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the cognizant contracting officer shall advise him that the proposed change review the accounting change concur- will not be recognized unless an agreerently for adequacy and compliance in ment can be reached which will preaccordance with $ 1-3.1205(d). Upon vent an increase in the aggregate cost completion of the review indicating to be paid under such contracts and that the change is both adequate and subcontracts. Contracts and subconin compliance, the contractor shall be tracts containing the equitable adjustnotified and requested to furnish the ment provisions of paragraph (a)(4)(C) cost impact proposal required pursu of the Cost Accounting Standards ant to paragraph (b) of the Adminis- clause, (a)(3) of the Disclosure and tration of Cost Accounting Standards Consistency of Cost Accounting Pracclause. It shall be in sufficient detail tices clause, (a)(3)(C) of the Cost Ac. to permit evaluation, determination counting Standards—Nondefense Conand negotiation of the cost impact tract clause, or (a)(2) of the Consisten. upon each contract and subcontract cy of Cost Accounting Practices-Noncontaining a cost accounting standards defense Contract clause may be equiclause. It shall contain as a minimum tably adjusted for changes if the conthe following information:
tracting officer determines that the (1) Identification of all contracts and change is desirable and not detrimensubcontracts containing a cost ac tal to the interests of the Government counting standards clause, and
(see § 1-3.1207(a)). When the cogni. (2) The effect on each contract and zant contracting officer (ACO) makes subcontract from the effective date of such a determination, he shall notify the proposed change until completion the contractor and the parties will neof the contract or subcontract.
gotiate an equitable adjustment. (c) Receipt of cost impact proposal. (d) Failure to submit cost impact Upon receipt of an acceptable proposal proposal or reach agreement concern. from the contractor, the cognizant ing cost impact. (1) If the contractor contracting officer shall promptly ana- does not submit a proposal in the form lyze the proposal with the assistance and time specified or if the parties fail of the auditor to determine whether to agree concerning the cost impact, or not the proposed change will result the cognizant contracting officer, with in increased costs being paid by the the assistance of the auditor, shall esUnited States. In considering the pro- timate the cost impact on contracts posed adjustments to subcontracts and subcontracts containing a cost accontaining a cost accounting standards counting standards clause, and clause to determine whether increased (2) Upon completion of the estimate cost to the United States will result indicating the effect on contract costs, from the change, the cognizant con the cognizant contracting officer shall tracting officer shall not consider the request agreement from the contraceffect of the proposed adjustments tor as to the cost or price adjustment. upon the prime contracts and subcon. The contractor shall also be advised tracts under which the subcontracts that in the event no agreement on the were entered into. If the cognizant cost or price adjustment is reached contracting officer determines that within 20 days, action may be taken in the proposed adjustments will not accordance with paragraph (b) of the result in an increase in the aggregate Cost Accounting Standards clause. If a cost to be paid under the contracts DOD cognizant contracting officer and subcontracts containing a cost ac- subsequently takes such action, he counting standards clause, he shall shall consider appropriate action to promptly negotiate the contract price protect the interests of the Govern. adjustments pursuant to § 1-3.1207. If ment, pursuant to DAR Appendix E, the cognizant contracting officer de- Part 6, (32 CFR Part 163, Subpart F) termines that the proposed adjust regarding any cost adjustment dements will result in an increase in the manded by the United States. Cogniaggregate cost to be paid under the zant contracting officers of civilian excontracts and subcontracts containing ecutive agencies shall consider the apa cost accounting standards clause, he propriateness of similar actions in shall so notify the contractor and regard to collection of contract debts
with respect to their affected con- standard, terms defined herein whentracts and subcontracts.
