agency, of the Cost Accounting Standards Board, or of the Comptroller General of the United States to examine and make copies of any documents, papers, or records relating to compliance with the requirements of this clause.

(d) The Contractor shall include in all negotiated subcontracts which he enters into the substance of this clause except paragraph (b), and shall require such inclusion in all other subcontracts of any tier, except that this requirement shall apply only to negotiated subcontracts in excess of $100,000 where the price negotiated is not based on:

(1) Established catalog or market prices of commercial items sold in substantial quantities to the general public; or

(2) Prices set by law or regulation, and except that the requirement shall not apply to negotiated subcontracts otherwise exempt from the requirement to accept the Cost Accounting Standards clause by reason of § 331.30 (b) of Title 4, Code of Federal Regulations (4 CFR 331.30 (b)) or § 1-3.1203 (a) (2) of Title 41, Code of Federal Regulations (41 CFR 1-3.1203 (a) (2)).

However, if this is a contract with an agency which permits subcontractors to appeal final decisions of the Contracting Officer directly to the head of the agency or his duly authorized representative, then the Contractor shall include the substance of paragraph (b) as well.

NOTE: (1) Subcontractors shall be required to submit their Disclosure Statements to the Contractor. However, if a subcontractor has previously submitted his Disclosure Statement to a Government Contracting Officer he may satisfy that requirement by certifying to the Contractor the date of such Statement and the address of the Contracting Officer.

(2) In any case where a subcontractor determines that the Disclosure Statement information is privileged and confidential and declines to provide it to his Contractor or higher tier subcontractor, the Contractor may authorize direct submission of that subcontractor's Disclosure Statement to the same Government offices to which the Contractor was required to make submission of his Disclosure Statement. Such authorization shall in no way relieve the Contractor of liability as provided in paragraph (a)(5) of this clause. In view of the foregoing and since the contract may be subject to adjustment under this clause by reason of any failure to comply with rules, regulations, and standards of the Cost Accounting Standards Board in connection with covered subcontracts, it is expected that the Contractor may wish to include a clause in each such subcontract requiring the subcontractor to appropriately indemnify the Contractor However, the inclusion of such a clause and the terms thereof are matters for negotiation and agreement between the Contractor and the subcontractor, provided that they do not conflict with the duties of the Contractor under its contract with the Government. It

is also expected that any subcontractor sublect to such inaemnification wil generally "equire substantially similar indemnification to be submitted by his subcontractors.

(e) The terms defined in § 331.20 of Part 331 of Title 4, Code of Federal Regulations (4 CFR 331.20) shall have the same meanings herein. As there defined, "negotiated subcontract" means "any subcontract except a firm fixed-price subcontract made by a Contractor or subcontractor after receiving offers from at least two firms not associated with each other or such Contractor or subcontractor, providing (1) the solicitation to all competing firms is identical, (2) price is the only consideration in selecting the subcontractor from among the competing firms solicited, and (3) the lowest offer received in compliance with the solicitation from among those solicited is accepted."

(End of Clause)

[29 FR 10155, July 24, 1964, as amended at 40 FR 18786, Apr. 30, 1975. Redesignated and amended at 40 FR 60022, Dec. 31, 1975]

§ 1-3.1204-2 Administration of cost accounting standards.

ADMINISTRATION OF COST ACCOUNTING
STANDARDS

For the purpose of administering Cost Accounting Standard in accordance with this contract, the Contractor shall:

(a) Submit to the cognizant contracting officer a description of the accounting change and the general dollar magnitude of the change to reflect the sum of all increases and the sum of all decreases for all contracts containing the Cost Accounting Standards clause:

(1) For any change in cost accounting practices required to comply with a new Cost Accounting Standards requirements under paragraphs (a)(3) and (a) (4) (A) of the clause of this contract entitled "Cost Accounting Standards" within 60 days (or such other date as may be mutually agreed to) after award of a contract requiring such change;

(2) For any change to cost accounting practices proposed in accordance with paragraph (a) (4) (B) of the clause of this contract entitled "Cost Accounting Standards" not less than 60 days (or such other date as may be mutually agreed to) prior to the effective date of the proposed change; or

(3) For any failure to comply with an applicable Cost Accounting Standard or to follow a disclosed practice as contemplated by paragraph (a) (5) of the clause of this contract entitled "Cost Accounting Standards" within 60 days (or such other date as may be mutually agreed to) after the date of agreement of such noncompliance by the Contractor.

