defining materiality in specific dollar amounts and/or specific percentages of impact on operations covered by the entire Standard or any provision thereof whenever it appears feasible and desirable to do so." (38 FR 6122 and 6123, March 6, 1973.)

(b) The cost of administrative processing of the price adjustment modification shall be considered. If the cost to process exceeds the amount to be recovered, it is less likely the amount will be material. [40 FR 60021, Dec. 31, 1975]

§ 1-3.1203 Applicability of cost асcounting standards and prime contractor disclosure statement(s).

(a) Solicitation notice-(1) National defense contracts. The notice entitled Disclosure Statement-Cost Accounting Practices and Certification set forth in § 1-3.1203 (a) (3), the notice entitled Cost Accounting Standards-Exemption for Contracts of $500,000 or Less-Certification set forth in § 1-3.1203 (h) (2), and the notice entitled Additional Cost Accounting Standards Applicable to Existing Contracts-Certification set forth in § 1-3.1203 (i) (2) shall be inserted in all solicitations which are likely to result in a negotiated contract exceeding $100,000, except when:

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

(ii) The method of procurement utilized is (A) "Small Business Restricted Advertising" (§ 1-1.706-5 (b)) Note: Contracts involving total small business setasides which are entered into by conventional negotiation are not exempt; (B) Partial small business set-aside (§ 1-1. 706-6); (C) Section 8(a) of the Small Business Act (§ 1-1.713); or (D) Partial labor surplus area set-aside (§ 1-1.804);

(iii) The contract is to be awarded to the Canadian Commercial Corporation in accordance with the terms of the agreement of July 27, 1956. as amended, between the Department of Defence Production (Canada) and the U.S. Departments of the Army, Navy, Air Force, and the Defense Supply Agency.

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

(v) The Cost Accounting Standards Board has otherwise approved a waiver or exemption for such contracts (see 4 CFR 331.30).

(vi) In addition, paragraph (h) of this section sets forth conditions under which

contracts of $500,000 or less can be exempted and requires an additional notice to be inserted in solicitations.

(2) Nondefense contract. The exemptions in § 1-3.1203 (a) (1) also apply to solicitations which are likely to result in a negotiated nondefense contract exceeding $100,000. Additionally, the following nondefense procurements are exempt:

(i) Contracts with educational institutions subject to Subpart 1-15.3 (41 CFR § 1-15.3);

(ii) Contracts with State and local governments subject to Subpart 1-15.7 (41 CFR § 1-15.7);

(iii) Contracts with hospitals; and

(iv) Firm fixed-price contracts to be awarded after receiving offers from at least two firms not associated with each other, providing that (A) the solicitation to all competing firms is identical; (B) price is the only consideration in selecting the contractor from among the competing firms solicited; (C) the lowest offer received in compliance with the solicitation from among those solicited is accepted: and (D) the profit center, division, or similar organizational unit of a company to which the contract is to be awarded is not on the date of such award performing a contract or subcontract subject to the Cost Accounting Standards clause. Under (D), performance of a contract or subcontract extends from the date of award of the contract to the date when the work required by the contract is completed. Provided, That the solicitation notice shall be inserted in all such solicitations, and the notice shall be withdrawn by the contracting officer only if, on the date of contract award, all of the criteria of this exemption are met.

(3) Notice for solicitations. Insert the following notice in all solicitations which are likely to result in a negotiated contract exceeding $100,000, unless the procurement is exempted under § 1-3.1203 (a) (1) or (a) (2) :

DISCLOSURE STATEMENT-COST ACCOUNTING PRACTICES AND CERTIFICATION

Any contract in excess of $100,000 resulting from this solicitation except (1) 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, or (2) contracts which are otherwise exempt (see 4 CFR 331.30 (b) and FPR § 1-3.1203 (a) (2)), shall be subject to the requirements of the Cost Accounting Standards Board. Any offeror submitting a proposal, which, if ac

cepted, 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 Federal Fiscal Year immediately preceding the year 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); (iii) the offeror has already submitted a Disclosure Statement disclosing the practices used in connection with the pricing of this proposal (see (IV) below); or (iv) post award submission has been authorized by the Contracting Officer. See 4 CFR 351.70 for submission of a copy of the Disclosure Statement to the Cost Accounting Standards Board.

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; and (ii) one copy to the cognizant contract auditor.

Date of Disclosure Statement(s) : Name(s) and Address(es) of Cognizant Contracting Officer (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 subject to cost accounting standards totaling more than $10,000,000 in either Federal Fiscal Year 1974 or 1975 or net awards of negotiated national defense prime contracts and subcontracts subject to cost accounting standards totaling more than $10,000,000 in Federal Fiscal Year 1976 or in any subsequent Federal Fiscal Year preceding the year in which this proposal was submitted.

