(1) The initial adoption of a cost accounting practice for the first time a cost is incurred or a function is created is not a change in cost accounting practice. The partial or total elimination of a cost or the cost of a function is not a change in cost accounting practice. As used here, function is an activity or group of activities that is identifiable in scope and has a purpose or end to be accomplished.

(2) The revision of a cost accounting practice for a cost which previously had been immaterial is not a change in cost accounting practice.

[47 FR 4069, Jan. 28, 1982]

§ 1-3.1203 Requirements. [47 FR 4070, Jan. 28, 1982]

§ 1-3.1203-1 Prime contractor disclosure statements.

A Disclosure Statement is a written description of a contractor's cost accounting practices in a format prescribed by the Cost Accounting Standards Board. Applicable requirements are as follows:

(a) Nondefense awards. Nondefense contracts, irrespective of whether they are subject to cost accounting standards and contain appropriate clauses, will not be counted in connection with Disclosure Statement dollar threshold submission requirements under 4 CFR Part 351.

(b) National defense awards. The filing of Disclosure Statements by certain large business concerns is required in connection with the award of certain negotiated national defense contracts and subcontracts in accordance with CASB rules (see 4 CFR Part 351 et seq.). A summary of those rules follow:

(1) A Disclosure Statement, when required to be submitted, covers the practices of a defense contractor's profit centers, divisions, or similar organizational units whose costs are included in the total price of a negotiated national defense "covered" contract. The requirement extends to each corporate or group office whose costs are allocated to such performing units of the contractor.

(2) Any defense contractor which, together with its segments, received net awards of negotiated national de

fense prime contracts and subcontracts subject to cost accounting standards totaling more than $10 million in its most recent cost accounting period, must submit a completed Disclosure Statement prior to award of the first covered defense contract reIceived by the contractor or by a segment of such contractor in the cost accounting period immediately following the period in which covered defense awards totaling more than $10 million were received. If the first covered defense contract is received within 90 days of the start of the cost accounting period, the contractor is not requried to file until the end of 90 days.

(3) Any business unit that receives a negotiated national defense contract or subcontract which is subject to cost accounting standards and is for $10 million or more must submit a completed Disclosure Statement as part of its proposal for such contract unless the business unit has already submitted a Disclosure Statement.

(c) Pre-award submission of Disclosure Statement(s). Each offeror submitting an offer which could result in a national defense CAS covered contract shall furnish copies of its Disclosure Statement(s) to the offices listed in paragraph (d) of this section concurrently with the submission of its proposal to the contracting officer except when the offeror has executed the Certificate of Monetary Exemption, the Certificate of Interim Exemption, or the Certificate of Previously Submitted Disclosure Statement (see § 1-3.1203-3(a)(1)). More than one Disclosure Statement may be required in connection with the award of a contract (see 4 CFR 351.40(a)(3) and (4)). Award of a contract shall not be made until a determination has been made by the cognizant contracting officer (ACO) that a Disclosure Statement is adequate (see § 1-3.1205(b)).

(d) Distribution of Disclosure Statement(s). The offeror shall distribute the Disclosure Statement(s) as follows:

(1) Original and one copy to the cognizant contracting officer (Contract Administration Office (ATTN: ACO), see DOD Directory of Contract Administration Components DOD

4105.59H) unless otherwise specified in accordance with § 1-3.1208(c);

(2) One copy to the cognizant contract auditor.

(e) Determination by agency head that it is impractical to secure Disclosure Statement(s). If the head of the agency (see § 1-1.204) or his designee; the cognizant Assistant Secretary for a Military Department; or the Director of the Defense Logistics Agency, the Defense Communications Agency, the Defense Nuclear Agency, or the Defense Mapping Agency determines that it is impractical to secure the Disclosure Statement(s) in accordance with the clause(s) in § 1-3.1204-1 and this Subpart 1-3.12 or DAR 7104.83(a) and DAR Part 12 of Section III, he may authorize award of such contract without obtaining such Statement(s). This authority shall not be delegated.

(f) Privileged and confidential information in Disclosure Statement(s). If the offeror or contractor notifies the contracting officer that the Disclosure Statement contains trade secrets and commercial or financial information which is privileged and confidential, the Disclosure Statement will be protected and will not be released outside the Government (see paragraph (a)(1) of the Cost Accounting Standards clause or paragraph (a)(2) of the Disclosure and Consistency of Cost Accounting Practices clause).