ever used in any standard shall have
the meanings ascribed to them in [47 FR 4081, Jan. 28, 1982)
paragraph (b) of this section. For con$8 1-3.1215—1-3.1218 [Reserved)
venience, the definitions of terms
prominent in an individual standard § 1-3.1219 Guidance for implementation. are reprinted in that standard. The se
This § 1-3.1219 will address specific lection or nonselection of a particular topics where it has been determined definition to be reprinted in an indithat the contracting community might vidual standard, however, does not benefit from such treatment. In addi- affect the applicability of all definition, the Cost Accounting Standards tions in this paragraph (b) of this Board often included preambles in the section to that standard. FEDERAL REGISTER issue that promul. (1) Accrued benefit cost method. An gated rules, regulations, and standards actuarial cost method under which in order to provide readers with his units of benefit are assigned to each torical information and pertinent com cost accounting period and are valued mentary. These preambles are also in as they accrue; that is, based on the cluded in Title 4 of the Code of Feder- services performed by each employee al Regulations, which is for sale by the in the period involved. The measure of Superintendent of Documents, U.S.
normal cost under this method for Government Printing Office, Wash
each cost accounting period is the ington, DC 20402. Temporary require present value of the units of benefit ments or informational guidance may
deemed to be credited to employees also be published from time to time in
for service in that period. The measthe Notices section of the FEDERAL
ure of the actuarial liability at a plan's REGISTER as FPR Temporary Regula
inception date is the present value of tions or FPR Bulletins. These tempo
the units of benefit credited to emrary regulations and bulletins are sub
ployees for service prior to that date. sequently distributed to subscribers of
(This method is also known as the the looseleaf edition of the FPR.
Unit Credit cost method.) (47 FR 4081, Jan. 28, 1982]
(2) Accumulating costs. The collect
ing of cost data in an organized § 1-3.1220 Standards and definitions pre
manner, such as through a system of scribed by the Cost Accounting Stand
accounts. ards Board.
(3) Actual cash value. The cost of re(a) The text of the Cost Accounting placing damaged property with other Standards Board standards are set property of like kind and quality in forth in the subsections following the physical condition of the property using the numbering system of 4 CFR
immediately prior to the damage. Subchapter G of Chapter III.
(4) Actual cost. An amount deterNOTE: This section of the FPR is included mined on the basis of cost incurred as for the convenience of procurement person distinguished from forecasted cost. Innel. Users are cautioned that changes to ex cludes standard cost properly adjusted isting standards or new standards may be
for applicable variance. published from time to time by a successor agency to the CASB. They will become ef
(5) Actuarial assumption. A predicfective for both defense and nondefense
tion of future conditions affecting contracts following publication in the FED pension cost; for example, mortality ERAL REGISTER on the date specified by such rate, employee turnover, compensation successor agency, even though a standard levels, pension fund earnings, and has not on that date, been republished in changes in values of pension fund the FPR.
assets. (b) Definitions promulgated by the (6) Actuarial cost method. A techCost Accounting Standards Board are nique which uses actuarial assumpset forth herein. Unless the text of a tions to measure the present value of particular standard demands a differ- future pension benefits and pension ent definition or the definition is ex- fund administrative expenses, and pressly modified for a particular which assigns the cost of such benefits
and expenses to cost accounting periods.
(7) Actuarial gain and loss. The effect on pension cost resulting from differences between actuarial assumptions and actual experience.
(8) Actuarial liability. Pension cost attributable, under the actuarial cost method in use, to years prior to the date of a particular actuarial valuation. As of such date, the actuarial liability represents the excess of the
: the excess of the present value of the future benefits and administrative expenses over the present value of future contributions, for the normal cost for all plan participants and beneficiaries. The excess of the actuarial liability over the value of the assets of a pension plan is the Unfunded Actuarial Liability.
(9) Actuarial valuation. The determination, as of a specified date, of the normal cost, actuarial liability, value of the assets of a pension fund, and other relevant values for the pension plan.
(10) Allocate. To assign an item of cost, or a group of items of cost, to one or more cost objectives. This term includes both direct assignment of cost and the reassignment of a share from an indirect cost pool.
(11) Asset accountability unit. A tangible capital asset which is a component of plant and equipment that is capitalized when acquired or whose replacement is capitalized when the unit is removed, transferred, sold, abandoned, demolished, or otherwise disposed of.
(12) Bid and proposal (B&P) cost. The cost incurred in preparing, submitting, or supporting any bid or proposal which effort is neither sponsored by a grant, nor required in the performance of a contract.
