Get "FAR

Get “FAR” Sighted
In 2020
J Schaus & Associates – Washington DC – PH: 202-365-0598 - Hello@JenniferSchaus.com
Join us in this complimentary webinars series as we uncover
each Part of The FAR (Federal Acquisition Regulations) so you can
better understand the rules of the (federal contracting) game.

Get “FAR” Sighted In 2020
The FAR, or Federal Acquisition Regulation
is the official rule book for how the Federal
Government purchases. It sets uniform
policies and procedures for the federal
acquisition and procurement process.
Webinars are complimentary and recorded.
NOTE: Recordings are posted to our website and YouTube channel.

The National Veteran Small Coalition (NVSBC)
is the largest non-profit trade association in the country
representing veteran and service-disabled veteran-
owned small business in the federal marketplace as
prime and subcontractors. NVSBC provides networking,
match-making, coaching, and training opportunities for
members.
Please visit: www.nvsbc.org
PARTNER:

Sponsors:

Reach
Federal Government Contractors
&
Federal Government
Advertise With Us
20,000+ Subscribers!!
hello@jenniferschaus.com

About Our Speaker:
Craig Stetson, Partner
Capital Edge
cstetson@capitaledgeconsulting.com
www.capitaledgeconsulting.com

FAR PART 30
Cost Accounting Standards
Administration
Link:
https://acquisition.gov/content/part-30-cost-accounting-standards-
administration
July 17, 2020

About Us:
Capital Edge is the country’s largest independent consulting firm
focusing solely on the U.S. Government contracting market.

About Us: Presence in the Marketplace

About Us:
Capital Edge provides both full service integrated solutions as well as
selected services within four main areas:

About Us: The Solution Model

Agenda
• Overview and CAS Basics
• Cost Accounting Practice Changes
• Disclosure Statements

Overview and CAS Basics

• Congressional Testimony and GAO Study – 1969, 1970
• Cost Accounting Standards Board (P.L. 91-379) – 1970
 Agency of Congress (moved to Executive Branch in 1988)
 Established to address concerns involving defense contractor cost
estimating, accumulating and reporting under negotiated
government contracts (Defense)
 “… exclusive authority to make, promulgate, and amend cost
accounting standards ….. designed to achieve uniformity and
consistency in the cost accounting practices governing the
measurement, assignment, and allocation of costs to contracts…”

• P.L. 100–679 requires certain contractors and subcontractors to:
 Comply with Cost Accounting Standards (CAS)
 Disclose its cost accounting practices in writing
 Consistently follow its disclosed cost accounting practices
• Agree to Equitable Adjustment for Applicable Changes
• Agree to Adjustment to Recover Increased Costs for
Noncompliance or Failure to Follow Established Practices
• Applicable flowdowns to subcontractors

FAR Part 30 – Cost Accounting Standards Administration
• 30.1 – General
• 30.2 – Program Requirements
 Applicability
 Clauses
 Disclosure Requirements
• 30.3 – Reserved
• 30.6 – Administration
 Changes
 Noncompliance

48 CFR Chapter 99 – Cost Accounting Standards
• Establishes contract coverage requirements (Part 9903)
 Applicability and Exemptions
 Disclosure Requirements
• Individual standards set forth how direct and indirect costs should be
accounted for (Part 9904)
 Measurement
 Assignment
 Allocation
 Educational Institutions (Part 9905)

Types of CAS Coverage
Full Coverage
• Must comply with all existing and newly issued CAS
• Coverage determined based on contract value
Modified Coverage
• Must comply with CAS 401, 402, 405, and 406
• Coverage determined based on contract value
None (Exempt from Coverage)

• Full Coverage (Segment level)
 Single award of $50M or more; subsequent awards greater
than $2M during same accounting period
 Awards greater than $2M in current cost accounting period if
net CAS-covered awards of $50M or more in preceding cost
accounting period
• Modified Coverage (Segment level)
 Single award of $7.5M or more (trigger contract)
 Subsequent awards greater than $2M while currently
performing under a trigger contract

• Exempt from Coverage (Partial List)
 Sealed bids
 Negotiated contracts less than the TINA threshold - $2M
 Small business concerns
 Foreign concerns (CAS 401 & 402 only)
 Prices set by law or regulation
 FFP commercial item acquisitions
 FFP adequate competition w/o certified cost or pricing data
 Contracts less than $7.5M if currently not performing under a
CAS-covered contract $7.5M or greater

CAS Description
401 Consistency in Estimating, Accumulating, and Reporting Costs
402 Consistency in Allocating Costs Incurred for the Same Purpose
403 Allocation of Home Office Expenses to Segments
404 Capitalization of Tangible Assets
405 Accounting for Unallowable Costs
406 Cost Accounting Period
407 Use of Standard Costs for Direct Material and Direct Labor
408 Accounting for Costs of Compensated Personal Absence
409 Depreciation of Tangible Capital Assets
410 Allocation of Business Unit G&A Expenses to Final Cost Objective

