Committee on Government Business Discusses the New Defense Cost Accounting Standards Board Proposal

By Robert KramerDuring the August FEI Committee on Government Business (CGB) meeting, held at Bechtel Headquarters in San Francisco, members raised concerns about the impact of a proposed provision in the Senate version of the FY2017 National Defense Authorization Act (NDAA) to create a Defense Cost Accounting Standards Board (D-CASB).The original CAS Board was established by Congress in 1970 to “(1) promulgate cost accounting standards designed to achieve uniformity and consistency in the cost accounting principles followed by defense contractors and subcontractors under Federal contracts in excess of $100,000 and (2) establish regulations to require defense contractors and subcontractors, as a condition of contracting, to disclose in writing their cost accounting practices, to follow the disclosed practices consistently and to comply with duly promulgated cost accounting standards.”After promulgating 19 standards, the original CAS Board was dissolved in 1980, but was reestablished under the OMB’s Office of Federal Procurement Policy (OFPP) in 1988.  The CAS Board is comprised of the Administrator of OFPP, and a representative from the Department of Defense (the Director of DCAA), the General Services Administration, industry (the current representative is Laurie Schmidgall of Boeing Corporation, also a member of CGB), and the accounting profession. Concerns about a relatively long period of inactivity on the part of the CAS Board, prompted the CGB to write two letters to the current OFPP Administrator (in 2014 and 2015) encouraging action on a number of pressing issues.  This year, the Senate Armed Services Committee included a provision (§ 811) in S.2943 (which passed the Senate on June 14, 2016), that created a new and separate Defense Cost Accounting Standards Board (D-CASB).  The proposed Board would be chaired by Department of Defense (DoD) CFO, with 3 DoD representatives and 3 private sector representatives appointed by the Secretary of Defense.The private sector representatives would include one from a “nontraditional defense contractor” and one from a public accounting firm.  It has been observed that this provision may be part of a broader DoD effort to attract such nontraditional contractors, especially large commercially-oriented IT companies that have hitherto avoided bidding on government contracts beyond the sale of commercial items.Under the proposed provision, the D-CASB will...

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