Many government contracts are subject to cost accounting standards (“ CAS ”). The nineteen CAS standards “govern the allocation of costs among the various contracts being performed by a government contractor.” While many contracts are subject to CAS exemptions, many are not.
As a government contractor, it is crucial to know whether your contract is subject to the standards or whether it falls under one of the cost accounting standards exemptions so that you do not accidentally violate the contract terms.
Cost Accounting Standards Exemptions
The following categories of contracts and subcontracts fall under one of the cost accounting standards FAR exemptions:
- Sealed bid contracts
- Negotiated contracts and subcontracts for less than $700,000
- Contracts and subcontracts with small businesses
- Contracts and subcontracts with foreign governments or their agents or instrumentalities
- Contracts and subcontracts where the price is set by law or regulation
- Firm-fixed-price contracts and subcontracts for the acquisition of commercial items
- Contracts or subcontracts less than $7.5 million, if, at the time of award the business unit is not currently performing any CAS covered contracts or subcontracts valued at $7.5 million or greater
- Subcontracts under the NATO PHM Ship program that are to be performed outside the US by a foreign concern
- Firm-fixed-price contracts and subcontracts awarded on the basis of price competition without submission of certified cost or pricing data
- Where the prime contract is exempt from CAS under 9903.201-1, any subcontract under that contract is also exempt from CAS
How do I know if my Contract is subject to CAS Exemptions?
As a general rule, you may fall under one of the CAS exemptions based on the dollar value and type of contract you have received from the federal government. For example, contracts and subcontracts with educational institutions are subject to special CAS coverage.
If you are subject to CAS, then a standard CAS clause will be incorporated into your contract.
If you do not fall under one of the cost account standards exemptions, you need to be aware of the type of coverage your contract has. There are various levels of CAS exemptions and coverage, such as full coverage, modified coverage, and exempt.
FAR Cost Accounting Standards — Subcontractor CAS Covered Contracts
When a subcontract is awarded under a CAS covered prime contract, the FAR coverage on the subcontract is determined in the same way as prime contracts awarded to the subcontractor’s business unit. Getting help with your FAR accounting standards would be essential.
Knowing what standards you will be held accountable to under a government contract is extremely important. If you are unsure, you could violate the contract without even knowing. Avoid costly mistakes; learn more about the FAR exemptions.
Contact any of our government contracts attorneys at 1-866-601-5518 for a free consultation.