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  • Question

    Are the costs associated with post-award definitization efforts considered allowable and allocable to the contract?


    Answer

    How these costs are treated should be driven primarily by generally accepted accounting principles and, when applicable, the company's written cost accounting practices which are represented in the company's Disclosure statement.  The Cost Accounting Standards Board (CASB) requires certain contractors and subcontractors to provide written disclosure of their cost accounting practices, follow the disclosed practices consistently and comply with promulgated cost accounting standards. A CASB disclosure statement form (CASB DS-1) is necessary when a contractor or sub-contractor is granted one CAS-covered contract of $50 million or more or a number of smaller CAS-covered contracts net totaling $50 million in its most recent cost-accounting period. 

    There is also modified coverage driven by smaller valued contracts, and of course exceptions; however many large Defense contractors apply CAS to all their Defense contracts regardless of individual value to ensure consistency and compliance with their Disclosure statement.  If your company falls into this category, you just need to ensure that the definitization costs have been proposed in accordance with the Disclosure statement.  The Administrative Contracting Officer who has cognizance over receipt and monitoring of the Disclosure statement should be able to verify whether the proposed costs comply. 

    If your company is a small business or company that does not have to comply with CAS, you still need to adhere to generally accepted accounting principles which includes accounting policies and practices for classifying costs as direct or indirect which are consistently applied to all cost objectives.  So you may need to demonstrate that this method of charging the definitization costs as a direct charge is consistently applied across all proposals and contracts.  The DCAA Cost Accounting Manual is one source of information as is FAR Part 31 and DFARS 231.



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