CAS Description
411 Accounting for Acquisition Costs of Material
412 Composition and Measurement of Pension Cost
413 Adjustment and Allocation of Pension Cost
414 Cost of Money as an Element of the Cost of Facilities Capital
415 Accounting for the Cost of Deferred Compensation
416 Accounting for Insurance Costs
417 Cost of Money as an Element of the Cost of Capital Assets Under Construction
418 Allocation of Direct and Indirect Costs
420 Accounting for Independent Research and Development Costs and Bid and
Proposal Costs

Basic Standards
• CAS 401 — Consistency in estimating, accumulating & reporting
• CAS 402 — Consistency in allocating costs for same purpose
• CAS 405 — Accounting for unallowable costs
• CAS 406 — Cost accounting period
Allocation of Cost Standards
• CAS 403 — Allocation of home office expenses to segments
• CAS 410 — Allocation of business unit G&A to final cost objectives
• CAS 418 — Allocation of direct and indirect costs
• CAS 420 — Accounting for IR&D/B&P costs

Compensation Standards
• CAS 408 — Compensated personal absence
• CAS 412 — Composition and measurement of pension costs
• CAS 413 — Adjustment and allocation of pension costs
• CAS 415 — Deferred compensation
Asset Standards
• CAS 404 — Capitalization of tangible capital assets
• CAS 409 — Depreciation of tangible capital assets
• CAS 414 — Cost of money as an element of the cost of facilities capital
• CAS 417 — Cost of money as an element of the cost of capital under
construction

Other Standards
• CAS 407 — Use of standard costs
• CAS 411 — Accounting for material costs
• CAS 416 — Accounting for insurance costs

Effect of Contract Modifications
• Mods made under the terms and conditions of the contract do not
affect CAS applicability, but ...
 if the contract modification adds new work not contemplated in
the original contract, the government may take the position that
this new work must be treated as if it were a new contract and
potentially subject to CAS if the added work exceeds the
thresholds for CAS
 This position is based on an old CAS working group paper, but is
not specifically addressed in CAS Guidance

Cost Accounting Practice Changes

Changes in Cost Accounting Practice
• FAR 30.302-1:
 Definition – A cost accounting practice is any disclosed or established
accounting method or technique which is used for
 Allocation of cost to cost objectives
 Assignment of cost to cost accounting periods
 Measurement of costs
• Under CAS, once a contractor has established its accounting practices,
a change to any disclosed accounting practice requires notification to
the government and the government may request an assessment of
the related cost impact of the proposed accounting change

CAS Clauses Requiring Price Adjustments
• Requires that contractors agree to
 Price adjustments, with interest, if increased costs to the
Government result from
 Failure to comply with CAS
 Failure to follow disclosed practices consistently in estimating,
accumulating and reporting costs on contracts & subcontracts with
this clause
 Price adjustments when a change in practice is required to comply
with a CAS that becomes applicable or is necessary to remain com-
pliant

Submission of Cost Impact Proposal
• Required Accounting Practice Change arises when contractor
 Needs to comply with a new or modified CAS
 Changes from one compliant practice (disclosed or established) to
another compliant practice to remain in compliance with CAS
• Unilateral Accounting Practice Changes
 Change from one compliant practice to another compliant practice
that a contractor elects to make, but that the Government has not
determined to be desirable

Submission of Cost Impact Proposal
• Desirable Accounting Practice Changes
 Contractor elects to make a change from one compliant practice to
another, and the Government determines that the change not
detrimental to the Government
 Changes may be desirable even if costs increase on existing contracts /
subcontracts
• Non-Compliances
 Contractor fails to comply with an applicable CAS
 Contractor fails to consistently follow any disclosed or established cost
accounting practice

Cost Accounting Changes
• Types of changes:
 Mandatory change to comply with new applicable CAS
 Equitable adjustment allowed
 Net increased costs to government allowable
 Net decreased costs to government also allowable
 Unilateral (Voluntary change - discretionary)
 Not agreed to by ACO
 Government does not consider necessary and beneficial to its
interests
 Net increase to government not allowable

Cost Accounting Changes
• Types of changes (continued):
• Unilateral (Voluntary change - sanctioned)
• Agreed to by ACO
• Considered desirable and not detrimental
• Equitable adjustment is allowed

Cost Accounting Practice Changes
• Contract requirement – no aggregate increased cost as a result of a
change in cost accounting practice
• Increased cost to the Government
 Fixed Price Contracts – practice causes allocation of “less cost” to the
contract
 Cost Type Contracts – practice causes allocation of “more cost” to the
contract
 Raytheon Case
• If change results in “increased costs” contract price must be adjusted

Cost Impact Proposals and GDMs
• Must be submitted within 60 days (or other mutually agreed-upon
date) after
 The proposed change is determined adequate and compliant
 The date of the contractor’s agreement with the initial finding of
non-compliance
 The date the contractor is notified by the Government of a
determination of non-compliance

