Pricing Subcontract Changes (Part 1 of 2)
If you are a prime contractor you are expected to monitor, oversee, and administer your subcontracts.
We’ve written before about DCAA’s wrongheaded (and judicially dismissed) notions of what that means. We’ve written before about what a subcontractor is (and is not); and, while admitting that the definition of what is a “subcontractor” is context-dependent, we’ve also skewed toward the interpretation that a “subcontractor” is an external supplier providing goods and/or services called-forth in a prime contract Statement of Work (SOW). Thus: this article isn’t about those topics. Take them as a given. If you need to know more, do a keyword search on the home page and find those articles. (Trust us, we’ve written extensively about subcontractor management on this site.)
This article is about prime contractor management of changes that arise during performance of a subcontract. Changes happen; they are a fact of life, especially in the government contracting environment. The subcontract you’ve awarded is often not the subcontract that gets performed, especially in a development or immature production situation. Things change and often they change frequently; and it is incumbent on the prime to have a subcontractor change management strategy in place before contract (or subcontract) performance starts.
As we’ve noted before, some prime contractors think they are effectively managing the impacts of subcontractor changes by awarding only firm, fixed-price subcontracts. They issue FFP subcontracts and they assume the price is fixed—and it is!. But only for the priced work. If the work changes, then the subcontractor is entitled to an “equitable adjustment” in the contract price.
Interestingly, the value of the subcontract equitable adjustment varies depending on whether or not the subcontract is for procurement of “commercial items” (as that phrase is defined in FAR 2.101). If the prime contractor has made a Commercial Item Determination (CID) and awarded a “commercial subcontract,” then there is one course of action to be taken when a subcontractor asserts its subcontract has been changed and therefore it is entitled to an equitable adjustment of contract price; and if the subcontract is not a “commercial subcontract,” then there is an entirely different course of action to be taken.
The cause of the differences noted above are found in the differing language of the “Changes” clause found it the different contract types. There is one “Changes” clause for commercial subcontractors and another, entirely different, “Changes” clause for non-commercial subcontracts.
The Changes clause in each contract is what gives the customer the authority to make changes to the performance requirements after contract award. Absent that language, the government would be stuck with exactly what it initially contracted for, even if it no longer needed it. But the Changes clause establishes the right of the government to make changes, and it establishes the right of the contractor to be make whole from those changes.
As the Defense Acquisition University (DAU) states on its website:
Contract modifications (frequently referred to as ‘mods’) are common actions for many contracting professionals. These changes may be related to contract cost, delivery schedule, schedule, fee, terms and conditions, and personnel. Changing technologies, funding, and mission requirements may create the need for changes to a contract. The complexity of contracts—which can involve numerous people from different functional areas on both the Government and contractor teams — can lead to misinterpretations and miscommunications of requirements and administrative issues that do not become evident until the contract is under way. Whenever the Government wants something different than was originally envisioned for the original contract or something unforeseen occurs, a modification may become necessary. ….
When dealing with non-commercial subcontracts, there are several different Changes clauses to choose from, depending on contract type. The clauses are numbered from 52.243-1 to 52.243-5. However, there is only one Changes clause for commercial subcontracts, and that is 52.212-4.
As the DAU site explains—
Contracts for non-commercial items may be modified by use of a change order, which is a unilateral order signed by the contracting officer directing the contractor to make changes using the authority of the various Changes clauses. If the change order causes an increase or decrease in the cost of, or time required for, performance of any part of the work under the contract, the contracting officer must make an equitable adjustment in the contract price, the delivery schedule, or both. …
A contracting officer may need to issue an out-of-scope modification. This can occur if the Government requires an increase or decrease in the scope of work beyond what is contained in the statement of work, and which will result in a change to the cost of the contract. In such cases, the modification is considered ‘bilateral’ and must be agreed to and signed by both the Government and the contractor.