(13) Business unit. Any segment of an organization, or an entire business organization which is not divided into segments.
(14) Category of material. A particular kind of goods, comprised of identical or interchangeable units, acquired or produced by a contractor, which are intended to be sold, or consumed or used in the performance of either direct or indirect functions.
(15) Compensated personal absence. Any absence from work for reasons
such as illness, vacation, holidays, jury duty, military training, or personal activities for which an employer pays compensation directly to an employee in accordance with a plan or custom of the employer.
(16) Cost input. The cost, except General and Administrative (G&A) expenses, which for contract costing purposes is allocable to the production of goods and services during a cost accounting period.
(17) Cost objective. A function, organizational subdivision, contractor other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capitalized projects, etc.
(18) Cost of capital committed to facilities. An imputed cost determined by applying a cost of money rate to facilities capital.
(19) Deferred compensation. An award made by an employer to compensate an employee in a future cost accounting period or periods for services rendered in one or more cost accounting periods prior to the date of the receipt of compensation by the employee. This definition shall not include the amount of year end accruals for salaries, wages, or bonuses that are to be paid within a reasonable period of time after the end of a cost accounting period.
(20) Defined-benefit pension plan. A pension plan in which the benefits to be paid or the basis for determining such benefits are established in advance and the contribution are intended to provide the stated benefits.
(21) Defined-contribution pension plan. A pension plan in which the contributions to be made are established in advance and the benefits are determined thereby.
(22) Direct cost. Any cost which is identified specifically with a particular final cost objective. Direct costs are not limited to items which are incorporated in the end product as material or labor. Costs identified specifically with a contract are direct costs of that contract. All costs identified specifically with other final cost objectives of the contractor are direct costs of those cost objectives.
(23) Directly associated cost. Any resenting the total activity of a busicost which is generated solely as a ness unit during a cost accounting result of the incurrence of another period. cost, and which would not have been (33) Home office. An office responsiincurred had the other cost not been ble for directing or managing two or incurred.
more, but not necessarily all, segments (24) Entitlement. An employee's of an organization. It typically estabright, whether conditional or uncondi- lishes policy for, and provides guidtional, to receive a determinable ance to the segments in their operamount of compensated personal ab ations. It usually performs managesence, or pay in lieu thereof.
ment, supervisory, or administrative (25) Estimating costs. The process of functions, and may also perform serv. forecasting a future result in terms of ice functions in support of the opercost, based upon information available ations of the various segments. An orat the time.
ganization which has intermediate (26) Expressly unallowable cost. A levels, such as groups, may have severparticular item or type of cost which, al home offices which report to a under the express provisions of an ap- common home office. An intermediate plicable law, regulation, or contract, is organization may be both a segment specifically named and stated to be un- and a home office. allowable.
(34) Immediate-gain actuarial cost (27) Facilities capital. The net book method. Any of the several actuarial value of tangible capital assets and of cost methods under which actuarial those intangible capital assets that are gains and losses are included as part of subject to amortization.
the unfunded actuarial liability of the (28) Final cost objective. A cost ob pension plan, rather than as part of jective which has allocated to it both the normal cost of the plan. direct and indirect costs, and, in the (35) Independent research and devel. contractor's accumulation system is opment (IR&D) cost. The cost of one of the final accumulation points. effort which is neither sponsored by a
(29) Fiscal year. The accounting grant, nor required in the performance period for which annual financial of a contract, and which falls within statements are regularly prepared, any of the following three areas: generally a period of 12 months, 52 (i) Basic and applied research, weeks, or 53 weeks.
(ii) Development, and (30) Funded pension cost. The por (iii) Systems and other concept fortion of pension costs for a current or mulation studies. prior cost accounting period that has (36) Indirect cost. Any cost not dibeen paid to a funding agency or, rectly identified with a single final under a pay-as-you-go plan, to plan cost objective, but identified with two participants or beneficiaries.
or more final cost objectives or with at (31) Funding agency. An organiza- least one intermediate cost objective. tion or individual which provides facile (37) Indirect cost pool. A grouping of ities to receive and accumulate assets incurred costs identified with two or to be used either for the payment of more objectives but not identified spebenefits under a pension plan, or for cifically with any final cost objective. the purchase of such benefits.