(g) Amendment of Disclosure Statements. Amendments of a Disclosure Statement after contract award shall be processed in accordance with 4 CFR 351.120 and 41 CFR 1-3.1205(d) and 13.1207. Normally the cognizant contracting officer should require resubmission of a complete, updated Disclosure Statement pursuant to 4 CFR 351.120 only when the number of amended pages or the nature of the amendments are so extensive that the review process would be substantially expedited as a result of the resubmission.

(h) Responsibility to maintain accuracy of Disclosure Statement(s). The contractor or subcontractor who has contracts containing either the Cost Accounting Standards clause or the Disclosure and Consistency of Cost Accounting Practices clause has a re

sponsibility to maintain an accurate Disclosure Statement(s) and comply with those disclosed practices if: (1) It was awarded a negotiated national defense contract in its current cost accounting period of $10 million or more, or (2) it is, a defense contractor which, together with its segments, reIceived net awards of negotiated national defense prime contracts and subcontracts subject to cost accounting standards totaling more than $10 million in its most recent cost accounting period. Should its obligation to maintain the Disclosure Statement cease because it no longer meets or exceeds the financial thresholds, it will be required to follow consistently the disclosed practices for those contracts awarded during a period in which it was obligated to submit a Disclosure Statement(s). A change to such practices may be proposed by either the contractor or the Government and negotiated by the contractor and its CAS cognizant contracting officer.

[47 FR 4070, Jan. 28, 1982]

§ 1-3.1203-2 Applicability of cost accounting standards.

(a) Small business concerns. All contracts and subcontracts with small business concerns are wholly exempt from cost accounting standards.

(b) National defense contracts with other than small business concerns.

(1) The applicability of cost accounting standards to a negotiated national defense contract is implemented by incorporation of a clause in the contract as required by CASB rules (4 CFR Parts 331 or 332). These national defense CAS awards consist of the first negotiated national defense contract or subcontract of more than $500,000 received by a contractor business unit and subsequent negotiated national defense prime contracts and subcontracts of more than $100,000 received by that business unit. Whenever a business unit completes all contracts subject to a CAS clause required by CASB regulations, its obligation to follow CAS requirements ends and is not reinstated until it again receives an award in excess of $500,000. Award and sales data of the preceding cost accounting period are used to deter

mine type of contract coverage for the current period. There are two types of CAS coverage: Full coverage under 4 CFR Part 331 and modified coverage under 4 CFR Part 332.

(2) Full coverage applies to contractor business units which: (i) Receive a national defense CAS award of $10 million or more, (ii) received national defense CAS awards during the preceding cost accounting period of $10 million or more, or (iii) received national defense CAS awards during the preceding cost accounting period of less than $10 million, but such CAS awards accounted for 10 percent or more of the business unit's total sales for the preceding period. These dollar thresholds apply to contractor business units, irrespective of companywide award dollar totals.

(3) Modified coverage applies to contractor business units which received national defense CAS awards during the preceding period of less than $10 million and such CAS awards accounted for less than 10 percent of the business unit's total sales of the preceding period. Modified coverage requires the contractor to comply only with requirements of standard 401, Consistency in Estimating, Accumulating, and Reporting Costs (4 CFR Part 401) and standard 402, Consistency in Allocating Costs Incurred for the Same Purpose (4 CFR Part 402).

(4) CAS coverage is extended to national defense subcontract awards under CAS covered contracts under the same provisions; thus a subcontractor could be required to comply with full coverage even though the prime contractor is required to comply only with modified coverage.

(5) Certain exemptions and waivers to applicability of CAS standards, rules, and regulations apply to national defense contracts and subcontracts. Cost accounting standards are applicable to negotiated national defense contracts and subcontracts exceeding $100,000 except when:

(i) The price is (A) based on established catalog or market prices of commercial items sold in substantial quantities to the general public, or (B) set by law or regulation;

(ii) A contract or subcontract is awarded to a small business concern;

(iii) The contract is to be executed and performed in its entirety outside the United States, its territories and possessions; or

(iv) A contract or subcontract is awarded to an educational institution subject to cost principles in 41 CFR Subpart 1-15.3. (Contracts awarded to federally funded research and development centers (FFRDC's) operated by such an institution are not exempt. See 4 CFR 331.30(b)(3) for further details);

(v) A contract is awarded to a labor surplus area concern pursuant to procedures providing for a partial setaside for such concern as set out in DAR 1-804;

(vi) A contract or subcontract is awarded to a foreign government or an agency or instrumentality of such government, or insofar as the requirements of Cost Accounting Standards 403 (4 CFR Part 403) or any subsequent standards are concerned, the contract or subcontract is awarded to a foreign concern.

to

NOTE: This exemption does not relieve foreign concerns of any obligation comply with the Cost Accounting Standards set forth in 4 CFR Parts 401 and 402 and to submit a Disclosure Statement.