Right away, we can see that there are two types of changes in the world of non-commercial subcontracts: there are in-scope changes (which can be issued unilaterally), and there are out-of-scope changes (which must be agreed-to by both contracting parties). There is also a third type of change (constructive) but the government doesn’t like to admit those ever happen and, since constructive changes aren’t germane to this article, we’re going to skip them.
The key takeaway from the discussion of changes to non-commercial contracts (or subcontracts) is that both types of changes, whether they result from a unilateral change order or a bilateral agreement of the parties, entitle the contractor to an equitable adjustment in contract price. The contractor will be made whole from the increased cost of performance. Or, to make it more on-point with this article: the subcontractor will be made whole by the prime contractor for its increased cost of performance, if the cost increase stems from changes made by the prime.
Importantly, the basis for the equitable change in contract price to the non-commercial subcontract is the change to the subcontractor’s costs. For example, contract clause 52.243-1 (Changes-Fixed Price, Aug. 1987) states “If any … change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under this contract … the Contracting Officer shall make an equitable adjustment in the contract price, the delivery schedule, or both, and shall modify the contract.” Obviously, in order to determine the value of the equitable adjustment, the subcontractor must submit a separate proposal that establishes the amount by which its costs have been increased as the result of the change (or changes) made by the prime contractor.
Remember, the subcontract has already been awarded. Competition (if any) has ended. Consequently, any post-award changes made to the contract will be made on a single-source basis. This means that if the subcontractor’s change proposal exceeds the TINA threshold (currently $2 million) then the prime contractor will be looking for certified cost or pricing data from the subcontractor. The process of preparing a change proposal in the format required by FAR 15.408 (Table 15-2) and providing cost or pricing data for analysis, and then analyzing the cost or pricing data, and then negotiating an “equitable” adjustment to the subcontract price, may be a long and resource-intensive process.
Which is why we wrote at the beginning of this article that the prime contractor must have a subcontractor change management process established and implemented before subcontractor performance starts.
All the above is for non-commercial subcontracts; as we stated, the process is different for commercial subcontracts. The commercial contract (or subcontract) clause 52.212-4(c) states “Changes in the terms and conditions of this contract may be made only by written agreement of the parties.” Right there, the commercial subcontract states that the prime contractor does not have the right to issue unilateral change orders; the commercial contract may only be changed via bilateral agreement. As the DAU site notes, if the parties do agree on a change, the result is not a contract mod; instead, the result is a “supplemental agreement.” (We confess that the nuances of the terms escape us.)
But what about pricing changes associated with commercial subcontracts?
Generally, a commercial item or service is being acquired at a price, and price analysis is the technique used to determine that the price is fair and reasonable. Thus, equitable adjustments to commercial contracts and subcontracts may be made on the basis of price, and the (sub)contractor’s costs can be irrelevant. But there's a hierarchy to be followed ....
FAR 15.403-1 clearly states that commercial items are exempt from the requirements to provide certified cost or pricing data. (“Any acquisition of an item that the contracting officer determines meets the commercial item definition in 2.101, or any modification … that does not change the item from a commercial item to a noncommercial item, is exempt from the requirement for certified cost or pricing data.”) However, commercial item contractors (and subcontractors) may be asked to provide information other than certified cost or pricing data to support a determination that the proposed price is fair and reasonable.
The DoD Commercial Item Handbook, Part B (“Commercial Item Pricing”) provides a clear hierarchy of information that may be used to support a determination that the commercial item price is fair and reasonable. The first source is market research, which is obvious because if the item isn’t being sold to the public, then why is it a commercial item? The second source is “public resources other than the offeror,” and the Handbook provides an extensive list of sources that may be used. Only if the first two sources don’t provide sufficient information (as may happen if the item is merely offered for sale but no sales have yet occurred) should the contracting officer (or prime contract buyer) turn toward the third source (the offeror itself) to obtain additional, noncertified, cost or pricing data. The (sub)contractor may, in certain circumstances, be asked to provide uncertified cost data.