(b) Submit a cost impact proposal in the form and manner specified by the cognizant contracting officer within 60 days (or such other date as may be mutually agreed to)

after the date of determination of the adequacy and compliance of a change supmitted pursuant to (a) (1), (2), or (3) above.

(c) Agree to appropriate contract and subcontract amendments to reflect adjustments established in accordance with paragraphs (a) (4) and (a) (5) of the clause of this contract entitled "Cost Accounting Standards."

(d) Include the substance of this clause in all negotiated subcontracts containing the clause entitled "Cost Accounting Standards." In addition, include a provision in these subcontracts which will require such subcontractors, within thirty (30) days after receipt of award, to submit the following information to the contracting officer cognizant of the subcontractor's facility:

(1) Subcontractor's name and subcontract number;

(2) Dollar amount and date of award: (3) Name of Contractor making the award; and

(4) A statement as to whether the subtontractor has made or proposes to make any changes to accounting practices that affect prime contracts or subcontracts containing the Cost Accounting Standards clause, unless such changes have already been reported. If award of the subcontract results in making a Cost Accounting Standard(s) effective for the first time this shall also be reported.

(e) In the event an adjustment is required to be made to any subcontract hereunder, notify the cognizant contracting officer in writing of such adjustment and agree to an adjustment in the price or estimated cost and fee of this contract, as appropriate, based upon the adjustment established under the subcontract. Such notice shall be given within 30 days after receipt of the proposed suhcontract adjustment, and shall include a proposal for adjustment to such higher tier subcontract or prime contract, as appropriate.

(f) When the Cost Accounting Standards clause and this clause are included in subcontracts, the term "contracting officer" shall be suitably altered to identify the purchaser. [End of clause]

[40 FR 60022, Dec. 31, 1975]

§ 1-3.1205 Review of prime contractor Disclosure Statements and changed practices.

(a) Contracting officer and auditor support responsibility. When the Department of Defense (DOD) has contract administration cognizance of a contractor for CASB matters, required Disclosure Statements shall be reviewed by the cognizant administrative contracting officer and contract auditor for all Government agencies including, but not limited to, DOD, NASA, AEC, and GSA (see § 1-3.1208 with respect to contract administration by other Government agencies).

(b) Determination of adequacy. The cognizant contract auditor shall perform an initial review of a Disclosure Statement to ascertain whether it adequately describes the offeror's cost accounting practices. In order to be deemed adequate, the Disclosure Statement must be current, accurate, and complete. Upon completion of this initial review the results shall be reported to the cognizant contracting officer. When the cognizant contracting officer determines that adequate disclosure has not been made, he shall identify the areas of inadequacy and request a revised Disclosure Statement from the offeror and so advise the auditor and the procurement contracting officer. When the cognizant contracting officer determines that the Disclosure Statement is adequate, he shall notify the offeror in writing and send a copy to the auditor and the procurement contracting officer. Notification of adequacy or inadequacy shall normally be made within 30 days after receipt of a Disclosure Statement by the cognizant contracting officer. In addition, the notice shall state that a disclosed practice 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. The contact may be awarded when it is determined that an adequate disclosure has been made (see § 1-3.1203 (b)).

(c) Determination of compliance. Subsequent to the issuance of the above notification, a more detailed review of the Disclosure Statement shall be made by the auditor to ascertain whether the disclosed practices are in compliance with Part 1-15 or ASPR Section XV, as applicable, and the Cost Accounting Standards. The auditor shall advise the cognizant contracting officer of his findings. The cognizant contracting officer shall take action regarding noncompliance with Cost Accounting Standards in accordance with § 1-3.1212. A revised Disclosure Statement may be required. In addition, adjustment of the prime contract price or cost allowance in accordance with § 1-3.1207(b) may be required. Noncompliance with Part 1-15 or Section XV shall be processed separately in accordance with normal administrative practices.