(vii) A subcontract is to be performed outside the United States either by an agency of a foreign government or by a foreign concern in connection with the class of hydrofoil guided missile ship known as the "NATO PHM Ship";

(viii) A contract or subcontract is awarded to a United Kingdom contractor for performance substantially in the United Kingdom provided the contractor meets certain conditions set forth in 4 CFR 331.30(b)(8);

(ix) A firm fixed-price contract or subcontract is awarded without submission of any cost data: Provided, That the failure to submit such data is not attributable to a waiver of the requirement for certified cost or pricing data;

(x) A contract or subcontract of $500,000 or less is awarded, unless the business unit to whom it is awarded (A) is performing one or more covered contracts and (B) has not received notification of final acceptance of all

items of work to be delivered under all such contracts. (For purposes of this exemption, an order issued by one segment to another segment shall be treated as a subcontract. Also see paragraph (b)(1) of this section.); or

(xi) The CASB has otherwise approved a waiver or exemption (see 4 CFR 331.30(c)).

(c) Nondefense contracts with other than small business concerns. (1) The applicability of cost accounting standards to a negotiated nondefense contract is implemented by a clause in the contract (substantially similar to the CASB clauses) as required by this Subpart 1-3.12. These nondefense CAS awards consist of the first negotiated nondefense contract or subcontract over $500,000 received by a contractor business unit in the event the business unit is not performing a CAS covered contract or subcontract. Otherwise, cost accounting standards are applicable to negotiated nondefense contracts and subcontracts over $100,000 received by that business unit. Whenever a contractor business unit completes the performance of all CAS covered contracts, the obligation to follow cost accounting standards ends and is not reinstated until it again receives an award in excess of $500,000. National defense CAS covered award and sales data of the preceding cost accounting period (normally, the contractor's fiscal year) for the business unit receiving the award are used to determine the type of contract coverage for the current period. Nondefense CAS covered award data is not used. There are two types of nondefense CAS coverage; namely full coverage and modified coverage.

(2) Full coverage applies to negotiated nondefense contracts and subcontracts awarded to contractor business units which (i) are performing a national defense CAS covered contract of $10 million or more awarded during the contractor's current cost accounting period, (ii) received national defense CAS covered awards during the preceding cost accounting period of $10 million or more, or (iii) received national defense CAS covered awards during the preceding cost accounting period of under $10 million, but such CAS awards accounted for 10 percent

or more of the business unit's total sales for the preceding period. These national defense dollar thresholds apply to contractor business units, irrespective of company-wide national defense award dollar totals (see § 13.1203-2(c)(4) for exemptions).

(3) Modified coverage applies to the first negotiated nondefense contract or subcontract over $500,000 received by a contractor business unit in the event the business unit is not performing a CAS covered contract or subcontract. Otherwise, modified coverage is applicable to negotiated nondefense contracts and subcontracts over $100,000 received by that business unit, unless full coverage in accordance with paragraph (c)(2) of this § 13.1203-2 applies (see § 1-3.1203-2(c)(4) for exemptions). Modified coverage requires the contractor to comply only with the requirements of Standard 401, Consistency in Estimating, Accumulating and Reporting Costs (4 CFR Part 401) and Standard 402, Consistency in Allocating Costs Incurred for the Same Purpose (4 CFR Part 402).

(4) The exemptions and waivers which apply to national defense contracts and subcontracts also apply to nondefense contracts and subcontracts. These provisions are contained in paragraph (b)(5) of this § 1-3.12032. In addition to the exemptions and waivers in paragraphs (a) and (b)(5) of this § 1-3.1203-2, the following nondefense procurements are exempt:

(i) Contracts with State, local, and federally-recognized Indian tribal governments subject to Subpart 1-15.7;

(ii) Contracts with hospitals; and

(iii) Contracts where a waiver under § 1-3.1211 has been approved or a modification or withdrawal of a standard by the FPR is applicable.

[47 FR 4071, Jan. 28, 1982]

§ 1-3.1203-3 Solicitation notices.