If the offeror is asked to provide data, the Handbook clearly emphasizes price information rather than cost information. However, price information is insufficient, the Handbook recognizes that commercial suppliers may not have the ability to provide detailed cost information in the manner the analyst may wish. It states “When obtaining uncertified cost data on commercial items, requests should not impose undue requirements on the offerors to provide data that is not normally maintained in the offeror’s business operation.”
We asserted above that an equitable adjustment to a commercial contract or subcontract is, generally, valued at price without respect to costs incurred, whereas an equitable adjustment to a non-commercial (sub)contract price is valued on the basis of costs incurred related to the change. Readers may reasonably ask us to support that assertion. Where in the FAR or DFARS does it say that? Where in the DoD Commercial Item Handbook does it say that?
Well, nowhere really. Remember, the FAR and DFARS and the DoD Commercial Item Handbook are not written for prime contractors managing subcontractors. Those documents are written for government contracting officers managing prime contractors. Accordingly, one must “read between the lines” to figure out that a prime contractor may value a change to a commercial subcontract on the basis of price rather than cost, unless there is some unique circumstance that drives the use of cost data. Certainly, where the commercial subcontract has been valued at priced units, acquiring more (or less) units than planned is easy to value. But sometimes it's not that clear.
In the next article, we’ll discuss two ASBCA cases that clarify the principles associated with subcontractor change management. Those two cases will (hopefully) show the differences in valuing commercial (sub)contracts and non-commercial (sub)contracts. In one case, the prime contractor’s mishandling of subcontractor changes cost it millions of dollars. In the other case, the government’s mishandling of changes to a commercial prime contract cost it $240 million.
Stay tuned.
Charitable Fraud
My parents were the victims of a fraudster, somebody who took advantage of a position of trust to take money that was rightfully theirs. I found out about it and pursued the individual all the way to the California Supreme Court. (It wasn’t my decision to take it there; the individual kept losing and appealing. He lost at the California Supreme Court as well. The decisions/opinions are a matter of public record.)
Do you know a victim of fraud? Was it you, or perhaps somebody close to you? Somebody you cared about? Then you know how it feels to be betrayed. And even if you don’t know somebody who was scammed, I’m pretty sure you’ve read about scams in the news. How did the reports of fraud make you feel?
And among the lowest form of fraud I can write about are the charities established in the name of military veterans, the ones that turn out to be opportunities to skim donated funds for the personal expenses of the people running the ostensible charity.
Most of us—I daresay all of us—know that our military veterans aren’t treated the way they should be. Their healthcare isn’t what was promised to them when they enlisted. The news has recently been filled with reports of a Department of Veterans Affairs policy that would deny veterans their full GI Bill benefits—benefits that were guaranteed by law. That policy was established by the “top benefits official” of the VA (according to this report) but it may have been “overruled” by the Department’s Secretary. Things are a bit unclear at the moment. The report stated:
The VA was supposed to begin granting expanded benefits in August under a law passed last year known as the Forever GI Bill. The law required the VA to change the way it calculated housing stipends, among other changes. But the agency blew through that deadline because it couldn’t get software in place to make the calculations and said this week it wouldn’t be up and running for another year.
Thus, even if the Department Secretary directs that his Department follow the law, it’s not clear that the Department actually can do so.
But what about a charity, a certified non-profit entity with the expressed mission “to protect and promote the physical, mental, and emotional wellness of military service members, veterans, and their families.” How would you feel if you knew that charity wasn’t fulfilling its expressed mission, or if you knew that some of the contributions from people such as yourself were being siphoned-off by at least one organization leader?
Would it make you sad, or would it piss you off?
Anyway: this Department of Justice press release.
Patricia Pauline Driscoll, the former executive director of the Armed Forces Foundation, was found guilty by a jury today of charges stemming from a scheme in which she stole from the non-profit charity, defrauded donors, and lied to the Internal Revenue Service and the public about her salary and benefits. … Driscoll, 40, of Ellicott City, Maryland, was found guilty of two counts of wire fraud and two counts of tax evasion, all federal offenses, and one count of first-degree fraud, a District of Columbia offense. The verdict followed a trial in the U.S. District Court for the District of Columbia.
