Jump to content

CAS requirements and a FFP subontract


Recommended Posts

My company has a FFP subcontract with a Prime contractor under a government contract for services which our other government contracts all have determined are commercial. We provided the original proposal for the subject subcontract to the Prime without a requirement for such a certification. The Prime recognized then that such a certification was not a requirement. Since then we have submitted numerous proposals for modifications to the Prime under this contract, all without certificate of Current Cost or Pricing Data. Now the contracting staff for the Prime has changed.

We were told previously that the proposal currently under consideration had been submitted to the government, which would have been done without such a certification. Now the Prime states that it won't be submitted unless such a certification is provided and that we must provide such by the end of this week or risk losing any chance of recovering monies due to the unilateral action by the Prime not to pay. Given that the Prime has had our proposal since December 2008, this new action is at best unreasonable.

We have provided the Prime with all of the FAR references we beleive clearly demonstrate that this contract does not fall under CAS requirements. Now the Prime is saying this is a TINA requirement. I can find nothing in TINA that supports this. My company does not have certified cost accounting standards in place and while we recognize the value and intend to move in this direction, this is not something we can do overnight and not something we want to be bullied into. Does anyone have any advice, thoughts or guidance?

Link to comment
Share on other sites

This is a common problem. Often contractors believe that they have commercial prices, when they don't.

It appears that you may be confusing two terms, Cost or Pricing Data and Cost Accounting Standards. Cost accounting standards do not apply to all businesses. For example, small businesses are exempt. However, Cost or Pricing data is the factual information that the company used to develop the proposal (there are better definitions posted here and in the FAR).

Your answer may reside in the FAR provision below.

15.403-1 Prohibition on obtaining cost or pricing data (10 U.S.C. 2306a and 41 U.S.C. 254b).

(a) Cost or pricing data shall not be obtained for acquisitions at or below the simplified acquisition threshold.

(B) Exceptions to cost or pricing data requirements. The contracting officer shall not require submission of cost or pricing data to support any action (contracts, subcontracts, or modifications) (but may require information other than cost or pricing data to support a determination of price reasonableness or cost realism)?

(1) When the contracting officer determines that prices agreed upon are based on adequate price competition (see standards in paragraph ©(1) of this subsection);

(2) When the contracting officer determines that prices agreed upon are based on prices set by law or regulation (see standards in paragraph ©(2) of this subsection);

(3) When a commercial item is being acquired (see standards in paragraph ©(3) of this subsection);

(4) When a waiver has been granted (see standards in paragraph ©(4) of this subsection); or

(5) When modifying a contract or subcontract for commercial items (see standards in paragraph ©(3) of this subsection).

Link to comment
Share on other sites

This is a common problem. Often contractors believe that they have commercial prices, when they don't.

It appears that you may be confusing two terms, Cost or Pricing Data and Cost Accounting Standards. Cost accounting standards do not apply to all businesses. For example, small businesses are exempt. However, Cost or Pricing data is the factual information that the company used to develop the proposal (there are better definitions posted here and in the FAR).

Your answer may reside in the FAR provision below.

15.403-1 Prohibition on obtaining cost or pricing data (10 U.S.C. 2306a and 41 U.S.C. 254b).

(a) Cost or pricing data shall not be obtained for acquisitions at or below the simplified acquisition threshold.

(B) Exceptions to cost or pricing data requirements. The contracting officer shall not require submission of cost or pricing data to support any action (contracts, subcontracts, or modifications) (but may require information other than cost or pricing data to support a determination of price reasonableness or cost realism)?

(1) When the contracting officer determines that prices agreed upon are based on adequate price competition (see standards in paragraph ?(1) of this subsection);

(2) When the contracting officer determines that prices agreed upon are based on prices set by law or regulation (see standards in paragraph ?(2) of this subsection);

(3) When a commercial item is being acquired (see standards in paragraph ?(3) of this subsection);

(4) When a waiver has been granted (see standards in paragraph ?(4) of this subsection); or

(5) When modifying a contract or subcontract for commercial items (see standards in paragraph ?(3) of this subsection).

Link to comment
Share on other sites

Thanks for taking time to reply - I appreciate it greatly. A couple of questions:

1) Is it possible to provide the same service to different agencies and have one agency (TRANSCOM) determine it is a commercial service and have another group (NAVFAC) decide it is not? I am really stumped on this one, especially after performing on this contract since 2004 with the understanding it is a commercial service, with no previous requirement for certified cost & pricing data.

2) I understand the difference between Cost & Pricing Data and Cost Accounting Standards... but I must admit that I thought cost & pricing data could not be "certified" unless the data was produced under Cost Accounting Standards. Perhaps that is the root of my inability to understand this request from the Prime?

3) Assuming that I am not understanding this correctly, when can certified cost & pricing data be required? This contract is well over the simplied acquisition threshold, but I do strongly believe we provide a commercial item. These services are advertised on our website and have been offered and sold to the general public since 1960.

Thanks again...

Link to comment
Share on other sites

Answer to your question #1: It is possible, but probably should not happen unless the initial commerciality determination was made with inadequate proof to support the qualification of the item as Commercial as defined in FAR 2.1 and the second buyer is correcting something that never should have happened. It doesn't sound like your situation fits that scenario.