Caution: Offerors who submitted or who currently are obligated to submit a Disclosure Statement under the filing requirements previously established by the Cost Accounting Standards Board are not eligible to claim this exemption unless they have received notification of final acceptance of all deliverable items on all of their prime contracts and subcontracts containing the Cost Accounting Standards clause (§ 1-3.1204-1).

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 the Federal Fiscal Year immediately preceding the year in which this proposal was submitted, and (ii) in accordance with the regulations of the Cost Accounting Standards Board (4 CFR 351.40(f)), he is not yet required to submit a Disclosure Statement. The offeror further certifies that if an award resulting from this proposal has not been made by March 31 of the current Federal Fiscal Year, he will immediately submit a revised certificate to the Contracting Officer, in the form specified under (I), above, or (IV), below, as appropriate, to verify his submission of a completed Disclosure Statement.

Caution: Offerors may not claim this exemption if they are currently required to disclose because they exceeded monetary thresholds in Federal Fiscal Years prior to fiscal year 1976. Further, the exemption applies only in connection with proposals submitted prior to March 31 of the year immediately following the Federal Fiscal Year in which the monetary exemption was exceeded.

ᄆ IV. CERTIFICATE OF PREVIOUSLY SUB-
MITTED DISCLOSURE STATEMENT(S)

The offeror hereby certifies that the Disclosure Statement(s) were filed as follows: Date of Disclosure Statement(s):

Name(s) and Address (es) of Cognizant Contracting Officer (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).

(b) Preaward submission of Disclosure Statement(s). Unless the procurement is exempted under § 1-3.1203 (a) (1) or (2), each offeror submitting an offer which could result in a negotiated contract exceeding $100,000 shall furnish copies of his Disclosure Statements to the offices listed in § 1-3.1203 (c) concurrently with the submission of his proposal to the contracting officer, except when the offeror has executed the Certificate of Monetary Exemption or the Certificate of Previously Submitted Disclosure Statement (see § 1-3.1203 (a) (3)). More than one Disclosure Statement may be required in connection with

the award of a contract (see 4 CFR 35140(a)). Award of a contract shall not be made until a determination has been made by the contracting officer or his authorized representative that a Disclosure Statement is adequate (see

§ 1-3.1205 (b)) unless, in order to protect the interests of the Government, the contracting officer waives this requirement. In this event, a determination shall be made as soon after award as possible.

(c) Distribution of Disclosure Statement(s). The offeror shall distribute his Disclosure Statement(s) as follows:

(1) Original and one copy to the cognizant contracting officer;

(2) One copy to the cognizant contract auditor; and

(3) One copy to the Cost Accounting Standards Board, 441 G Street, NW, Washington, DC 20548, within 10 days after the determination of adequacy pursuant to § 1-3.1205 (b).

(d) Postaward submission of Disclosure Statement(s). Postaward submission of Disclosure Statement(s) may be authorized only when the contracting officer has made a written determination that such authorization is essential (1) to the national defense, (2) because of the public exigency, or (3) to avoid undue hardship. Each determination shall set forth facts which clearly support the determination to authorize postaward submission, and a copy of the determination shall be included in the contract file. Authorization issued pursuant to this paragraph shall specify the period of time, not to exceed 90 days after contract award, within which disclosure must be made.

(e) Determination by agency head that it is impractical to secure Disclosure Statement (s). If the head of the agency (see § 1-1.204) determines that it is impractical to secure the Disclosure Statement(s) in accordance with the clause set forth in § 1-3.1204 and this subpart, he may authorize award of such contract without obtaining such Statement. This authority shall not be delegated. He shall, within 30 days thereafter, submit a report to the Cost Accounting Standards Board, setting forth all material facts.

(f) Privileged and confidential inforImation 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 Dis

closure Statement will be protected and will not be released outside the Government (see paragraph (a) (1) of the Cost Accounting Standards clause set forth in § 1-3.1204).

(g) Amendment of disclosure statement(s). Amendments of a Disclosure Statement after contract award shall be processed in accordance with 4 CFR 351.120 and §§ 1-3.1205 (d) and 1-3.1207 of these regulations. Normally, the cognizant contracting officer should require submission 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) Exemption for contracts of $500,000 or less and additional notice for solicitations. (1) In addition to the exemptions in paragraphs (a) (1) and (a) (2) of this § 1-3.1203, the requirements of this section shall not be applicable to any contract or subcontract of $500,000 or less, unless it is awarded to a contractor, who, on the date of such award, (1) has already received a contract or subcontract in excess of $500,000 and (ii) has not received notification of final acceptance of all items of work to be delivered on that contract or subcontract and on all other contracts or subcontracts awarded after January 1, 1975, which were subject to the Cost Accounting Standards clause. For this purpose, an intracorporate transfer shall be considered to be a subcontract. Notwithstanding this exemption, any contractor entitled to an exemption under this provision may elect to comply with the Cost Accounting Standards clause prescribed by § 1-3.1204. The contractor may elect to comply in connection with the receipt of its first contract or subcontract awarded after January 1, 1975, which but for this provision would be subject to the clause. A contractor which does not elect to comply with the clause in connection with the receipt of the first contract or subcontract, may thereafter make such an election only if it receives a contract or subcontract of the type described, at a time when it has no other contract or subcontract of that type on which notification of final acceptance of all items or work to be delivered has not been received. Retroactive exemption of existing contracts entered into prior to January 1, 1975, where the circumstances are

