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August 31, 2020 By cs

Government reliance on waiver argument to keep price adjustment windfall fails

The U.S. Court of Appeals for the Federal Circuit has articulated limits to the government’s ability to rely on the waiver doctrine to enforce Federal Acquisition Regulation (FAR) provisions of questionable legality.

In so doing, the court has cast doubt on the government’s “heads we win, tails you lose” approach to measuring the cost impact of simultaneous changes to a contractor’s cost accounting practices.

In The Boeing Company v. United States, 2019-2148 (Aug. 10, 2020), the Federal Circuit rejected the government’s argument that Boeing’s claim — which was based on an apparent conflict between: 1) a statutory provision limiting the costs the government may recover for cost accounting practice changes to the aggregate increased cost to the government, and 2) a FAR provision under which the government’s recovery considers only the changes that increase costs to the government, and disregards changes that decrease costs to the government — was waived because Boeing did not raise the issue prior to contract award.

Background

Contractors covered by the Cost Accounting Standards (CAS) sometimes change their cost accounting practices.  They are allowed to do this so long as they disclose the changes and cooperate with the government’s efforts to determine whether, and the extent to which, the changes increase costs to the government. If changes in cost accounting practices do increase the amount charged to the government, the government is entitled to a price adjustment to neutralize the increased costs.

Keep reading this article at: https://governmentcontractsnavigator.com/2020/08/18/government-reliance-on-waiver-argument-to-keep-price-adjustment-windfall-fails/

Filed Under: Government Contracting News Tagged With: Boeing, CAS, COFC, cost accounting, Cost Accounting Standard, Court of Federal Claims, DCMA, FAR, price adjustment, U.S. Court of Appeals, windfall

August 21, 2018 By AMK

CAS Board clarifies commercial item exemption, but raises potential audit issue

After publishing a proposed rule more than five and a half years ago, the Cost Accounting Standards (CAS) Board on July 17, 2018 issued a final rule revising the CAS exemption for contracts or subcontracts for the acquisition of commercial items.

The final rule clarifies that the current CAS exemption for commercial items extends to all contract types listed in Federal Acquisition Regulation (FAR) 12.207. However, in doing so, it also creates a potential audit issue arising out of the conditions levied by FAR 12.207 on certain contract types.

FAR lists contract types the government may use to acquire commercial items, including firm-fixed-price (FFP) contracts in conjunction with award fee incentives or performance/delivery incentives, known as fixed-price incentive (FPI) contracts. The relevant CAS commercial item exemption states that certain types of contracts for the acquisition of commercial items are exempt from all CAS. CAS 9903.201-1(b)(6) lists various contract types, including FFP, fixed-priced with economic price adjustment, time-and-materials (T&M) and labor-hour (LH), but makes no mention of FPI contracts. This inconsistency is the result of various amendments over time by the FAR Council to FAR 12.207. The final rule amends the language in CAS 9903.201-1(b)(6) to exempt commercial item contracts and subcontracts authorized in FAR 12.207 from all CAS requirements. Look for this change to CAS 9903.201-1(b)(6) when the final rule becomes effective on August 16, 2018.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=726522

Filed Under: Government Contracting News Tagged With: CAS, CASB, commercial item, cost accounting, Cost Accounting Standard, Cost Accounting Standards Board, economic price adjustment, FAR, firm fixed price, fixed price, fixed price incentive, GAO, OFPP

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