAS-covered contract award of

$50 million or more, that contract must

be subject to full CAS coverage.

Thereafter, any covered contract

awarded in the same cost accounting

period must also be subject to full CAS

coverage.

* * * * *

4. Section 9903.201–3 is amended by

revising the clause heading; by revising

paragraph (c)(3) in Part I of the clause,

by revising the CAUTION paragraph

following paragraph (c)(4) in Part I of

the clause; and by revising Part II of the

clause, to read as follows:

9903.201–3 Solicitation provisions.

* * * * *

Cost Accounting Standards Notices and

Certification (April 2000)

* * * * *

I. Disclosure Statement—Cost

Accounting Practices and Certification

* * * * *

(c) * * *

■(3) Certificate of Monetary

Exemption.

The offeror hereby certifies that the

offeror, together with all divisions,

subsidiaries, and affiliates under

common control, did not receive net

awards of negotiated prime contracts

and subcontracts subject to CAS totaling

$50 million or more in the cost

accounting period immediately

preceding the period in which this

proposal was submitted.

The offeror further certifies that if

such status changes before an award

resulting from this proposal, the offeror

will advise the Contracting Officer

immediately.

(4) * * *

Caution: Offerors currently required

to disclose because they were awarded

a CAS-covered prime contract or

subcontract of $50 million or more in

the current cost accounting period may

not claim this exemption (4). Further,

the exemption applies only in

connection with proposals submitted

before expiration of the 90-day period

following the cost accounting period in

which the monetary exemption was

exceeded.

II. Cost Accounting Standards—

Eligibility for Modified Contact Coverage

If the offeror is eligible to use the

modified provisions of 9903.201–2(b)

and elects to do so, the offeror shall

indicate by checking the box below.

Checking the box below shall mean that

the resultant contract is subject to the

Disclosure and Consistency of Cost

Accounting Practices clause in lieu of

the Cost Accounting Standards clause.

■The offeror hereby claims an

exemption from the Cost Accounting

Standards clause under the provisions

of 9903.201–2(b) and certifies that the

offeror is eligible for use of the

Disclosure and Consistency of Cost

Accounting Practices clause because

during the cost accounting period

36770 Federal Register / Vol. 65, No. 112 / Friday, June 9, 2000 / Rules and Regulations

immediately preceding the period in

which this proposal was submitted, the

offeror received less than $50 million in

awards of CAS-covered prime contracts

and subcontracts. The offeror further

certifies that if such status changes

before an award resulting from this

proposal, the offeror will advise the

Contracting Officer immediately.

Caution: An offeror may not claim the

above eligibility for modified contract

coverage if this proposal is expected to

result in the award of a CAS-covered

contract of $50 million or more or if,

during its current cost accounting

period, the offeror has been awarded a

single CAS-covered prime contract or

subcontract of $50 million or more.

* * * * *

5. Section 9903.201–4 is amended by

revising paragraph (c)(1) to read as

follows:

9903.201–4 Contract clauses.

* * * * *

(c) Disclosure and Consistency of Cost

Accounting Practices. (1) The

contracting officer shall insert the clause

set forth below, Disclosure and

Consistency of Cost Accounting

Practices, in negotiated contracts when

the contract amount is over $500,000

but less than $50 million, and the

offeror certifies it is eligible for and

elects to use modified CAS coverage

(see 9903.201–2, unless the clause

prescribed in paragraph (d) of this

subsection is used).

* * * * *

6. Section 9903.201–5 is revised to

read as follows:

9903.201–5 Waiver

(a) The head of an executive agency

may waive the applicability of the Cost

Accounting Standards for a contract or

subcontract with a value of less than

$15 million, if that official determines,

in writing, that the business unit of the

contractor or subcontractor that will

perform the work—

(1) Is primarily engaged in the sale of

commercial items; and

(2) Would not otherwise be subject to

the Cost Accounting Standards under

this Chapter.

(b) The head of an executive agency

may waive the applicability of the Cost

Accounting Standards for a contract or

subcontract under exceptional

circumstances when necessary to meet

the needs of the agency. A

determination to waive the applicability

of the Cost Accounting Standards by the

agency head shall be set forth in writing,

and shall include a statement of the

circumstances justifying the waiver.

(c) The head of an executive agency

may not delegate the authority under

paragraphs (a) and (b) of this section, to

any official below the senior

policymaking level in the agency.

(d) The head of each executive agency

shall report the waivers granted under

paragraphs (a) and (b) of this section, for

that agency, to the Cost Accounting

Standards Board, on an annual basis,

not later than 90 days after the close of

the Government’s fiscal year.

(e) Upon request of an agency head or

his designee, the Cost Accounting

Standards Board may waive all or any

part of the requirements of 9903.201–

4(a), Cost Accounting Standards, or

9903.201–4(c), Disclosure and

Consistency of Cost Accounting

Practices, with respect to a contract

subject to the Cost Accounting

Standards. Any request for a waiver

shall describe the proposed contract or

subcontract for which the waiver is

sought and shall contain—

(1) An unequivocal statement that the

proposed contractor or subcontractor

refuses to accept a contract containing

all or a specified part of a CAS clause

and the specific reason for that refusal;

(2) A statement as to whether the

proposed contractor or subcontractor

has accepted any prime contract or

subcontract containing a CAS clause;

(3) The amount of the proposed award

and the sum of all awards by the agency

requesting the waiver to the proposed

contractor or subcontractor in each of

the preceding 3 years;

(4) A statement that no other source

is available to satisfy the agency’s needs

on a timely basis;

(5) A statement of alternative methods

considered for fulfilling the need and

the agency’s reasons for rejecting them;

(6) A statement of steps being taken

by the agency to establish other sources

of supply for future contracts for the

products or services for which a waiver

is being requested; and

(7) Any other information that may be

useful in evaluating the request.

(f) Except as provided by the Cost

Accounting Standards Board, the

authority in paragraph (e) of this section

shall not be delegated.

9903.202 Disclosure requirements.

7. Section 9903.202–1 is amended by

revising paragraphs (b)(1) and (2) to read

as follows:

9903.202–1 General requirements.

* * * * *

(b) * * *

(1) Any business unit that is selected

to receive a CAS-covered contract or

subcontract of $50 million or more shall

submit a Disclosure Statement before

award.

(2) Any company which, together

with its segments, received net awards

of negotiated prime contracts and

subcontracts subject to CAS totaling $50

million or more in its most recent cost

accounting period, must submit a

Disclosure Statement before award of its

first CAS-covered contract in the

immediately following cost accounting

period. However, if the first CAScovered contract is received within 90

days of the start of the cost accounting

period, the contractor is not required to

file until the end of 90 days.

* * * * *

[FR Doc. 00–14242 Filed 6–8–00; 8:45 am]

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