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 Office of Management and Budget Office of Federal Procurement Policy 48 CFR Parts 9901 and 9903
 AGENCY: Cost Accounting Standards Board, Office of Federal Procurement Policy, OMB.
 ACTION: Proposed rule with request for comment.
 SUMMARY: The Cost Accounting Standards (CAS) Board is proposing to adjust the CAS application and full coverage thresholds for inflation in accordance with section 807 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (Pub. L. 108-375).
 DATES: Comments upon this proposed rule must be in writing and must be received by February 10, 2006.
 ADDRESSES: Due to delays in OMB's receipt and processing of mail, respondents are strongly encouraged to submit comments electronically to ensure timely receipt. Electronic comments may be submitted to 
                        *casb2@omb.eop.gov.*
                         Please put the full body of your comments in the text of the electronic message and also as an attachment readable in either MS Word or Corel WordPerfect. Please include your name, title, organization, postal address, telephone number, and e-mail address in the text of the message. Comments may also be submitted via facsimile to (202) 395-5105.
 FOR FURTHER INFORMATION CONTACT: David J. Capitano, Cost Accounting Standards Board (telephone: 703-847-7486).


SUPPLEMENTARY INFORMATION: A. Background Analysis of Statutory Acquisition-Related Thresholds Section 807 provides for adjustment every 5 years of acquisition-related thresholds, except for thresholds set by the Davis-Bacon Act, Service Contract Act, and trade agreements. The statute requires that the adjustment be based on inflation, using the Consumer Price Index (CPI) for all-urban consumers. Acquisition-related thresholds in statutes that were in effect on October 1, 2000, are subject to 5 years of inflation. For purposes of this proposed rule, the calculation of escalation is based on the CPI from December 1999 to December 2004 (the most recent available data), which currently computes at 1.1307, as determined by the Federal Acquisition Regulatory (FAR) Council. Once the escalation factor is applied to the acquisition-related threshold, the law requires rounding of the calculated threshold as follows: < $10,000
Nearest $500$10,000-<$100,000
Nearest $5,000$100,000-<$1,000,000
Nearest $50,000$1,000,000 or more
Nearest $500,000
 Applying the 1.1307 factor and the rounding criteria described above, the CAS thresholds have been revised as follows: (a) For contract applicability, from $500,000 to $550,000; (b) For applicability to a business unit, from $7.5 million to $8.5 million; (c) For waiver authority, from $15 million to $17 million; (d) For full coverage, from $50 million to $56.5 million; (e) For disclosure statement submissions by a company (other than educational institutions), from $50 million to $56.5 million; (f) For disclosure statement submissions by a segment of a company, from $10 million to $11.5 million; and (g) For disclosure statement submissions by an educational institutions, from $25 million to $28.3 million. B. Paperwork Reduction Act The Paperwork Reduction Act, Public Law 96-511, does not apply to this rulemaking, because this rule imposes 
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                    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.* C. Executive Order 12866 and the Regulatory Flexibility Act The economic impact of this rule on contractors and subcontractors is expected to be minor. As a result, the Board has determined that this rule is not significant under the provisions of Executive Order 12866, and that a regulatory impact analysis will not be required. Furthermore, this rule will not have a significant impact on a substantial number of small businesses 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. D. Public Comments Interested persons are invited to participate by submitting data, views or arguments with respect to this proposed rule. All comments must be in writing and submitted to the address indicated in the 
                    **ADDRESSES**
                     section. List of Subjects in 48 CFR Part 9903 Accounting
Government procurement
 Joshua B. Bolten, Director.
 For the reasons set forth in this preamble, chapter 99 of title 48 of the Code of Federal Regulations is proposed to be amended as set forth below: PART 9901—RULES AND PROCEDURES 1. The authority citation for part 9901 is revised to read as follows: Authority:
                        41 U.S.C. 422(f). 2. Revise section 9901.306 to read as follows: § 9901.306
  Cost Accounting Standards promulgated by the Board shall be mandatory for use by all executive agencies and by contractors and subcontractors in estimating, accumulating, and reporting costs in connection with pricing and administration of, and settlement of disputes concerning, all negotiated prime contract and subcontract procurements with the United States Government in excess of $550,000, other than contracts or subcontracts that have been exempted by the Board's regulations.
 PART 9903—CONTRACT COVERAGE 3. The authority citation for part 9903 continues to read as follows: Authority:
                        41 U.S.C. 422(f). Subpart 9903.2—CAS Program Requirements
 4. Section 9903.201-1 is amended by revising paragraphs (b)(2) and (b)(7) to read as follows: § 9903.201-1
  
