A PDF of the below Comment Letter can be downloaded here »
Cost Accounting Standards Board
ATTN: Mr. John L. McClung
Office of Federal Procurement Policy, Office of Management and Budget
Subject: Financial Executives International (FEI) Comments on CASB Case No. 2021-01, Regarding the Application of Cost Accounting Standards (CAS) to Indefinite Delivery Vehicles (IDVs)
Reference: a) Recommendation 30, Volume 2 of the June 2018 Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations (Section 809 Panel)
b) DoD CAS Working Group Paper 76-2, “Application of CAS to Contract Modifications and to Orders Place Under Basic Agreements – Interim Guidance” (February 24, 1976)
Dear Mr. McClung,
FEI is a leading international organization comprised of members who hold positions as Chief Financial Officers, Chief Accounting Officers, Controllers, Treasurers, and Tax Executives at companies in every major industry. This letter is submitted by FEI’s Committee on Government Business (CGB) which formulates policy opinions on government contracting issues and represents the views of CGB and not necessarily the views of FEI or its members individually.
The purpose of this letter is to provide public comments pursuant to 41 U.S.C 1502 related to CAS Board Case No. 2021-01 published in the Federal Register on June 18, 2024, regarding whether and how to amend the Cost Accounting Standards (CAS) to address the application of CAS to Indefinite Delivery Vehicles (IDVs). In the Federal Register Notice, the CAS Board provisionally identified six possible approaches for addressing CAS coverage to IDVs.
1) Order-by-order. Each task order and delivery order would be treated as an individual contract and CAS would apply only to those orders whose values met the coverage thresholds.
2) Maximum award value. CAS would apply to all orders under an IDV, no matter the value of the order, if the ceiling amount of the IDV met the coverage thresholds.
3) Minimum award value. CAS would not apply to any orders under an IDV unless its minimum guarantee amount met the CAS coverage thresholds, in which case CAS would apply to all orders.
4) Cumulative threshold. CAS would apply at the point where the cumulative value of the orders awarded crosses the dollar threshold for CAS coverage. At that point, the current order and all subsequent orders awarded would be covered by CAS.
5) Order-by-order for multiple award IDVs and maximum award value for single award IDVs. For multiple award IDVs each order would be regarded as if it were an individual contract for CAS coverage (see alternative no. 1). For single-award IDVs, coverage would be based on the maximum award value (see alternative no. 2).
6) Order-by-order for multiple award IDVs and cumulative threshold for single award IDVs. For multiple award IDVs each order would be regarded as if it were an individual contract for CAS coverage (alternative no. 1). For single-award IDVs, CAS would apply at the point where the cumulative value of the orders awarded crosses the dollar threshold for CAS coverage. At that point, the current order and all subsequent orders awarded would be covered by CAS (alternative no. 4).
FEI strongly and fully supports the “order-by-order” approach (i.e., Alternative 1) with respect to addressing CAS coverage to IDVs because it is the most practical and logical approach. The “order-by-order” approach fully aligns with:
• Section 809 Panel Recommendation 30 (reference “a”) which specifically addresses IDV contracts (also referred to as Indefinite Delivery Contracts or IDCs) and recommends that the CAS Board establish a rule that the determination of CAS coverage occurs at the time of order placement and that each order be evaluated for CAS applicability on its own; and,
• The treatment of orders under basic ordering agreements (BOAs). A BOA is unlike an IDV because it is not a contract by itself. However, the ordering process under a BOA is similar to the ordering process under an IDV. DoD CAS Working Group Paper 76-2 (reference “b”) recognized that basic agreements and basic ordering agreements were not contracts under ASPR (now FAR) and specified that CAS applicability was to be determined separately for each order. Although IDVs are contracts under the FAR, the similarity of the ordering process under IDVs and BOAs means that similar treatment for determining CAS applicability would result in a logical, consistent, and practical approach.
