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We are a prime contractor with a multiple award IDIQ from the government. (DoD) The Department of Defense awarded an IDIQ to multiple Primes/ 

FAR 52.230-2 is in the IDIQ contract.  We were awarded a task order, and we have a subcontract included with our task order work. The subcontract at the time of award, was a small business, and the value of this subcontract at the time of award was >2M.  We have a modification coming to the contract where will add 100K to this subcontract.  Since the time of award to the Sub, they were acquired and are now a large business.  Will the modification to the subcontract of 100K, effectively making the total subcontract value $2,100,000 be a CAS covered subcontract?

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I defer to @here_2_help on all things related to cost principles and CAS, but Nash & Cibinic, Cost-Reimbursement Contracting, ch. 8, sec. II.A.6 (beginning at page 661 of the Third Edition) suggests to me that a post-award contract change does NOT make the subcontract subject to CAS.  The text cites Comment 6 to the policy published at 37 Fed. Reg. 4139 as authority.  I'll try to hunt down the reference.

EDIT:

It reads in relevant part:

Quote

The Board is persuaded that for the time being it should not cover negotiated modifications to contracts exempt at their inception.  It has, therefore, eliminated coverage for the time being of such contract modifications.  In doing so, however, the Board intends that the annual extension of existing negotiated contracts and similar contract modification would not be exempt from the Board's rules, regulations, and Cost Accounting Standards.

37 Fed. Reg. 4139, 4141 (Feb. 29, 1972).  See also DCAA's Contract Audit Manual at 8-103.4:

Quote

Contract modifications made under the terms and conditions of the contract do not affect its status with respect to CAS applicability. Therefore, if CAS was applicable to the basic contract, it will apply to the modification. Conversely, if the basic contract was exempt from CAS, the modification will also be exempt regardless of the amount of the modification. However, if the contract modification adds new work it must be treated for CAS purposes as if it were a new contract. In this case, if the modification exceeds the threshold, it will be CAS-covered (see CAS Working Group Paper 76-2).

 

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Perhaps the more interesting question is whether, when the subcontractor was acquired, that drove a change in CAS coverage.  I couldn't find anything on point, but it wouldn't surprise me if folks analogized to the normal rule that business size is determined at the time of the sub’s proposal in support of the subcontract, so becoming large does not result in a change of coverage either.  I'm speculating though.  If I'm reading your facts right, the exception you were relying upon at time of award was the subcontractor's status as a small business.

I also don't know how the fact an ID/IQ contract is involved might affect the analysis.  I assume the subcontract isn't an ID/IQ, but I suppose it could be.  I understand that for ID/IQs, the "expected value" at the date of award is considered the contract value, which I understand to be the ceiling (or maximum).  I suppose an increase to that ceiling could be "new work" for purposes of CAM ¶ 8-103.4.  Sorry for all the speculation.

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 you are correct, but task orders would have to be new work, would they not?  It's not as though dozens of task orders are in the multi millions of dollars with several large DoD prime contractors and none of them are CAS covered due to the ceiling minimum value of the IDIQ?

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37 minutes ago, general_correspondence said:

 you are correct, but task orders would have to be new work, would they not?  It's not as though dozens of task orders are in the multi millions of dollars with several large DoD prime contractors and none of them are CAS covered due to the ceiling minimum value of the IDIQ?

I'm not following.

Are you asking whether a task order within scope of its basic, issued within the ordering period, and for an amount that is consistent with the ceiling of that basic, would be "new work" for purposes of CAM ¶ 8-103.4?  If that is your question, I would say, no, that task order probably isn't "new work."

If you're asking whether a modification of the basic contract to expand its technical scope, its ordering period, or its ceiling would be treated as "new work" for purposes of CAM ¶ 8-103.4, I would say, that contract modification likely qualifies as "new work."  Whether something qualifies as "new work" can be a fact-intensive thing, but it is a term we use in contracting quite often.

 

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the minimum value of the IDIQ ceiling is $10K.  As stated, this is minimum ceilings at this IDIQ. 

We were awarded a 24M task order a few months after the base IDIQ was awarded. FAR 52.230-2 is in the IDIQ contract, and the task order release states the parent IDIQ clauses apply.

I am the subcontracts manager.  I issued a subcontract a little over 2M.  The subcontractors 2M order is part of our overall 24M task order contract.  We will increase the subcontractors order by 100K, CAS was not applicable at the time of the subcontractors award, but they are no longer a small business,

Do I notify the contracting officer we have a CAS covered contract once I modify the subcontractors contract?

