Is it the ACO or PCO who determines if a contract is CAS covered?
What is the basis (minimum ordering amount, maximum order amounts, something else) for determining the dollar threshhold for CAS applicability?
There seems to be a lot of confusion regarding IDIQ contracts and determining CAS coverage. Is DPAP going to issue a policy alert that clarifies the issue?
Question 1 Is it the ACO or PCO who determines if a contract is CAS covered?
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The parties’ obligations with respect to the CASB’s regulation are embodied in a contract by the insertion of corresponding terms and conditions. As such, it is the Procuring Contracting Officer’s (PCO) responsibility to properly write the contract and to include in the contract the required/appropriate terms and conditions such as those implementing the requirements of the Cost Accounting Standards (CAS). See FAR §30.202-6 (a)
Very specific to this question, the FAR directs the PCO to evaluate stated CAS applicability criteria, determine CAS applicability, and to include CAS implementing terms and conditions into the contract. (e.g., FAR 52.230-1 offeror’s election to seek “modified coverage”; FAR 52.230-2 (“full coverage”); FAR 52.230-3 (“modified coverage”)).
An early stage determination by the PCO of CAS applicability to a contract is a best practice. After all, the requirements established by the Cost Accounting Standards Board are such that there is a need to know whether or not the contract will be subject to the CAS before contract execution. First, if the contract will be subject to CAS, then any cost accounting data required to be submitted as part of the price proposal must be compliant with CAS (e.g., CAS 401 – Consistency in Estimating, Accumulating and Reporting Costs). Second, the contract “value” may be determinative of a requirement to submit a Disclosure Statement and under some circumstances before award of a CAS covered contract (see 9903.202-1(a)). And finally, if a contract is subject to CAS, cost accounting practices used to accumulate and report cost under that contract, must comply with CAS. So, not only does the FAR call for the PCO to make these determinations and to incorporate appropriate implementing contract clauses, it is a necessity, that is, if the Government is to receive the benefits of CAS compliance and to better avoid costly compliance disputes.
Notwithstanding the PCO role, it is the CFAO’s responsibility to determine if noncompliance has occurred and to resolve any impact of such. See FAR §30.202-6 (a). Accordingly, the CFAO plays a primary role (amongst contracting officers) in resolving reported/observed CAS compliance issues.
Question 2 What is the basis (minimum ordering amount, maximum order amounts, something else) for determining the dollar threshhold for CAS applicability?
The discrepancy in legal opinion (see Question Background) is not totally unexpected, especially since the computation of IDIQ contract value within the CAS applicability context has not been expressly described in CASB regulations and no known legal tribunal opinion directly addresses the issue. Your question involves a matter of contract and regulation interpretation and therefore seeking a legal opinion from assigned counsel was and is a prudent decision on the part of the contracting officers involved. Although comments will be provided here for explanation and your consideration, nothing contained in this post should be considered legal advice.
The CASB regulations identify two dollar-threshold type exemptions that are very relevant to the question posed and these two exemptions are (in pertinent part):
“(2) Negotiated contracts and subcontracts not in excess of the Truth in Negotiations Act (TINA) threshold,” and
“(7) Contracts or subcontracts of less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts or subcontracts valued at $7.5 million or greater.” 48 CFR 9903.201-1
It is the value of the contract that dictates whether or not the contract is exempt from CAS coverage. So, it is reasonable to conclude that the contracting officer must determine the value of the IDIQ contract at the time of award and thereby determine CAS applicability. This is problematic because by its nature an IDIQ contract’s actual final value may not be knowable at the time of award.
An IDIQ contract permits flexibility in both quantities and delivery schedule and supplies and services may be ordered after requirements materialize. The IDIQ contract must require the Government to order and the contractor to furnish at least the stated minimum quantity and if ordered, the contractor must furnish any additional quantities, not to exceed the stated maximum (quantity limits may be stated as number of units or as dollar vales). See FAR § 16.504(a)
There are at least three possibilities for IDIQ “value” (while not even considering that CAS applicability determinations might be made at the time of each delivery/task order award): (1) value at stated minimum; (2) value at stated maximum; and (3) estimated actual value. The first two possibilities, “value at stated minimum” and “value at stated maximum,” have the advantage that they are readily identifiable. They are spelled out in the contract. The third value, “estimated actual value,” is less readily available and the contracting parties may even have conflicting estimates.
In the absence of CASB regulation or tribunal interpretation thereof, reference to the FAR convention at § 1.108(c) is a reasonable supporting guide for the contracting officer making the decision on CAS applicability:
FAR § 1.108(c) Dollar thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar values must be the highest final priced alternative to the Government, including the dollar value of all options. (Bolding added for emphasis)
It may also be enlightening to note that the FAR Councils, when addressing the TINA dollar threshold application to IDIQ contracts had this to say:
“In the case of IDIQ contracts, it is commonly understood that it is the estimated value of orders for the specified period at the time of contract award, as well as the individual value of any subsequent discrete orders, to which the TINA thresholds apply.” See 75 Fed. Reg. 13414 (March 19, 2010)
It appears that the value of an IDIQ contract in the CAS applicability context is anything but settled. While the anticipated value is attractive, the maximum stated value seems to be a better choice.
Question 3 There seems to be a lot of confusion regarding IDIQ contracts and determining CAS coverage. Is DPAP going to issue a policy alert that clarifies the issue?
It is not known at this time whether or not DPAP has plans to address this issue.