Here are some of the details:
According to the evidence, Driscoll caused false reports to be filed on the Form 990s in a number of ways. For example, she failed to include the fact that she received commissions from fundraising, the amounts of commissions that she received from fundraising, and the other benefits that she received. Driscoll also falsely categorized and caused others to falsely categorize expenses in the Armed Forces Foundation’s books and records as being for the benefit of the veterans, troops, and their families, when, in fact, they were for her own private benefit. Driscoll also concealed from the foundation’s accountants the money she took from the charity, such as rent that was paid for the use of office space in a building that she co-owned.
Additionally, Driscoll falsely reported and caused others to falsely report the amount of donations received by the foundation on Forms 990, by inflating the amounts of donations and incorrectly listing the types of donations. According to the evidence, she sent false and fraudulent Forms 990 to members of the foundation’s Board of Directors and to the IRS, and caused to be published Forms 990, containing false and fraudulent information.
The jury found that Driscoll took the foundation’s money for her own personal use and to pay her for-profit business expenses.
(Emphasis added.)
A story from the San Diego Union-Tribune had this quote from Driscoll’s attorney:
“The jury did not get it right — Patricia Driscoll is innocent,” attorney Brian W. Stolarz said in a statement. “We are very disappointed by the verdict and the government’s misconduct in this case. We will appeal. This is not the final chapter to this story.”
That same Union-Tribune story, written by Morgan Cook, also added some details not found in the DoJ press release. It reported—
The charity was established in 2001 to promote veterans’ emotional and physical health through outdoor activities and small grants to help needy military families pay bills. On its 2015 federal tax filing, it disclosed that it had found evidence that Driscoll had misspent more than $900,000 for personal purposes, starting in 2006. … Some of [Driscoll’s] suspect spending included a trip to a jewelry store, a grocery, a dermatologist and more than $65,000 in legal fees related to her accusations of domestic violence against her ex-boyfriend … according to court records.
Shortly after Driscoll was indicted, the Armed Forces Foundation announced it was suspending operations and planned to shut down.
According to the Union-Tribune story, the charity was “co-founded by former Rep. Hunter, R-Alpine, who helped recruit Driscoll to run day-to-day operations. The mission was to support veterans by hosting events and awarding grants to needy servicemembers. Hunter was succeeded in the House by his son, Rep. Duncan D. Hunter, R-Alpine, who promoted the organization and attended charity events after he was elected to Congress in 2008.” Importantly, there is no evidence that either of the two Hunters benefited from—or were even aware of—Driscoll’s fraud.
That said, the Union-Tribune story also noted that the younger Hunter has his own legal problems. It reported—
In an unrelated criminal proceeding, the younger Hunter and his wife and former campaign manager, Margaret, were indicted in August on 60 counts of felony crimes stemming from their alleged personal use of more than $250,000 from the coffers of Hunter’s political campaign. Both Duncan and Margaret Hunter have pleaded not guilty to all charges. Duncan Hunter was re-elected to a sixth term earlier this month and faces trial next year.
So, while we continue to hear and read about contractor fraud, let’s not forget that fraud can be found anywhere. There is no evidence that shows fraud is any more prevalent in government contracting than, say, in the world of not-for-profit charitable organizations.
All we can do is be on the lookout for fraudsters and, when we catch them, prosecute the hell out of ‘em.
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Indirect Rates Are Not Hard But Ignorance Makes It So
Homine imperito nunquam quidquid injustius,
Qui nisi quod ipse facit nihil rectum putat.
IMPORTANT NOTE: THE FOLLOWING IS FICTION. IT IS OUR INTERPRETATION OF A DISPUTE BETWEEN GOVERNMENT AND CONTRACTOR. IT IS NOT INTENDED TO BE AN ACCURATE REPORT OF ACTUAL EVENTS.