 

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General, you do not have a CAS covered subcontract.  This is the definition of "small business" from the CAS Board's rules "Small business, as used in this part, means any concern, firm, person, corporation, partnership, cooperative, or other business enterprise which, under 15 U.S.C. 637(b)(6) and the rules and regulations of the Small Business Administration in part 121 of title 13 of the Code of Federal Regulations, is determined to be a small business concern for the purpose of Government contracting."  For purposes of your task order, the subcontractor is a small business under the SBA rules.  Additionally, what CAS rule would you apply to say that the subcontractor is no longer a small business for purposes of your TO? 

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Under the SBA rules, which the CASB adopted for the definition of a small business, they are still a small business.

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Retread, I trust your right,  BUT - they were only small because of the NAICS code of the work?  All other NAICS they operate under they were a large business. (I should have mentioned that in the OP) Also, the research Jacques did with the Cibinic & Nash, seems reasonable not to continue to keep documenting this large business as a small business forever?  No?

 

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No.  Size is determined by the NAICS code assigned to a procurement.  The fact that a concern may be large under one NAICS code but small under another is irrelevant to whether the concern qualifies as a small business under a procurement using the NAICS under which the concern is a small business.  If it qualifies as a small business under the NAICS code assigned to a procurement, it is a small business under that action.  See, 13 CFR 121.402.

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It's fairly settled that CAS applicability is determined at the time of contract award. The only unknown here is whether the contract type of the subcontract award was IDIQ. If yes then the IDIQ was issued to a small business which makes all task orders subsequently awarded exempt from CAS. I don't like it but thems the rules.

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10 hours ago, general_correspondence said:

The subcontract is not an IDIQ.  

Then the issue revolves around when the subcontractor is required to make its size representation.  If the $100K effort would be treated as "new work," then the original small business representation is irrelevant.  If the $100K effort is being added to the original subK effort and is within scope of the original subK effort, then you can rely on the original small business representation.

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Thank you Jacques, I think that makes sense, but are you implying that when its time to renew their annual representations and certifications to us, this subcontract suddenly switches to a CAS covered contract, requiring a notice to both supplier and contracting officer?

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1 hour ago, general_correspondence said:

are you implying that when its time to renew their annual representations and certifications to us, this subcontract suddenly switches to a CAS covered contract, requiring a notice to both supplier and contracting officer?

I will let Jacques speak for himself on this, but the representation that is relevant is the representation as to the subcontractor's size when it submitted its proposal for the subcontract.  The size of the subcontractor is determined then and generally applies for the life of the contract (but see FAR 52.219-28).  If the subcontractor later changes its representations in SAM to reflect that it is no longer a small business, that does not effect the validity of the size representation made pre-contract award.  Further, this does not change the terms of the subcontract.  See, 13 CFR 121.404(g).

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4 hours ago, general_correspondence said:

Thank you Jacques, I think that makes sense, but are you implying that when its time to renew their annual representations and certifications to us, this subcontract suddenly switches to a CAS covered contract, requiring a notice to both supplier and contracting officer?

ANNUAL reps and certs have nothing to do with it.  You might want to look at FAR Part 19 on when, for long-term contracts, contractors are required to REREPRESENT their size.  My point is that you cannot rely on an old representation of size to support an out-of-scope modification (or at least that's my going in position until someone shows me otherwise).

Whether the subcontract is CAS-covered is made at the time of the award of the subcontract.  That said, there are limits on your ability to avoid coverage by awarding "new work" through a modification.  If the effort represents "new work," then you should ask for a new size representation as part of the subcontractor's proposal for the $100K effort.

EDIT:

That said, you may be able to avoid CAS coverage by relying on another exception.  As the $100K effort is under the TINA threshold, then the exception at 48 CFR 9903.201-1(b)(2) would apply.  There may be other exceptions (like 48 CFR 9903.201-1(b)(7)).  At least that seems to me to be the implication of the following sentence from the CAM quoted above:  "However, if the contract modification adds new work it must be treated for CAS purposes as if it were a new contract." 

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taking out the small/large business aspects of this original post, would the IDIQ award we received from the government that has a $10,000 minimum IDIQ Value,

determine all or any subcontracts awarded under the Prime contractors task orders be exempt from CAS coverage?  Said another way, assume we get a task order and we included a large business in our Bid, - would this large business be subjected to CAS?