(d) Review of changed practices. (1) When a change to disclosed practices is proposed or required, a description of the

changed practices shall be distributed in accordance with § 1-3.1203 (c). The cognizant contract auditor shall review the changed practices for adequacy and compliance (as defined in (b) and (c) of this section) concurrently. Upon completion of the review, the results shall be reported to the cognizant contracting officer. When the cognizant contracting officer determines that the changed practices are adequate and in compliance, he shall so notify the contractor and send a copy of the notification to the auditor.

(2) When the cognizant contracting officer determines that the description of the changed practices is not adequate, or the changed practices are not in compliance, he shall identify the deficiencies and so notify the contractor and send a copy of the notification to the auditor. This notice shall require the contractor to advise the cognizant contracting officer and the auditor of the corrective action taken or to be taken. Resubmission of the changed practices will be required. If the contractor has submitted an adequate description of the changed practices but these practices are determined to be in noncompliance and the contractor does not agree, the cognizant contracting officer shall issue an adequacy determination with the stipulation that if those changed practices are implemented for the purpose of pricing or costing Government contracts, the contractor shall be considered in noncompliance and the cognizant contracting officer shall take action in accordance with § 1-3.1212.

(3) When a change to established, but not disclosed, practices is proposed or required, it shall be processed in accordance with paragraph (d) (1) and (2) of this section except that no submission is required to be made to the Cost Accounting Standards Board.

[39 FR 43058, Dec. 10, 1974, as amended at 40 FR 60022, Dec. 31, 1975; 41 FR 47238, Oct. 28, 1976]

tractor or higher tier subcontractor the contracting officer to whom his Disclosure Statement was previously submitted.

(c) When a subcontractor considers that his Disclosure Statement contains information that is privileged and confidential, he may, with the approval of the prime contractor, submit it direct to the contracting officer and auditor having cognizance of the prime contractor's facility. The contracting officer for the prime contractor shall furnish copies to the contracting officer and auditor cognizant of the subcontractor for use in administration of the Cost Accounting Standards clause.

(d) Postaward submission of the subcontractor's Disclosure Statement (see § 1-3.1203 (d)) must be approved by the contracting officer having cognizance of the prime contractor.

(e) A determination that it is impracticable to secure a subcontractor's Disclosure Statement must be made in accordance with § 1-3.1203(e).

§ 1-3.1207 Contract price adjustments.

(a) Modification to Disclosure Statements or established practices. Paragraph (a) (4) of the Cost Accounting Standards clause (§ 1-3.1204-1) provides for adjustment of the contract price under certain circumstances. The cognizant contracting officer is responsible for obtaining the contractor's cost impact proposal and for the conduct of all negotiations of such adjustments to all Government prime contracts.

(b) Failure to comply with Cost Accounting Standards clause. Paragraph (a) (5) of the Cost Accounting Standards clause (§ 1-3.1204) provides for an adjustment of the prime contract price or cost allowance, as appropriate, if the contractor or a subcontractor fails to comply with an applicable cost accounting standard or fails to follow any disclosed accounting practice and such failure results in any increased cost paid by the Government. The cognizant contract auditor shall be responsible for conducting audits as necessary to disclose such failures. The cognizant contracting officer shall negotiate all resultant prime contract adjustments, including applicable interest.

(c) Conduct of negotiations of defense and nondefense contracts and execution of supplemental agreements. The cognizant contracting officer shall require

the contractor to include in the cost impact proposal, proposals for adjustment to subcontracts containing the Cost Accounting Standards clause. Negotiations pursuant to paragraphs (a) and (b) of this section shall be conducted on behalf of all Ciovernment agencies including, but not limited to, DOD, NASA, ERDA, and GSA. As part of these negotations the cognizant contracting officer shall also determine the effect of the change in accounting practices on each subcontract being performed by the contractor and containing the Cost Accounting Standards clause. The cognizant contracting officer shall invite purchasing officers to participate in negotiations of adjustments when the price of any of their contracts will be increased or decreased by $10,000 or more. At the conclusion of negotiations the following actions shall be taken by the cognizant contracting officer:

(1) Execute supplemental agreements to contracts of his own agency. If additional funds are required, request them from the appropriate procurement contracting officer; and

(2) Prepare a negotiation memorandum in accordance with § 1-3.811. This negotiation memorandum is of particular importance because it will be used in reviewing the effectiveness of cost accounting standards, rules, and regulations. Copies of the memorandum shall be furnished to cognizant auditors and contracting officers of other agencies which have contracts affected by the negotiation. Those agencies shall execute supplemental agreements in the amounts negotiated.