The NASA Contracting Officer’s Story:
On December 21, 2007, I awarded a small business contractor named L&M Technologies (L&M) a huge contract for logistics support services at the Johnson Space Center (JSC), in Houston, Texas. The contract contemplated up to 10 Contract Years of performance and included a combination of CPFF, CPAF, and Award Term options. L&M used a Calendar Year for its fiscal year, but the Contract Years were not calendar years. They were both abbreviated CY though. In hindsight, this may have caused some confusion. To keep things simple, I’m going to use FY to indicate the contractor’s Fiscal Year and CY to indicate the Contract Year.
To further make things clear: CY1 ran from March 1, 2008 through February 28, 2009 and CY2 ran from March 1, 2009 through February 28, 2010.
In April, 2008, L&M informed me that DCAA had approved its FY2008 provisional billing rates. Those provisional billing rates covered most—but not all—of CY 1. I still needed DCAA-approved provisional billing rates for January and February, 2009.
Why didn’t I let the contractor bill its fiscal year rates for the months of performance for which it had approved rates? In hindsight, perhaps I should have considered that approach. Regardless, that’s not the approach I took.
For some reason, L&M was slow to submit a provisional billing rate proposal to DCAA for its FY2009. It wasn’t until May, 2009, that the proposal was submitted. That’s on L&M, not on me. Anyway, right after they submitted their 2009 provisional billing rates to DCAA, they called me and asked to process indirect rate adjustment invoices for CY 1. I assumed they were going to bill everything at the approved FY2008 rates but for some reason they billed FY2008 costs at FY2008 rates and FY2009 (January and February) costs at FY2009 provisional billing rates—even though DCAA had not yet approved those FY2009 rates. Naturally, I rejected the invoice.
But then DCAA told me that the contractor could bill me at the submitted rates prior to DCAA approving them. That part surprised me—though in hindsight I could have read the Allowable Cost and Payment clause (52.216-7) in the contract and seen that provisional billing rates were supposed to be as close to estimated final rates as possible, and then I might have taken a different tack. But that’s what hindsight is for, I guess.
L&M submitted NASA Form 533, as required by the contract. But there was some confusion, because Form 533 requires reporting of “actual costs incurred” and “estimated cost to complete” but L&M seemed to be reporting its costs as billed rather than as incurred. More confusion was caused because L&M was reporting costs at its FY2008 DCAA-approved provisional billing rates and was not reporting costs at the FY2009 rates because—get this—they said we had directed them not to use those rates. They sent me a letter that said “In … June … we were directed to remove 2009 rate true-ups from our 533. Since then we understood from a number of conversations that the rate adjustments would be dealt with after the REA was resolved.” So now somehow this was all my fault, when of course the contractor is responsible for accurate reporting, not me. Can you believe it?
I told L&M in no uncertain terms that this situation needed to be corrected. I wrote them and said—
L&M's 2009 provisional rates were not even approved by DCAA at the time of May 2009 (Invoice 67 dated 5/14/09 and 70 dated 5/18/09) yet L&M attempted to bill them and include them in the REA and I took exception to that. So do you concur that you are reporting on the 533 and invoicing for provisional rates ('08) just not '09 rates? What are L&M's '09 provisional rates?
Not much happened for a few months. We finalized the REA and then, in September, 2010, L&M submitted a “contract-to-date adjusting invoice for the period of 03/01/2008 – 08/27/2010” in the amount of $433,839. According to the letter of transmittal, L&M was now billing its FY2009 costs at DCAA-approved FY2009 provisional billing rates.
Then I found out that DCAA has a disagreement with L&M over its indirect cost allocation bases, and that if L&M were to invoice at the rates DCAA wanted them to use, then it would blow through some contract “cost gates” and would result in some negative incentives. L&M told me it wanted to establish contract indirect cost rate ceilings that would prevent this from happening. So even if L&M’s rates went up over the ceilings, the resulting costs would be unallowable for the contract.