(38) Insurance administration ex(32) General and administrative penses. The contractor's costs of ad(G&A) expense. Any management, fi- ministering an insurance program; nancial, and other expense which is in- e.g., the costs of operating an insurcurred by or allocated to a business ance or risk-management department, unit and which is for the general man processing claims, actuarial fees, and agement and administration of the service fees paid to insurance compabusiness unit as a whole. G&A ex- nies, trustees, or technical consultants. pense does not include those manage (39) Intangible capital assets. An ment expenses whose beneficial or asset that no physical substance, has causal relationship to cost objectives more than minimal value, and is excan be more directly measured by a pected to be held by an enterprise for base other than a cost input base rep- continued use or possession beyond
the current accounting period for the percentage-of-completion sales accrubenefits it yields.
als except that it includes only the fee (40) Labor cost at standard. A prees for management contracts under tablished measure of the labor ele which the contractor acts essentially ment of cost, computed by multiplying as an agent of the Government in the labor-rate standard by labor-time erection or operation of Governmentstandard.
owned facilities. It excludes incidental (41) Labor-rate standard. A prees interest, dividends, royalty, and rental tablished measure, expressed in mone income, and proceeds from the sale of tary terms, of the price of labor.
assets used in the business. (42) Labor-time standard. A prees
(51) Original complement of low cost tablished measure, expressed in tem
equipment. A group of items acquired poral terms, of the quantity of labor.
for the initial outfitting of a tangible (43) Material cost at standard. A
capital asset or an operational unit, or preestablished measure of the materi
a new addition to either. The items in al elements of cost, computed by mul
the group individually cost less than tiplying material-price standard by
the minimum amount established by material-quantity standard.
the contractor for capitalization for (44) Material inventory record. Any
the classes of assets acquired but in record used for the accumulation of
the aggregate they represent a materiactual or standard costs of a category
al investment. The group, as a compleof material recorded as an asset for
ment, is expected to be held for consubsequent cost allocation to one or
tinued service beyond the current more cost objectives.
period. Initial outfitting of the unit is (45) Material-price standard. A
completed when the unit is ready and preestablished measure, expressed in
available for normal operations. monetary terms, of the price of mate
(52) Pay-as-you-go cost method. A rial. (46) Material-quantity standard. A
method of recognizing pension cost
only when benefits are paid to retired preestablished measure, expressed in physical terms, of the quantity of ma
employees or their beneficiaries. terial.
(53) Pension plan. A deferred com(47) Moving average cost. An inven
pensation plan established and maintory costing method under which an
tained by one or more employers to average unit cost is computed after
provide systematically for the payeach acquisition by adding the cost of
ment of benefits to plan participants the newly acquired units to the cost of
after their retirement, Provided, That the units of inventory on hand and di
the benefits are paid for life or are viding this figure by the new total
payable for life at the option of the number of units.
employees. Additional benefits such as (48) Multiemployer pension plan. A permanent and total disability and plan to which more than one employer
death payments, and survivorship pay. contributes and which is maintained
ments to beneficiaries of deceased empursuant to one or more collective bar ployees may be an integral part of a gaining agreements between an em pension plan. ployee organization and more than
(54) Pension plan participant. Any one employer.
employee or former employee of an (49) Normal cost. The annual cost employer or any member or former attributable, under the actuarial cost member of an employee organization, method in use, to years subsequent to who is or may become eligible to rea particular valuation date.
ceive a benefit from a pension plan (50) Operating revenue. Amounts ac which covers employees of such emcrued or charged to customers, clients, ployer or members of such organizaand tenants, for the sale of products tion who have satisfied the plan's parmanufactured or purchased for resale, ticipation requirements, or whose for services, and for rentals of proper beneficiaries are receiving or may be ty held primarily for leasing to others. eligible to receive any such benefit. A It includes both reimbursable costs participant whose employment status and fees under cost-type contracts and with the employer has not been termi.