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59 minutes ago, general_correspondence said:

taking out the small/large business aspects of this original post, would the IDIQ award we received from the government that has a $10,000 minimum IDIQ Value,

determine all or any subcontracts awarded under the Prime contractors task orders be exempt from CAS coverage?  Said another way, assume we get a task order and we included a large business in our Bid, - would this large business be subjected to CAS?

I assume you're asking whether the large business's subcontract would be CAS-covered.  The rule is essentially the same for subcontracts as for prime contracts.  In other words, you look at the four corners of the subcontract and ask, is this subcontract CAS-covered?

You have mentioned the minimum a few times, and I don't understand why.  For a given IDIQ, the maximum or ceiling is what is used, not the minimum.  But that would be the case only for IDIQ contracts, and you've said the subcontract isn't an IDIQ.    I worry I'm making matters more confusing than they need to be, so I'll stop talking now.

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Don't feel as though you are confusing things, it's hard to be crystal clear writing back and forth in chat rooms, the fact its regarding FAR and contracts makes it even more cloudy 😄

 so here's the thing, 

As I mentioned, I work in Subcontracts, and although I'm fairly certain subcontractors (large business)  we outsource to under the aforementioned conditions will be CAS covered if the $ exceeds 750K, the contract documents and review documents at the contract level, indicate NO CAS, and that is exactly correct because when awarded an IDIQ with ceiling of $10,000, CAS is not applicable.  However IDIQ's are the vehicle for task orders, and so here we are.  Is the large business I subcontract under a task order where the dollar value is >750K, be a CAS covered subcontract? 

I can't get answers from our own compliance or contracts people to these questions, I am good with the answers you an several others gave me regarding the small business that was acquired by a large business scenario, so I'm down to this final question of CAS applicability to the prime's subcontractor under a task order under an IDIQ that was awarded w/ $10,000 ceiling, and documented by the Primes internal team as "NO CAS" required. 

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Your latest post still has me concerned that you are not looking solely at the subcontract, and a $10K ceiling or maximum seems so low that I'm not sure we're talking about the same thing.  I recommend you review the slides here, which includes a decision tree on page 8.  Perhaps seeing it phrased differently will help.  You might also take a look at Appendix 3 to the CPSR Guidebook.

EDIT:  If your employer has a contracts library, Nash & Cibinic, Cost-Reimbursement Contracting, ch. 8, sec. II is useful.  If you have back issues of the Briefing Papers, take a look at Roger N. Boyd & Jeffrey M. Villet, "Cost Accounting Standards Fundamentals," 96-12 Briefing Papers 1 (Nov. 1996).

P.P.S. (9 Mar 20):  Just for the sake of having all the references in one place, I just found an excellent article: Karen L. Manos & Darrell J. Oyer, "Defining 'Awards' and 'Net Awards' for CAS Coverage," 4-6 Government Contract Costs, Pricing & Accounting Report ¶ 46 (Nov. 2009).  It references 7 Nash & Cibinic Report 41 (July 1994).

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$10,000 “CEILING”??? Do you mean $10,000 “minimum guarantee” or similar wording ???

Please note that a ceiling refers to a maximum value not a minimum value. 

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27 minutes ago, joel hoffman said:

$10,000 “CEILING”??? Do you mean $10,000 “minimum guarantee” or similar wording ???

Please note that a ceiling refers to a maximum value not a minimum value. 

It looks like, in the seventh post in this thread, that General Correspondence says "As stated, this is minimum ceilings at this IDIQ."   Based on this, I'd guess the meaning to be "minimum guarantee" as the other dollar amounts mentioned are in excess of this.   GC, some IDIQs come with a minimum guarantee that says you'll get at least that much business from the contract, or just a check.  It ensures the contract wasn't a total waste of B&P resources.  I don't believe that minimum guarantee acts a trigger for anything else, like CAS. 

But maybe it means something else.  Maybe GC could provide a excerpt from the contract that puts the $10k into context. 

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General, have you read the CASB's rules to determine CAS applicability?  Per those rules, if a contract does not exceed the "TINA" threshold, it is not subject to the CAS.  The Truthful Cost or Pricing Data threshold is now $2M.  Thus, all contracts that do not exceed that value are exempt from the CAS.  Also, for IDIQ contracts, you have to look at the value of each order to determine if it is a CAS covered order.  If the order would be exempt from CAS coverage if it were a separate contract, the order is not subject to the CAS.  See FAR 30.001.

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