such that these existing contracts would have been exempt if awarded after that date is authorized, provided the contracting officer determines that the Government receives adequate consideration for deletion of the Cost Accounting Standards clause from the contract(s). In the event a contractor was awarded a prime contract containing the Cost Accounting Standards clause prior to January 1, 1975, and must award a subcontract of $500,000 or less subsequent to January 1, 1975, such subcontract may be exempted in accordance with this paragraph (h) provided the contractor obtains from the subcontractor the substance of the Certificate of Exemption established in this paragraph (h)(2).

(2) Additional notice for solicitations. In addition to the notice for solicitations entitled "Disclosure Statement-Cost Accounting Practices and Certification," the following notice will be inserted in all solicitations that contain that notice as required by paragraph (a)(3) of this section:

COST ACCOUNTING Standards-EXEMPTION FOR CONTRACTS OF $500,000 OR LESS-CERTIFICA

TION

If this proposal is expected to result in the award of a contract of $500,000 or less and the offeror is otherwise eligible for an exemption, he shall indicate by checking the box below that the exemption to the Cost Accounting Standards clause (FPR § 1-3.1204) under the provisions of 4 CFR 331.30 (b) (8) (see FPR § 1-3.1203 (h)) is claimed. Where the offeror fails to check the box, he shall be given the opportunity to make an election in writing to the Contracting Officer prior to award. Failure to check the box below or make such an election shall mean that the offeror cannot claim the exemption to the Cost Accounting Standards clause or that the offeror elects to comply with such clause,

[ ] Certificate of Exemption for Contracts of $500,000 or Less.

The offeror hereby claims an exemption from the Cost Accounting Standards clause under the provisions of 4 CFR 331.30 (b) (8) and certifies that he has received notification of final acceptance of all items or work on (1) any prime contract or subcontract in excess of $500,000 which contains the Cost Accounting Standards clause, and (ii) any prime contract or subcontract of $500,000 or less awarded after January 1, 1975, which contains the Cost Accounting Standards clause. The offeror further certifies he will immediately notify the contracting officer in writing in the event he is awarded any other contract or subcontract containing the Cost Accounting Standards Clause subsequent to the date of this certificate but prior to the

date of any award resulting from this proposal.

(i) Effect of proposed award on existing contracts and subcontracts containing the Cost Accounting Standards clause. (1) In addition to compliance with all cost accounting standards in effect on the date of award of a contract or if the contractor has submitted cost or pricing data, on the date of final agreement on price as shown on the contractor's signed certificate of current cost or pricing data, paragraph (a) (3) of the Cost Accounting Standards clause (§ 1-3.1204-1) requires that a contractor comply with any cost accounting standard which thereafter becomes applicable to any other of his contracts or subcontracts. The applicability of the additional standard (s) to an existing contract or subcontract is prospectively from the date of applicability to any other contract or subcontract. Thus, if an additional standard is promulgated by the CASB with an effective date after award of the existing contract, it would not become applicable to that contract until the contractor was awarded a new contract or subcontract to which the additional standard is applicable. This provision operates so that at any given time a contractor is complying with identical cost accounting standards under all of his contracts and subcontracts subject to the clause.

(2) Third notice for solicitations. The following notice will be inserted (as well as the notice in paragraph (h) (2) of this section) in all solicitations that contain the notice entitled Disclosure Statement-Cost Accounting Practices and Certifications as required by paragraph (a) (3) of this section:

ADDITIONAL COST ACCOUNTING STANDARDS APPLICABLE TO EXISTING CONTRACTS-CERTIFICATION

(a) Cost accounting standards will be applicable and effective as promulgated by the Cost Accounting Standards Board to any award as provided in the Federal Procurement Regulations Subpart 1-3.12. If the offeror presently has contracts or subcontracts containing the Cost Accounting Standards clause, a new standard becomes applicable to such existing contracts prospectively when a new contract or subcontract. containing such clause is awarded on or after the effective date of such new standard. Such new standard may require a change in the offeror's established cost accounting practices, whether or not disclosed. The offeror shall specify by an appropriate entry below, the effect on his cost accounting practice.

