CAS INTERIM RULE
On February 7, 2000, the CAS Board issued an interim rule (as published in the Federal Register, 65FR5990) that changes the CAS coverage and Disclosure Statement (DS) thresholds, effective April 2, 2000. This interim ruling was a result of the President signing into law P.L. 106-65 the Defense Authorization Act for FY 2000, last October. Section 802 of the act provided for the streamlined applicability of the Cost Accounting Standards (CAS).
Admittedly, understanding the complexities of the various CAS and DS thresholds can be a difficult task. In order to facilitate your understanding of the revisions, we have flowcharted the CAS coverage and DS threshold levels. Flowchart #1 is predicated on the CAS and DS thresholds before the ruling as it appears in the Defense Contract Audit Agency's Contract Audit Manual, Chapter 8, Figure 8-1-1. Flowchart #2 presents the revised CAS and DS threshold relationships. We also denoted the changes on the second flowchart.
We will discuss the revised thresholds. We will point out the changes and discuss some of the differences. However, there were some items that were not updated and might cause confusion.
1. Exemption from CAS Coverage
a. Firm, fixed-price contracts or subcontracts awarded on the basis of adequate price competition without the submission of cost or pricing data will be exempt from CAS coverage. In flowchart #2, we show the old language that has a strikeout, and below is the new language. Regarding the reference in the new language to "the submission of cost or pricing data", this is the same as certified cost or pricing data. They used the former language in order to conform it to the original statutory requirements.
b. Contracts or subcontracts having an awarded value less than $7,500,000 will also be exempt from CAS coverage if at contract award, the segment of the contractor or subcontractor will perform the effort has not received at least one contract or subcontract with a value greater than $7,500,000 that is CAS covered. This is not the new trigger amount. As discussed later, such trigger has been eliminated.
c. When the CAS Board added the $7.5 million threshold, they added an entire new line to the list of CAS exemptions. They did not remove the second exemption to CAS coverage, "negotiated contracts and subcontracts not in excess of $500,000." Regarding the aforementioned $7.5 M threshold, it is only applicable if there is not even one, single CAS covered contract currently being performed. Accordingly, if there is one contract being performed that exceeds $500,000, the aforementioned $7.5 M threshold level is not applicable.
2. CAS Waiver
a. A new waiver provision revises the CAS regulations (FAR 9903.201-5) giving the head of an executive agency the option of eliminating the applicability of CAS for contracts or subcontracts with a value less than $15,000,000. This written waiver would only be granted to a contractor or subcontractor that performs work that meets the following requirements. First, they must be primarily involved in the sale of commercial items. Second, the firm would not otherwise be subject to CAS as of effective date of the newly implemented regulation.
b. There is also a new provision permitting the head of an executive agency to waive CAS applicability under exceptional circumstances to meet the needs of the agency.
c. The original waiver provisions have also been retained where the CAS Board has such authority under unusual circumstances.
3. CAS Full & Modified Coverage Thresholds
a. The CAS threshold for full coverage is increased from $25,000,000 to $50,000,000 as prescribed in FAR 9903.201-2.
b. Please be aware that the $1 Million (M) trigger contract was eliminated. The old provision was added to the full coverage of $25 M or more in the preceding fiscal year. It was also incorporated in the definition of modified coverage. Under the old language, a contractor could have $500 M in CAS covered contracts, but if not one of them exceeded $1 M, they would not have full but rather modified coverage.
The trigger stipulation has been completely eliminated from the interim rule with respect to both full and modified CAS coverage. Regarding full CAS coverage, if the contractor has over $50 M in covered contracts in the preceding fiscal year, they have to comply with all of the CAS standards. Conversely, there is no longer modified coverage in excess of the $50 M threshold based on the size of a single trigger contract.
4. CAS Disclosure Statement (DS) Threshold
a. The threshold for submitting a CAS DS has also increased from $25 M to $50 M as prescribed in FAR 9903.202-1(b). Once again, the $1 M trigger requirement if contracts exceeded the new threshold has been eliminated.
b. Apparently, the CAS Board did not address an obscure requirement relating to the threshold of filing a CAS DS for a segment. Perhaps the Board did not revise this threshold because it was not considered in the Defense Authorization Act for FY 2000. Nevertheless this provision in FAR 9903.202-1(c) is still applicable, i.e.
"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 $500,000, unless (i) the contract or subcontract is of the type or value exempted by 9903.201-1 or (ii) 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 $10 million."
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