Finally: CAS Board asks for input on CAS coverage of vehicles with undetermined value

The Cost Accounting Standards Board (CASB) recently announced that it is seeking public comment on “whether and how” to amend the rules to clarify whether the CAS applies to indefinite value contract vehicles (or IDVs, also known as indefinite delivery/indefinite quantity contracts or IDIQ contracts). Comments must be submitted no later than August 19, 2024. The full text of the notice is available here. The CASB also published a paper discussing six possible approaches and the criteria it will use to evaluate those approaches, but the public is encouraged to provide alternatives for the CASB to consider.

For contractors that do not currently have CAS-covered contracts but have IDIQ contracts that are not otherwise exempt from CAS (for example, if the contractor is a small business or the contract involves commercial products or services), this potential change could affect the CAS coverage of contracts awarded under those IDIQ contracts. And for contractors that currently have CAS-covered contracts, this question is critical for quantifying the cost impact when cost accounting practices change and when the government makes or asserts a claim for noncompliance with CAS.

The six approaches proposed by the CASB are:

1. Treat each order as a single contract for the purpose of determining CAS coverage (as recommended in 2018 by the Acquisition Rules Simplification Advisory Panel established by Section 809 of the National Defense Authorization Act of 2016);
2. Apply CAS to all orders based on the maximum award value of the IDV, regardless of the value of the order.
3. Apply CAS to all orders based on the minimum guarantee amount, regardless of order value.
4. Apply CAS only when the cumulative value of all orders exceeds the threshold. From that point on, this order and all subsequent orders are covered by CAS.
5. Use a mix of approaches 1 and 2: for IDVs with multiple awards, use approach 1 and treat each order as a single contract, while for IDVs with single awards, use approach 2 and apply CAS based on the maximum value of the IDV; or
6. Use a mix of approaches 1 and 4: For multi-award IDVs, use approach 1 and treat each order as a single contract. For single-award IDVs, use approach 4 and apply CAS if the cumulative value exceeds the threshold.

The Board has indicated that it will consider a number of criteria in making its decision, including the parties’ respective risks, regulatory and compliance burdens, promoting strong competition, minimising complexity and promoting consistency in the application of CAS. We believe that Approach 1 best meets these criteria and is also based on a sound interpretation of the Treaty principles.

This is one of several developments we have been following since the CASB reconvened earlier this year after a five-year hiatus due to lack of membership. Other key issues the CASB is addressing include CAS-GAAP conformity for CAS 408, CAS 409, changes in accounting and accounting for operating income and leases, harmonization of pensions, and raising the threshold for a CAS exemption from $15 million to $100 million if the business unit of the contractor or subcontractor that will perform the work is primarily engaged in the sale of commercial items and would not otherwise be subject to CAS, as provided in the 2017 NDAA.