(b) The offeror hereby certifies that an award under this solicitation [] would, [] would not, in accordance with paragraph (a)(3) of the Cost Accounting Standards clause require a change in his established cost accounting practices affecting existing contracts and subcontracts.

NOTE: If the offeror has checked "would" above, and is awarded the contemplated contract, he will also be required to comply with the clause entitled Administration of Cost Accounting Standards.

[End of notice]

[29 FR 10155, July 24, 1964, as amended at 40 FR 18786, Apr. 30, 1975; 40 FR 60021, Dec. 31, 1975; 41 FR 47237, Oct. 28, 1976]

EDITORIAL NOTE: For a notice document relating to this section see 41 FR 44475, Oct. 8, 1976.

§ 1-3.1204 Contract clauses.

The clauses set forth in §§ 1-3.1204-1 and 1-3.1204-2 shall be inserted in all negotiated contracts exceeding $100,000 unless the procurement is exempted under § 1-3.1203(a) (1), (2), or (h) (1). [40 FR 60022, Dec. 31, 1975] § 1-3.1204-1 ards.

Cost accounting stand

COST ACCOUNTING STANDARDS

(a) Unless the Cost Accounting Standards Board, or the General Services Administration in the case of nondefense contracts, has prescribed rules or regulations exempting the Contractor or this contract from standards, rules, and regulations promulgated pursuant to 50 U.S.C. App. 2168 (P.L. 91-379, August 15, 1970), or other statutory authority, the Contractor, in connection with this contract shall:

(1) By submission of a Disclosure Statement, disclose in writing his cost accounting practices as required by regulations of the Cost Accounting Standards Board. The required disclosures must be made prior to contract award unless the Contracting Officer provides a written notice to the Contractor authorizing postaward submission in accordance with regulations of the Cost Accounting Standards Board. The practices disclosed for this contract shall be the same as the practices currently disclosed and applied on all other contracts and subcontracts being performed by the Contractor and which contain this Cost Accounting Standards clause. If the Contractor has notified the Contracting Officer that the Disclosure Statement contains trade secrets and commercial or financial information which is privileged and confidential, the Disclosure Statement will not be released outside of the Government.

(2) Follow consistently the cost accounting practices disclosed pursuant to (1), above, in accumulating and reporting contract performance cost data concerning this

contract. If any change in disclosed practices is made for purposes of any contract or subcontract subject to Cost Accounting Standards Board requirements, the change must be applied prospectively to this contract, and the Disclosure Statement must be amended accordingly. If the contract price or cost allowance of this contract is affected by such changes, adjustment shall be made in accordance with subparagraph (a) (4) or (a) (5), below, as appropriate.

(3) Comply with all Cost Accounting Standards in effect on the date of award of this contract or if the Contractor has submitted cost or pricing data, on the date of final agreement on price as shown on the Contractor's signed certificate of current cost or pricing data. The Contractor shall also comply with any Cost Accounting Standard which hereafter becomes applicable to a contract or subcontract of the Contractor. Such compliance shall be required prospectively from the date of applicability to such contract or subcontract.

(4) (A) Agree to an equitable adjustment (as provided in the Changes clause of this contract, if any) if the contract cost is affected by a change which, pursuant to (3) above, the Contractor is required to make to his established cost accounting practices whether such practices are covered by a Disclosure Statement or not.

(B) Negotiate with the Contracting Officer to determine the terms and conditions under which a change to either a disclosed cost accounting practice or an established cost accounting practice, other than a change under (4) (A), above, may be made. A change to a practice may be proposed by either the Government or the Contractor, provided, however, that no agreement may be made under this provision that will increase costs paid by the United States.

(5) Agree to an adjustment of the contract price or cost allowance, as appropriate, if he or a subcontractor falls to comply with an applicable Cost Accounting Standard or to follow any practice disclosed pursuant to subparagraphs (a) (1) and (a)(2), above, and such failure results in any increased costs paid by the United States. Such adjustment shall provide for recovery of the increased costs to the United States together with interest thereon computed at the rate determined by the Secretary of the Treasury pursuant to P.L. 92-41, 85 Stat. 97, or 7 percent per annum, whichever is less, from the time the payment by the United States was made to the time the adjustment is effected.

(b) If the parties fail to agree whether the Contractor or a subcontractor has complied with an applicable Cost Accounting Standard, rule, or regulation of the Cost Accounting Standards Board and as to any cost adjustment demanded by the United States, such failure to agree shall be a dispute concerning a question of fact within the meaning of the Disputes clause of this contract.

(c) The Contractor shall permit any authorized representatives of the head of the