I didn’t go for it; and why should I have? Instead, we submitted a draft Clause B.8 that would allow L&M to bill at rates less than DCAA calculated as the correct rates. It said—
For contract years 1 through 5 that the Contractor invoiced at indirect rates below the provisional billing rates approved by the DCAA, the Contractor shall assume all costs in excess of the indirect rates in the table below. Any costs incurred above these amounts shall be unallowable costs and shall not be billed to the Government under this or any other Government contract.
Pretty good, huh?
In hindsight, I might have wondered how the agreement would affect the Form 533 reporting. Would L&M report at actual indirect rates, or at the provisional billing rates, or at the contract ceiling rates? I’ve got to be honest here and tell you nobody asked those questions at the time.
In any case, all was seemingly fine for years, until December, 2016, when L&M and DCAA entered into a final indirect cost rate agreement for L&M’s FY2009. A few months later—in January, 2017, L&M submitted another series of rate adjustment invoices for costs incurred in its FY2009, and this time they wanted an additional $683,739! Naturally, I rejected those invoices because the rates agreed-to between DCAA and L&M were in excess of the rates established by contract clause B.8—which was the clause that L&M had asked for in the first place. Can you believe the nerve of those guys?
L&M argued that the clause only applied if they invoiced at “indirect rates below the provisional billing rates approved by DCAA,” and if they billed at DCAA-approved provisional billing rates then the clause was not applicable. That was clearly not the intent of my clause, and I told them so.
L&M filed a certified claim for the $683,739, which I denied. Then they appealed to the ASBCA.
Great; more work for me. But I know I’m right on this.
L&M Technologies’ Story:
There’s always a balance between telling the customer it is wrong and giving in on a point in the name of customer relations. In this case, we gave in and it cost us a ton of lost cash flow. As a small business, that really hurt us.
The CO kept insisting that we needed DCAA-approved provisional billing rates. Even when DCAA told the CO that we could bill without a DCAA approval, the CO didn’t budge. As a result, we kept billing at FY2008 rates even though we knew that FY2009 rates were higher.
In hindsight, we should have done a better job of helping the CO to understand how the lifecycle of billing rates under 52.216-7 works. We should have explained that the rates were going to be trued-up eventually, and it was in both parties’ best interests to make sure they were trued-up as the work was performed and costs were incurred. We didn’t do a great job there, and it cost us—not only in lost cash flow but also in unallowable legal fees as we appealed that CO’s final decision denying our rightful costs. But what do you expect from us? We’re a small business. We don’t know everything like the big contractors do.
What was that? No, we didn’t really think too much about the Form 533. We made sure it accurately reported the costs we had billed. The Form was as accurate as we could make it. When NASA told us to keep billing at FY2008 provisional billing rates, we kept reporting at FY2008 provisional billing rates on the Form. I told you, it was accurate. We did our job.
What do you mean that there’s a difference between actual cost rates and provisional billing rates? I told you we should have done a better job with the 52.216-7 clause. Maybe we should have made sure we fully understood it, as well. But we can’t be expected to know everything: I told you, we are a small business.
Those contract “cost gates” were really important and so when DCAA recalculated our rates higher based on a change in allocation base, we had a problem. We had to keep our rates low; that was an investment we needed to make to retain the contract work.
What do you mean we didn’t need anybody’s approval to bill at rates below the ones that DCAA calculated? The CO wouldn’t let us bill at anything other than DCAA-approved rates, and we needed to stay below those rates. What do you mean, we could have self-disallowed the costs rather than dealing with a contract mod? Well, now you tell us. At the time, we didn’t think of that. I told you, we are a small business.
Anyway, we know we are right on this and we’re appealing the decision.
