SUPPLEMENTARY INFORMATION:

A. Background

On March 9, 2005, the Councils issued a final rule (FAR case 1999-025) revising FAR Part 30, “CAS Administration” which significantly streamlined the process for submitting, negotiating, and resolving cost impacts resulting from a change in cost accounting practice or noncompliance with stated practices. Subsequent to this, a number of recommended changes to FAR Part 30 have been submitted by both government and industry representatives. These recommendations have been evaluated and, where warranted, changes are being proposed herein.

B. Discussion

The Councils are proposing to revise the following FAR provisions:

1. FAR 30.001 includes minor changes to the definitions of a number of terms. Related changes are made to the FAR clause at 52.230-6(a). These changes are made to ensure that each term is consistently defined in both locations.

2. FAR 30.601(c) is added to require that the cognizant Federal agency official (CFAO) request and consider the advice of the auditor, as appropriate, when administering the Cost Accounting Standards. As a result, the phrase “with the assistance of the auditor” is deleted from several other sections of FAR Part 30.

3. FAR 30.602(d) is revised to include references to FAR 30.603, 30.604, and 30.605.

4. FAR 30.604(g) and 30.605(f) are revised to specify that the CFAO must evaluate the Detailed Cost Impact (DCI) proposal for cost accounting practice changes or noncompliances when a contractor is required to submit a DCI.

5. FAR 30.604(h)(4) is revised to indicate that the Changes clause is to be used to negotiate equitable adjustments related to required or desirable changes.

6. 30.605(h)(6) is added (and the current (h)(6) is redesignated as (h)(7)) to specify that the cost impact of a noncompliance that affects both cost estimating and cost accumulation shall be determined by combining the separate cost impacts of both the cost estimating and cost accumulation noncompliances.

Two other related issues were considered by the Councils no changes will be made in response to those recommendations. These include the following:

Issue: The Councils were informed of a concern about precluding contract awards when a contractor has submitted a revised Disclosure Statement, but that Disclosure Statement has not yet been determined adequate by the contracting officer.

Councils' Position: The Councils believe that the regulations currently provide adequate flexibility to address any such circumstances that may arise, including the waiver authority contained in the CAS/FAR. Furthermore, to date the Councils are unaware of any instances in which awards have been delayed pending determinations about the adequacy and/or compliance of revised Disclosure Statements.

Issue: Currently, FAR 30.606(a) prohibits combining the cost impacts of two unilateral accounting changes unless they both result in increased costs. The Councils were informed that such a rule may reduce contracting officer flexibility and may be contrary to established practices.

Councils' Position: FAR 30.606(a) is consistent with current statutory requirements which do not permit the combining of cost impacts for two or more unilateral changes. The Councils note that the contracting officer in such cases should separately determine whether each change is desirable, based on the criteria in FAR Part 30. Should the contracting officer determine that certain of the changes are desirable, the contracting officer would then have the authority to combine the cost impacts of those changes in determining the amount of the equitable adjustment resulting from the desirable changes.

This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

C. Regulatory Flexibility Act

The Councils do not expect this proposed rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because contracts and subcontracts awarded to small businesses are exempt from the Cost Accounting Standards. An Initial Regulatory Flexibility Analysis has, therefore, not been performed. We invite comments from small businesses and other interested parties. The Councils will consider comments from small entities concerning the affected FAR Part 30 in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 601, et seq. (FAR case 2005-027), in correspondence.

D. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the proposed changes to the FAR do not impose information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

Therefore, DoD, GSA, and NASA propose amending 48 CFR part 30 as set forth below:

1. The authority citation for 48 CFR part 30 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

2. Amend section 30.001 by—

a. Adding to the definition “Cognizant Federal agency official (CFAO)” “the ” following “administer”;

b. Removing from the definition “Desirable change” “unilateral” and adding “compliant” in its place; and

c. Revising paragraph (1) of the definition “Required change” to read as follows:

3. Amend section 30.601 by removing from paragraph (b) “52.230-6(b)” and adding “52.230-6(l)” in its place; and by adding paragraph (c) to read as follows:

4. Amend section 30.602 by revising paragraph (d) to read as follows:

5. Amend section 30.604 by—

a. Removing from the introductory text of paragraphs (b) and (f) “, with the assistance of the auditor,”;

b. Revising the introductory text of paragraph (g);

c. Revising the introductory text of paragraph (h)(4) and removing paragraphs (h)(4)(i) and (h)(4)(ii); and

d. Removing from paragraph (i)(1) “With the assistance of the auditor, estimate” and adding “Estimate” in its place.

The revised text reads as follows:

6. Amend section 30.605 by—

a. Removing from the introductory text of paragraph (c)(2) “, with the assistance of the auditor,”;

b. Revising the introductory text of paragraph (f); and

c. Redesignating paragraph (h)(6) as (h)(7) and adding a newly designated paragraph (h)(6).

The revised text reads as follows:

7. Amend section 52.230-6 by—

a. Revising the date of the clause;

b. Removing from the definition “Fixed-price contracts and subcontracts” the word “FAR” each time it appears (4 times);

c. Amending the definition “Flexibly-priced contracts and subcontracts” by revising paragraph (1); and by removing from paragraphs (2) through (5) the word “FAR”; and

d. Revising paragraph (1) of the definition “required change”.

The revised text reads as follows: