HR 5414 RH 
and procedures governing actions of the Board under this chapter. The 
rules and procedures shall require that any action to prescribe, amend, 
or rescind a standard or interpretation be approved by majority vote 
of the Board. 
(b) MANDATORY USE OF STANDARDS.— 
(1) SUBCONTRACT.— 
(A) DEFINITION.—In this paragraph, the term ‘‘subcontract’’ 
includes a transfer of commercial items between divisions, subsidi-
aries, or affiliates of a contractor or subcontractor. 
(B) WHEN STANDARDS ARE TO BE USED.—Cost accounting 
standards prescribed under this chapter are mandatory for use by 
all executive agencies and by contractors and subcontractors in es-
timating, accumulating, and reporting costs in connection with the 
pricing and administration of, and settlement of disputes con-
cerning, all negotiated prime contract and subcontract procure-
ments with the Federal Government in excess of the amount set 
forth in section 2306a(a)(1)(A)(i) of title 10 as the amount is ad-
justed in accordance with applicable requirements of law. 
(C) NONAPPLICATION OF STANDARDS.—Subparagraph (B) does 
not apply to— 
(i) a contract or subcontract for the acquisition of a com-
mercial item; 
(ii) a contract or subcontract where the price negotiated is 
based on a price set by law or regulation; 
(iii) a firm, fixed-price contract or subcontract awarded on 
the basis of adequate price competition without submission of 
certified cost or pricing data; or 
(iv) a contract or subcontract with a value of less than 
$7,500,000 if, when the contract or subcontract is entered 
into, the segment of the contractor or subcontractor that will 
perform the work has not been awarded at least one contract 
or subcontract with a value of more than $7,500,000 that is 
covered by the standards. 
(2) EXEMPTIONS AND WAIVERS BY BOARD.—The Board may— 
(A) exempt classes of contractors and subcontractors from the 
requirements of this chapter; and 
(B) establish procedures for the waiver of the requirements of 
this chapter for individual contracts and subcontracts. 
(3) WAIVER BY HEAD OF EXECUTIVE AGENCY.— 
(A) IN GENERAL.—The head of an executive agency may waive 
the applicability of the cost accounting standards for a contract 
VerDate Aug 31 2005 
00:57 Sep 19, 2006
Jkt 049200
PO 00000
Frm 00026
Fmt 6652
Sfmt 6221
E:\BILLS\H5414.RH
H5414
jcorcoran on PRODPC62 with BILLS
HR 5414 RH 
or subcontract with a value of less than $15,000,000 if that offi-
cial determines in writing that the segment of the contractor or 
subcontractor that will perform the work— 
(i) is primarily engaged in the sale of commercial items; 
and 
(ii) would not otherwise be subject to the cost accounting 
standards under this section. 
(B) IN EXCEPTIONAL CIRCUMSTANCES.—The head of an execu-
tive agency may waive the applicability of the cost accounting 
standards for a contract or subcontract under exceptional cir-
cumstances when necessary to meet the needs of the agency. A de-
termination to waive the applicability of the standards under this 
subparagraph shall be set forth in writing and shall include a 
statement of the circumstances justifying the waiver. 
(C) RESTRICTION ON DELEGATION OF AUTHORITY.—The head 
of an executive agency may not delegate the authority under sub-
paragraph (A) or (B) to an official in the executive agency below 
the senior policymaking level in the executive agency. 
(D) CONTENTS OF FEDERAL ACQUISITION REGULATION.—The 
Federal Acquisition Regulation shall include— 
(i) criteria for selecting an official to be delegated authority 
to grant waivers under subparagraph (A) or (B); and 
(ii) the specific circumstances under which the waiver may 
be granted. 
(E) REPORT.—The head of each executive agency shall report 
the waivers granted under subparagraphs (A) and (B) for that 
agency to the Board on an annual basis. 
(c) REQUIRED BOARD ACTION FOR PRESCRIBING STANDARDS AND IN-
TERPRETATIONS.—Before prescribing cost accounting standards and inter-
pretations, the Board shall— 
(1) take into account, after consultation and discussions with the 
Comptroller General, professional accounting organizations, contrac-
tors, and other interested parties— 
(A) the probable costs of implementation, including any infla-
tionary effects, compared to the probable benefits; 
(B) the advantages, disadvantages, and improvements antici-
pated in the pricing and administration of, and settlement of dis-
putes concerning, contracts; and 
(C) the scope of, and alternatives available to, the action pro-
posed to be taken; 
VerDate Aug 31 2005 
00:57 Sep 19, 2006
Jkt 049200
PO 00000
Frm 00027
Fmt 6652
Sfmt 6221
E:\BILLS\H5414.RH
H5414
jcorcoran on PRODPC62 with BILLS
HR 5414 RH 
(2) prepare and publish a report in the Federal Register on the 
issues reviewed under paragraph (1); 
(3)(A) publish an advanced notice of proposed rulemaking in the 
Federal Register to solicit comments on the report prepared under 
paragraph (2); 
(B) provide all parties affected at least 60 days after publication to 
submit their views and comments; and 
(C) during the 60-day period, consult with the Comptroller General 
and consider any recommendation the Comptroller General may make; 
and 
(4) publish a notice of proposed rulemaking in the Federal Register 
and provide all parties affected at least 60 days after publication to 
submit their views and comments. 