The issue of the need for CAS Board guidance on the application of CAS to IDVs was covered in substantial detail in the Section 809 Panel recommendations. As noted by the Panel, the maximum value of the IDV is meaningless for the purpose of determining CAS applicability because at the time of award no one knows the monetary value of awards that will be made to a specific contractor. This is true even when the IDV is awarded to a single contractor because the government is under no obligation to award task orders/delivery orders (orders) beyond the identified minimum award value. Moreover, often awards made under an IDV contract are firm fixed price (FFP) with adequate price competition and no requirement for certified cost or pricing data and thus subject to a CAS exemption. This situation is further complicated by the fact that the issued orders may be hybrid contracts that include multiple contract types (i.e., FFP CLINs, cost type CLINs, and CLINs for commercial items). Based on these facts, Alternatives 2 and 5 are not viable options to resolve the problems with the application of CAS to IDVs.
FEI also does not believe that Alternatives 4 and 6 are practical options because contractors’ business systems are not designed to track the cumulative value of orders, each of which is established as a separate project in the accounting system. Consequently, the cumulative value tracking becomes a manual process that is subject to error and contrary to the CAS Board’s stated objectives of helping the contracting parties manage risk, reduce the regulatory burden, and minimize complexity.
Since the requirements for CAS applicability can vary under an IDV depending on type of order (e.g., fixed price or cost type), basis of pricing and extent of competition and negotiation, the determination of CAS applicability should occur at the time the order is awarded. If the government seeks to encourage competition and incentivize new entrants in the Federal marketplace then contractors must know at the time of proposal submission whether the award will or will not be CAS covered. Therefore, the most practical and logical approach is Alternative 1.
If Alternative 1 is not selected, then FEI recommends that the CAS Board do nothing and simply apply the interpretation of Alternative 3 as established in existing case law (e.g., Future Forest, LLC vs. Department of Agriculture, CBCA 5863, March 9, 2020) which confirmed that CAS applicability to Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts is determined by the minimum stated value at the time of award. However, using the minimum award value as the determination of CAS applicability may not meet the CAS Board’s stated objective of helping the contracting parties manage risk. It could be argued that if the government wants CAS to apply to a particular IDV contract, it could unilaterally raise the minimum award value to the CAS threshold. However, that may not be the most effective option in today’s acquisition environment, particularly when the Panel is also recommending increases to the thresholds for CAS coverage as a means to streamline and improve the efficiency and effectiveness of the defense acquisition process.
Considering the above, FEI recommends that specific guidance for IDVs be added to the CAS program requirements at 48 CFR 9903.201-1 that would (1) determine CAS applicability at the time of order placement, (2) evaluate each order for CAS applicability on its own, and (3) add a definition of IDV, using the existing definition at FAR 4.601.
Additionally, although not specifically addressed in the subject notice, FEI also strongly recommends the CAS Board consider revisions to various CAS related applicability thresholds as addressed in the Section 809 Panel Recommendation 30 (reference “a”) and summarized below. These recommendations align with the intent of CAS as stated in the Materiality section of the Cost Accounting Standards Board: Restatement of Objectives, Policies, and Concepts (August 1992) where “determining the measurement, assignment, and allocation of costs should not be so stringently interpreted that the desired benefits are negated by excessive administrative costs”. Through consideration of the recommendations below, FEI believes that barriers to access the larger market will be reduced, thereby increasing competition, and ultimately benefiting both industry and the federal government.
1) Decoupling the CAS-covered contract monetary threshold from the FAR 15.403-4 (TINA) monetary threshold and raise the CAS monetary threshold to $25M while eliminating the trigger contract exemption;
2) Raise the full CAS-coverage monetary threshold and the disclosure statement monetary thresholds to $100M; and
3) Add specific guidance for hybrid contracts to the CAS program requirements at 48 CFR 9903.201-1 that would exclude exempted portions of contracts from CAS coverage, including the application of monetary thresholds.
FEI appreciates the CAS Board’s consideration of our input. If you wish to engage with the FEI CGB on this matter or have any questions, please contact Ms. Christina Coulter, Manager, Technical Committee Operations, at (973) 765-1047 or email at
[email protected]. You may also contact me directly at (508) 309-8118 or
[email protected].
Sincerely,
David K. Ferrari
Chair, Financial Executives International – Committee on Government Business
Distribution: Christina Coulter, Manager, Technical Committee Operations
FEI CGB Members