 (b) * * * (2) Negotiated contracts and subcontracts not in excess of $550,000. For purposes of this paragraph (b)(2) an order issued by one segment to another segment shall be treated as a subcontract. 
 (7) Contracts or subcontracts of less than $8.5 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 $8.5 million or greater. 
 5. Section 9903-201-2 is amended by revising paragraphs (a)(1) and (2), (b)(1) and (2), and (c)(3) and (5) to read as follows:
 § 9903.201-2
  (a) * * * (1) Receive a single CAS-covered contract award of $56.5 million or more; (2) Receive $56.5 million or more in net CAS-covered awards during its preceding 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 if less than $56.5 million awarded to a business unit that received less than $56.5 million in net CAS-covered awards in the immediately preceding cost accounting period. (2) If any one contract is awarded with modified CAS coverage, all CAS-covered contracts awarded to that business unit during that cost accounting period must also have modified coverage with the following exceptions: if the business unit receives a single CAS-covered contract award of $56.5 million or more, the 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. 
 (c) * * * (3) Applicable Standards. Coverage for educational institutions requires that the business unit comply with all of the CAS specified in part 9905 that are in effect on the date of the contract award and with any CAS that become applicable because of later award of a CAS-covered contract. This coverage applies to business units that receive negotiated contracts in excess of $550,000, except for CAS-covered contracts awarded to FFRDCs operated by an educational institution. 
 (5) Contract Clauses. The contract clause at 9903.201-4(e) shall be incorporated in each negotiated contract and subcontract awarded to an educational institution when the negotiated contract or subcontract price exceeds $550,000. For CAS-covered contracts awarded to an FFRDC operated by an educational institution, however, the full or modified CAS contract clause specified at 9903.201-4(a) or (c), as applicable, shall be incorporated. 
 6. Section 9903-201-3 is amended by revising the clause heading; by revising paragraphs (a) and (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
  
 Cost Accounting Standards Notices and Certification (October 2005) 
 I. Disclosure Statement—Cost Accounting Practices and Certification (a) Any contract in excess of $550,000 resulting from this solicitation, except for those contracts which are exempt as specified in 9903.201-1. 
 (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 $56.5 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 
                                ( print page 73425)
                                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 $56.5 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 Contract 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 immediately preceding the period in which this proposal was submitted, the offeror received less than $56.5 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 $56.5 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 $56.5 million or more. 
 7. Section 9903.201-4 is amended by revising: A. The clause heading in paragraph (a)(2); B. Paragraph (d) of the clause in paragraph (a); C. Paragraph (c)(1); D. The clause heading in paragraph (c)(2); E. Paragraph (d)(2) of the clause in paragraph (c); F. The clause heading in paragraph (e)(2); and G. Paragraph (d) introductory text and (d)(2) of the clause in paragraph (e). The revisions read as follows:
 9903.201-4
  (a) * * * (2) * * * Cost Accounting Standards (October 2005) 
 (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, including the obligation to comply with all CAS in effect on the subcontractor's award date or if the subcontractor has submitted cost or pricing data, on the date of final agreement on price as shown on the subcontractor's signed Certificate of Current Cost or Pricing Data. If the subcontract is awarded to a business unit which pursuant to 9903.201-2 is subject to other types of CAS coverage, the substance of the applicable clause set forth in 9903.201-4 shall be inserted. This requirement shall apply only to negotiated subcontracts in excess of $550,000, except that the requirement shall not apply to negotiated subcontracts otherwise exempt from the requirement to include a CAS clause as specified in 9903.201-1. (End of Clause) 
 (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 $550,000 but less than $56.5 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). (2) * * * Disclosure and Consistency of Cost Accounting Practices (October 2005) 
 (d) * * * (2) This requirement shall apply only to negotiated subcontracts in excess of $550,000. 
 (e) 
                            *Cost Accounting Standards—Educational Institutions*. * * * (2) * * * Cost Accounting Standards—Educational Institution (October 2005) 
 (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, including the obligation to comply with all applicable CAS in effect on the subcontractor's award date or if the subcontractor has submitted cost or pricing data, on the date of final agreement on price as shown on the subcontractor's signed Certificate of Current Cost or Pricing Data, except that: (1) * * * (2) This requirement shall apply only to negotiated subcontracts in excess of $550,000. 
 8. Section 9903.201-5 is amended by revising paragraph (a) to read as follows:
 9903.201-5
  (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 $17 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.
 9903.202
  9. Section 9903-202-1 is amended by revising (b)(1) and (2); (c); and (f)(2)(i), (ii), and (iii) to read as follows:
 9903.202-1
  
 (b) Completed Disclosure Statements are required in the following circumstances: (1) Any business unit that is selected to receive a CAS-covered contract or subcontract of $56.5 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 $56.5 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 CAS-covered 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. (c) When a Disclosure Statement is required, a separate Disclosure Statement must be submitted for each segment whose costs included in the total price of any CAS-covered contract or subcontract exceed $550,000, unless: (1) The contract or subcontract is of the type or value exempted by 9903.201-1 or (2) In the most recently completed cost accounting period the segment's CAS-covered awards are less than 30 percent of total segment sales for the period and less than $11.5 million. 
 (f) 
                            *Educational institutions-disclosure requirements.* (1) * * * (2) * * * (i) Any business unit of an educational institution that is selected to receive a CAS-covered contract or subcontract in excess of $550,000 and is part of a college or university location 
                            ( print page 73426)
                            listed in Exhibit A of Office of Management and Budget (OMB) Circular A-21 shall submit a Disclosure Statement before award. A Disclosure Statement is not required, however, if the listed entity can demonstrate that the net amount of Federal contract and financial assistance awards received during its immediately preceding cost accounting period was less than $28.5 million. (ii) Any business unit that is selected to receive a CAS-covered contract or subcontract of $28.5 million or more shall submit a Disclosure Statement before award. (iii) Any educational institution which, together with its segments, received net awards of negotiated prime contracts and subcontracts subject to CAS totaling $28.5 million or more in its most recent cost accounting period, of which, at least one award exceeded $1 million, must submit a Disclosure Statement before award of its first CAS-covered contract in the immediately following cost accounting period. However, if the first CAS-covered contract is received within 90 days of the start of the cost accounting period, the institution is not required to file until the end of 90 days.


[FR Doc. 05-23647 Filed 12-9-05; 8:45 am] BILLING CODE 3110-01-P