(a) National defense contracts. (1) The notice entitled, Disclosure Statement-Cost Accounting Practices and Certification, in this § 1-3.1203-3(a)(1) shall be inserted in all national defense solicitations which are likely to result in the award of a negotiated contract exceeding $100,000 except when the price is (i) based on estab

lished catalog or market prices of commercial items sold in substantial quantities to the general public, or (ii) set by law or regulation. The notice shall not be inserted in: solicitations limited to small business concerns; solicitations limited to educational institutions subject to the cost principles in Subpart 1-15.3, except that the notice shall be inserted in solicitations sent to federally funded research and development centers operated by educational institutions; and solicitations limited to a foreign government or an agency or instrumentality of such government; solicitations which will result in contracts executed and performed in their entirety outside the United States, its territories, and possessions; or solicitations which will result in firm fixed-price contracts awarded without the submission of any contractor cost data.

DISCLOSURE STATEMENT-COST ACCOUNTING PRACTICES AND CERTIFICATION

Any contract in excess of $100,000 resulting from this solicitation except (i) when the price negotiated is based on: (A) established catalog or market prices of commercial items sold in substantial quantities to the general public, or (B) prices set by law or regulation; (ii) contracts awarded to small business concerns (as defined in 1701.1 of the Defense Acquisition Regulation or FPR § 1-1.701-1); or (iii) contracts which are otherwise exempt (see 4 CFR 331.30(b)) shall be subject to the requirements of the Cost Accounting Standards Board. Any offeror submitting a proposal, which, if accepted, will result in a contract subject to the requirements of the Cost Accounting Standards Board must, as a condition of contracting, submit a Disclosure Statement as required by regulations of the Board. The Disclosure Statement must be submitted as a part of the offeror's proposal under this solicitation (see (I), below) unless (i) the offeror, together with all divisions, subsidiaries, and affiliates under common control, did not receive net awards exceeding the monetary exemption for disclosure as established by the Cost Accounting Standards Board (see (II), below); (ii) the offeror exceeded the monetary exemption in the cost accounting period immediately preceding the cost accounting period in which this proposal was submitted but, in accordance with the regulations of the Cost Accounting Standards Board, is not yet required to submit a Disclosure Statement (see (III), below); or (iii) the offeror has already submitted a Disclosure Statement disclosing

the practices used in connection with the pricing of this proposal (see (IV), below).

Caution: A practice disclosed in a Disclosure Statement shall not, by virtue of such disclosure, be deemed to be a proper, approved, or agreed to practice for pricing proposals or accumulating and reporting contract performance cost data.

Check the appropriate box below.

I. Certificate of concurrent submission of disclosure statement(s).

The offeror hereby certifies that he has submitted, as a part of his proposal under this solicitation, copies of the Disclosure Statement(s) as follows: (i) original and one copy to the cognizant contracting officer (Administrative Contracting Officer (ACO), see DOD Directory of Contract Administration Components (DOD 4105.59H)); and (ii) one copy to the cognizant contract auditor. Date of Disclosure Statement(s):

Name(s) and Address(es) of Cognizant ACO(s) where filed:

The offeror further certifies that practices used in estimating costs in pricing this proposal are consistent with the cost accounting practices disclosed in the Disclosure Statement(s).

II. Certificate of monetary exemption. The offeror hereby certifies that he, together with all divisions, subsidiaries, and affiliates under common control, did not receive net awards of negotiated national defense prime contracts and subcontracts subject to Cost Accounting Standards totaling more than $10 million in his cost accounting period immediately preceding the period in which this proposal was submitted. The offeror further certifies that if his status changes prior to an award resulting from this proposal he will advise the contracting officer immediately.

Caution: Offerors who submitted a Disclosure Statement under the filing requirements previously established by the Cost Accounting Standards Board may claim this exemption only if the dollar volume of CAS covered national defense prime contract and subcontract awards in their preceding cost accounting period did not exceed the $10 million threshold and the amount of this award will be less than $10 million. Such offerors will continue to be responsible for maintaining the Disclosure Statement and following the disclosed practices on CAS covered prime contracts and subcontracts awarded during the period in which a Disclosure Statement was required.

III. Certificate of interim exemption. The offeror hereby certifies that (i) he first exceeded the monetary exemption for disclosure, as defined in (II) above, in his cost accounting period immediately preceding the cost accounting period in which this proposal was submitted, and (ii) in accord