The Armed Services Board of Contract Appeals’ Story:
Clause B.8 is silent about when the contractor's invoice must be submitted, ‘For contract years 1 through 5 that the Contractor invoiced at indirect rates below the provisional billing rates approved by the DCAA’ (finding 15). Nothing in the clause directs us to consider the invoices itemized in the NF 533s (finding 8) to take precedence over Invoice No. 200 that bills at the higher 2009 rates and was paid by NASA (finding 12). Taking into consideration that it was NASA's direction that prevented L&M from invoicing at the 2009 rates earlier, we hold that Invoice No. 200 satisfies the B.8 requirement that L&M invoice at the approved provisional rate[s] listed in the clause in order to receive any increase in rates when DCAA approve[d] the final indirect rates. For that reason we conclude that the rate cap in Clause B.8 does not apply and L&M may recover any increase in its final rates over approved provisional rates.
In accordance with the above, L&M's appeal is sustained. The matter is remanded to the parties to determine quantum.
For those interested in the decision that sparked this fictional story, here is a link.
CAS Board Meets! Has Agenda!
Recently we published some blog pieces that were mildly critical of the current CAS Board. One of our criticisms was about the lack of CASB transparency. In September, we wrote, “There is no coherent messaging, no overall communication strategy. Part of this obviously stems from the Trump Administration’s focus on things other than CAS (or even reform of CAS administration). But we suspect that the remainder of the gap comes from a loss of focus on transparency.”
Those articles about the CAS Board have proven to be among our most popular this year, as best we can tell. (It’s tough to separate the “hits” from bots or hack attempts from the legitimate downloads.) Which, of course, proves our point that people are getting desperate for news about what the CAS Board is up to. If the CAS Board was more forthcoming then people wouldn’t need to use our site for CAS-related news.
Now, we are not saying that members or staff of the CAS Board read our website. That would be ridiculous. And we are not saying that, even if somebody related to the CAS Board did read our site and heard our criticisms about the lack of transparency, they would care enough to do anything about those criticisms. We aren’t that full of ourselves. Really.
But what we are saying is that on November 23, 2018, the CAS Board published in the Federal Register its agenda for the next two meetings.
According to the Federal Register notice, the next two meetings of the CAS Board will be taking place 27 November 2018 and 24 January 2019. The notice is careful to point out that the same agenda will be used for both meetings, and that the meetings themselves are closed to the public.
The notice also stated that “The CAS Board will discuss its accomplishments and activities for FY 2019 in its annual report to Congress, which will be transmitted after the end of the fiscal year ….” (Presumably that’s the Government Fiscal Year (GFY), which ends 30 September. That statement implies that we should expect a FY 2018 annual report to Congress, covering “accomplishments and activities” for the GFY that ended 30 September 2018 sometime in the near future.
The planned agenda for the next two meetings is deceptively simple. What makes the agenda deceptive is that the topics are really not simple at all: they are wickedly complex. The agenda includes:
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Review of Advanced Notice of Proposed Rulemaking (ANPR) for Pension Adjustments for Extraordinary Events. “The CAS Board contemplates it will also issue a Staff Discussion Paper (SDP), the first step of the four-step process, addressing fact-finding that was made by the working group and public outreach conducted subsequent to the issuance of the 2011 final rule to help inform the CAS Board in its deliberations.”
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Conformance of CAS to Generally Accepted Accounting Principles (GAAP). As part of this effort, the Board forewarns the public of at least two SDPs related to “conformance of CAS 404, Capitalization of Tangible Assets, and CAS 411, Accounting for Acquisition Costs of Material, to GAAP.”
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CAS Applicability Thresholds. The Board will discuss the Section 809 Panel’s recommendations to increase the thresholds at which CAS coverage applies.
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Review of Section 809 Panel Recommendation on Defense Cost Accounting Standards Board (Defense CAS Board). The Board will discuss the Section 809 Panel’s recommendations to eliminate the second (and superfluous) CAS Board by “repeal [of] the provisions in section 820 of the FY 2017 NDAA that created the Defense CAS Board.”
There you have it. The CAS Board is active and its members and staff want you to know they are active. Stay tuned for further developments, including Staff Discussion Papers (for which public input will be solicited) and for annual reports to Congress.
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