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    1. Can you please describe when a Contractor Business System is required? 2. Can you further describe how being a CAS exempt small business changes these requirements if any? 3. Could you describe the potential penalties for non compliance with business system requirements, if found for a CAS exempt small business? I'm assuming that the penalty rules outlined in 48 CFR 252.242-7005 do not apply since the clause clearly states that it applies only to those contracts that are covered by CAS.


    Answer

    This response is based on the information provided.  We suggest you discuss with your contracting team, program manager and/or legal department as appropriate. 
     
    We cannot answer this question in detail without knowing the value of the contracts your company holds and with whom.  CAS thresholds are determined at both the contract and companywide levels in considering CAS applicability. 
     
    As to when business systems apply:  That, first and foremost, is a function of the clauses in the contract.  We assume you are referring to a contract with a DoD  agency.  Using the government property example mentioned in the background, DFARS 252-242-7005 states -- “Contractor business systems” means— ....
      (5)  Property management system, if this contract includes the clause at 252.245-7003, Contractor Property Management System Administration"
    Following the reference....
     
    "DFARS 252.245-7003 Contractor Property Management System Administration.
      (a)  Definitions.  As used in this clause— Acceptable property management system” means a property system that complies with the system criteria in paragraph (c) of this clause.
    Property management system” means the Contractor’s system or systems for managing and controlling Government property.
    ....
      (c)  System criteria.  The Contractor’s property management system shall be in accordance with paragraph (f) of the contract clause at Federal Acquisition Regulation 52.245-1."
     
    Withholding of contract payment for deficient systems is applicable specifically to CAS covered contracts as stated in DFARS 252.242-7004
     
    If after assessing all contracts, your company qualifies as a small business as delineated in FAR Appendix 1, 9903.201-1 CAS applicability.
    {(a) This subsection describes the rules for determining whether a proposed contract or subcontract is exempt from CAS. …. The rules for determining the applicable type of CAS coverage are in 9903.201–2.
    (b) The following categories of contracts and subcontracts are exempt from all CAS requirements:
    … (3) Contracts and subcontracts with small businesses.} then, even if the clause is inserted in your contract(s), the clause says it only applies if the contract is CAS covered.  As mentioned at the beginning we suggest you discuss with your legal advisor and PCO as to whether you are an exempt small business.

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