(d) EFFECTIVE DATES.—Rules, regulations, cost accounting standards, 
and modifications thereof prescribed or amended under this chapter shall 
have the full force and effect of law, and shall become effective within 120 
days after publication in the Federal Register in final form, unless the 
Board determines that a longer period is necessary. The Board shall deter-
mine implementation dates for contractors and subcontractors. The dates 
may not be later than the beginning of the second fiscal year of the con-
tractor or subcontractor after the standard becomes effective. 
(e) ACCOMPANYING
MATERIAL.—Rules, regulations, cost accounting 
standards, and modifications thereof prescribed or amended under this 
chapter shall be accompanied by prefatory comments and by illustrations, 
if necessary. 
(f) IMPLEMENTING REGULATIONS.—The Board shall prescribe regula-
tions for the implementation of cost accounting standards prescribed or in-
terpreted under this section. The regulations shall be incorporated into the 
Federal Acquisition Regulation and shall require contractors and sub-
contractors as a condition of contracting with the Federal Government to— 
(1) disclose in writing their cost accounting practices, including 
methods of distinguishing direct costs from indirect costs and the basis 
used for allocating indirect costs; and 
(2) agree to a contract price adjustment, with interest, for any in-
creased costs the Federal Government pays the contractor or subcon-
tractor because of a change in the contractor’s or subcontractor’s cost 
accounting practices or a failure by the contractor or subcontractor to 
comply with applicable cost accounting standards. 
(g) NONAPPLICABILITY OF CERTAIN SECTIONS OF TITLE 5.—Functions 
exercised under this chapter are not subject to sections 551, 553 to 559, 
and 701 to 706 of title 5. 
VerDate Aug 31 2005 
00:57 Sep 19, 2006
Jkt 049200
PO 00000
Frm 00028
Fmt 6652
Sfmt 6221
E:\BILLS\H5414.RH
H5414
jcorcoran on PRODPC62 with BILLS
HR 5414 RH 
§ 1503. Contract price adjustment 
(a) DISAGREEMENT CONSTITUTES A DISPUTE.—If the Federal Govern-
ment and a contractor or subcontractor fail to agree on a contract price ad-
justment, including whether the contractor or subcontractor has complied 
with the applicable cost accounting standards, the disagreement will con-
stitute a dispute under chapter 69 of this title. 
(b) AMOUNT OF ADJUSTMENT.—A contract price adjustment undertaken 
under section 1502(f)(2) of this title shall be made, where applicable, on 
relevant contracts between the Federal Government and the contractor that 
are subject to the cost accounting standards so as to protect the Federal 
Government from payment, in the aggregate, of increased costs, as defined 
by the Cost Accounting Standards Board. The Federal Government may not 
recover costs greater than the aggregate increased cost to the Federal Gov-
ernment on the relevant contracts subject to the price adjustment unless the 
contractor made a change in its cost accounting practices of which it was 
aware or should have been aware at the time of the price negotiation and 
which it failed to disclose to the Federal Government. 
(c) INTEREST.—The interest rate applicable to a contract price adjust-
ment is the annual rate of interest established under section 6621 of the 
Internal Revenue Code of 1986 (26 U.S.C. 6621) for the period. Interest 
accrues from the time payments of the increased costs were made to the 
contractor or subcontractor to the time the Federal Government receives full 
compensation for the price adjustment. 
§ 1504. Effect on other standards and regulations 
(a) PREVIOUSLY EXISTING STANDARDS.—All cost accounting standards, 
waivers, exemptions, interpretations, modifications, rules, and regulations 
prescribed by the Cost Accounting Standards Board under section 719 of 
the Defense Production Act of 1950 (50 App. U.S.C. 2168)— 
(1) remain in effect until amended, superseded, or rescinded by the 
Board under this chapter; and 
(2) are subject to the provisions of this part in the same manner as 
if prescribed by the Board under this part. 
(b) INCONSISTENT AGENCY REGULATIONS.—To ensure that a regulation 
or proposed regulation of an executive agency is not inconsistent with a cost 
accounting standard prescribed or amended under this chapter, the Admin-
istrator, under the authority in sections 1121, 1122(a) to (c)(1), 1125, 
1126, 1130, 1131, and 2304 of this title, shall rescind or deny the promul-
gation of the inconsistent regulation or proposed regulation and take other 
appropriate action authorized under sections 1121, 1122(a) to (c)(1), 1125, 
1126, 1130, 1131, and 2304. 
VerDate Aug 31 2005 
00:57 Sep 19, 2006
Jkt 049200
PO 00000
Frm 00029
Fmt 6652
Sfmt 6221
E:\BILLS\H5414.RH
H5414
jcorcoran on PRODPC62 with BILLS