There are many misconceptions about Commerciality that often lead a buyer (whether Government agency or prime contractor) to confuse the determination of a supply or service as a commercial item with price-related decisions. I have been in situations where a buyer refuses to acknowledge the commerciality determination made by another agency or company for a same or similar item because they believed that they would not get the best price and they would somehow lose some control if the item was procured as a commercial item. I think this goes against the guidance that the DoD put out in its Commercial Item Handbook, (URL below).

http://www.acq.osd.mil/dpap/Docs/cihandbook.pdf

Answer to your question #3: See FAR 15.403-4

Is the real question "Can something be done to correct an initial determination that an item is NOT commercial when you believe you have sufficient proof that it meets the tests of Commerciality at FAR 2.1????

Link to comment
Share on other sites

Thanks for the link to the Commercial Item Handbook - its a tool I have been using in this ongoing disagreement and supports my position. The services we offer are helicopter transport services - nothing complicated. We pick up people and supplies and move them from point A to point B. We do that for government contracts and for commercial contracts. We operate under FAA Part 135 - which is commercial. So - I think you are correct - teh real question is what can be done to correct the non-commercial determination by this Prime contractor? We will continue to work it...

Now if you have a link to a site that would clearly explain the relationship between Cost Accounting Standards and Certified Cost and Pricing Data, I would be even more grateful than I am already!!

Thanks so much -

Link to comment
Share on other sites

Now if you have a link to a site that would clearly explain the relationship between Cost Accounting Standards and Certified Cost and Pricing Data, I would be even more grateful than I am already!!

Thanks so much -

There are only two commonalities between CAS and TINA. The first is that they share the same threshold ($650,000). The second is that cost impacts to fixed-price contracts from changes to cost accounting practice are treated in a similar fashion to defective pricing -- i.e., contract price reduction.

Otherwise, there is no relationship between the two. Different public laws, different sections of the FAR, different issues altogether.

Hope this helps.

Link to comment
Share on other sites

Thanks, Here_2_Help.

However, for some interesting reading, see the below URL. It is a a letter by the head of the Professional Services Council written in 1998 to the CAS board review panel. The writer cites some historical communications from the GAO about the need for disclosed/consistency requirements in accounting practices to help proposal evaluators compare proposals that were submitted under TINA (negotiated procurements).

http://www.pscouncil.org/pdfs/GAOCostAccou...June16,1998.pdf

The writer opines

"...one of the driving concerns which led to the conclusion that cost accounting standards were needed was the large number of negotiated procurements in which prices were based on cost estimates, supported by cost data, in the context of a lack of competition and a lack of market restraints."

The writer further opines that

"The CAS Board has no mission with respect to contracts for which cost or pricing data are not required or submitted. Any procurement that does not require cost or pricing data submission must also not require compliance with cost accounting standards."

Does this provide some further insight ??

Link to comment
Share on other sites

Thanks, Here_2_Help.

However, for some interesting reading, see the below URL. It is a a letter by the head of the Professional Services Council written in 1998 to the CAS board review panel. The writer cites some historical communications from the GAO about the need for disclosed/consistency requirements in accounting practices to help proposal evaluators compare proposals that were submitted under TINA (negotiated procurements).

http://www.pscouncil.org/pdfs/GAOCostAccou...June16,1998.pdf

The writer opines

"...one of the driving concerns which led to the conclusion that cost accounting standards were needed was the large number of negotiated procurements in which prices were based on cost estimates, supported by cost data, in the context of a lack of competition and a lack of market restraints."

The writer further opines that

"The CAS Board has no mission with respect to contracts for which cost or pricing data are not required or submitted. Any procurement that does not require cost or pricing data submission must also not require compliance with cost accounting standards."

Does this provide some further insight ??

Hi govtacct02,

The PSC letter was advocating a position. That position was that contracts exempt from TINA should also be exempt from CAS. While I tend to agree with that position from a philosophical point of view, I think time has now passed it by. I don't think that same position would be advocated today with any serious expectation that the CAS Board would modify the CAS exemptions to add "any contract exempt from TINA is also exempt from CAS." To the contrary, in fact, as the CAS Board is currently seeking public input regarding eliminating a current exemption, that being for contracts executed and performed entirely outside the U.S.A.

Again, linkage between TINA and CAS is tenuous at best. Different public laws, different sections of the FAR, different contract clauses with different language. One is a disclosure requirement with a fixed compliance period that ends on the date of price agreement, while the other may or may not involve disclosure, but definitely includes compliance with specific rules, on-going administration of cost accounting practices, and advance notification of changes to cost accounting practice, with a compliance period extending from the initial proposal preparation through contract close-out. The fact that they are both public laws and require compliance does not mean that there is any "relationship" between the two.

And as I think about it, there is actually some tension between the two requirements. CAS coverage is determined at the time of contract award, and subsequent modifications do not change whatever CAS coverage was initially determined. Contrast that with TINA, in which a contract might be initially exempt because of competition, but subsequent pricing actions (proposals for equitable adjustments, for example) could be subject to TINA. All in all, I think it's best to keep the two requirements separate.

Hope this helps to clarify.

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
×
×
  • Create New...