Cost Impact Proposals and GDMs (continued)
• Data required to be included:
 Identification of each CAS-covered contract / subcontracts and the
calculated cost impact by type of change
 Cost, profit/fee, and price/amount on each CAS-covered contract /
subcontracts
 Contracts grouped by contract type (e.g., FFP, FPI, CPFF, CPIF)
 Contracts grouped by the various Departments/ Agencies (e.g.,
Army, Navy, Air Force, NASA, DOE)

Cost Impact Proposals and GDMs (continued)
• List of CAS-covered contracts & subcontracts that are, or will be,
affected by the change/non-compliance
• Maintain a system for identifying all contracts and subcontracts
containing FAR 52.230-2 (CAS Clause)
• Format of the Cost Impact Proposal is typically not specified
• Format may be Determined by Govt and provided to Contractor
• Must be in sufficient detail

Disclosure Statements

• To Describe a Contractor’s Cost Accounting Practices & Procedures
 Format is prescribed by the CASB, Disclosure Statement Form No. CASB
DS-1 (48 CFR 9903.202)
 DS Template can be found on-line at
 www.whitehouse.gov/omb/procurement/casb_ds-1.pdf
• Required under fully CAS-Covered contracts
• Home offices allocating costs to segments must submit applicable DS Parts
• Segments where costs included in CAS-covered contracts exceed
$2M, unless
 The segment's CAS-covered awards are less than 30% of total
segment sales for the period & less than $10M

General Background Concepts
• Cost Accounting Practices
• Any disclosed or established accounting method or technique which is
used for
 Allocation of cost to cost objectives
 Assignment of cost to cost accounting periods
 Measurement of cost

• Measurement of Cost
 Standard or actual cost
 Definition of asset book value
• Assignment of Cost to a Cost Accounting Period
 Use of accrual or cash basis accounting
 Depreciation methods
• Allocation of Costs to Cost Objectives
 Overhead expenses based on direct labor dollars
 Composition of expense pools or allocation bases

The Components of the Disclosure Statement
• Cover Sheet and Certification
• Part I – General Information
• Part II – Direct Costs
• Part III – Direct vs. Indirect Costs
• Part IV – Indirect Costs
• Part V – Depreciation & Capitalization Practices
• Part VI – Other Costs & Credits
• Part VII – Deferred Compensation & Insurance
• Part VIII – Home Office Expenses

Coversheet and Certification
• Contractor’s name, address and POC
• Reporting Unit Type
 Business Unit not divided by segments OR
 HO, IHO or Segment for Business Units which are divided
• Effect Date of the DS
• Identification of Original DS submission or Revision to Existing DS
• Name of Agency/Auditor DS will be submitted to and contact information

Part I – General Information
• Major Items
 Type of Business Entity (Corp, NFP, FFRDC, etc.)
 Predominant Type of Government Sales (Manufacturing, R&D, Construction,
Services, Other)
 Sales and industry data
 Description of cost accounting system (actual cost vs. standard cost)
 Integration of cost accounting system with financial accounting system
 Treatment of unallowable costs
 Fiscal year

Part II – Direct Costs
• Major Items
 Description of principal types of direct costs
 Method of charging direct materials
 Method of charging direct labor
 As applicable, method of direct material and labor standard costing and
variance disposition
 Treatment of inter-organizational transfers

Part III – Direct vs. Indirect Costs
• Major Items
 Criteria for determining how costs are charged or allocated to cost
objectives
 Treatment of specific transactions involving direct labor, direct material,
and miscellaneous costs

Part IV –Indirect Costs
• Major Items
 The number & type of indirect cost pools to include general & admin.
(G&A), the composition of cost pools & the allocation bases
 Number of and how service center costs are allocated to cost
objectives
 Allocation of IR&D/B&P to cost objectives

Part V – Depreciation & Capitalization Practices
• Major Items
 Method of depreciation
 Method of determining useful lives and residual value
 Comparison to methods used for tax and financial purposes
 Criteria for capitalization
 Treatment of costs incurred in procurement of assets

Part VI – Other Costs & Credits
• Major Items
 Method of charging and crediting compensated personal absence
 Treatment of severance payments and supplemental unemployment
 Treatment of credits

Part VII – Deferred Compensation & Insurance
• Major Items
 Description of pension plans which cover the greatest number of
employees, if applicable
 Description of pension plan contribution basis
 Description of deferred compensation plans
 Description of purchased insurance and treatment of self-insurance
programs

Part VIII – Home Office Expenses
• Major Items
 Description of home office expense pools and methods of allocation
 Description of home office expenses
 Sales information and listing of business units/segments receiving an
allocation

Thank You For Joining Us!
Craig Stetson
cstetson@capitaledgeconsulting.com
408-921-2128

Brought To You By:
JSchaus & Associates
Washington DC
PH: 202-365-0598
Hello@JenniferSchaus.com

Get "FAR

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Get "FAR

Similar to Get "FAR (20)

More from JSchaus & Associates

More from JSchaus & Associates (17)

Recently uploaded

Recently uploaded (20)

Get "FAR