(3) When a subcontract is to be adjusted, copies of the memorandum indicating the effect on costs shall be furnished the cognizant contracting officer of the next higher tier subcontractor or prime contractor, as appropriate. This memorandum shall be the basis for negotiation between the subcontractor and the next higher tier subcontractor or prime contractor and execution of a supplemental agreement to the subcontract. The cognizant contracting officer of the next higher tier subcontractor shall furnish in turn a memorandum of these negotiations to the cognizant contracting officer of the next higher tier subcontractor or prime contractor until the adjustment is reflected in the prime contract.

[39 FR 43058, Dec. 10, 1974, as amended at 40 FR 60023, Dec. 31, 1975]

§ 1-3.1208 Contract administration for CASB matters by agencies other than DOD.

(a) A list of agency contact points for the identification of cognizant contracting officers will be published from time to time in FPR Bulletins. (NOTE: The initial GSA Bulletin FPR 22 appears at 40 FR 17644, April 21, 1975.) The various components of the Department of Defense have assigned a CASB cognizant contracting officer for the majority of contractors/subcontractors subject to

CASB rules and regulations. This contracting officer is also the cognizant Government contracting officer for nondefense contracts with such contractors/ subcontractors awarded by the various civilian agencies. For other contractors/ subcontractors a civilian agency may have assigned a CASB cognizant contracting officer. In the event no cognizant contracting officer has been assigned to a particular contractor/subcontractor, an assignment shall be made in accordance with paragraph (b) of this § 1-3.1208. CASB cognizant contracting officers assigned by a civilian agency shall perform for DOD and other civilian agencies all functions set out in §§ 1-3.1205, 1-3.1206, and 1-3.1207 which DOD contracting officers perform for other Government agencies when DOD assigns the cognizant contracting officer.

(b) The cognizant contracting officer for a given contractor shall be a contracting officer so designated by the predominant interest agency (ie., in the event a DOD cognizant contracting officer assignment has not been made, the agency having the largest dollar volume of prime contracts and subcontracts subject to CAS with the contractor on July 1, prior to award of the contract. During negotiations of new Government prime contracts or subcontracts, any firm subject to CASB regulations shall be required to inform the agency (in the case of a prime contract) or the contractor (in the case of subcontracts) of the identity of his predominant interest agency and whether a cognizant contracting officer assignment exists. Within 30 days of the execution of any new prime contract or subcontract subject to CASB regulations, the agency making the award or administering the prime contract or the contractor awarding the subcontract, shall furnish written notification thereof (requesting contract administration for CASB matters) to the

cognizant contracting officer of the predominant interest agency for the prime contractor or subcontractor. Such written notification shall contain at least the following:

(1) The prime contractor's or subcontractor's name, address, and contract number;

(2) The prime contract or subcontract price and date of award;

(3) The names and addresses of proposed subcontractors or lower tier subcontractors involving procurements estimated to be subject to CASB regulations; and

(4) A request that, if appropriate, he provide notification of the awards to the (1) cognizant contracting officer(s) of any such subcontractor(s), and (ii) cognizant contract auditor(s) for the prime contractor and any such subcontractor(s).

[39 FR 43058, Dec. 10, 1974, as amended at 40 FR 60023, Dec. 31, 1975]

§ 1-3.1209 Additional documentation.

The cognizant contracting officer shall prepare a memorandum indicating action taken on advisory audit reports which do not result in contract price adjustments.

§ 1-3.1210

Cost Accounting Standards Board report.

(a) Each Government agency is required to furnish to the Cost Accounting Standards Board (CASB) within 120 days after the close of each calendar year an annual report to provide to the CASB information for assessing the effectiveness of the CASB publications and for revealing problem areas requiring new or revised CASB standards, rules, and regulations. Each agency's report will include information for all affected contracts, including those of other Federal agencies for which the reporting agency has cognizance. Reports will cover the full calendar year and will be submitted to the Cost Accounting Standards Board, 441 G Street, N.W., Washington, DC 20548. Copies of the report shall be submitted to the Office of Management and Budget, Financial Management Branch, Budget Review Division, Washington, DC 20503, and to the General Services Administration (FV), Washington, DC 20406.

(b) Each civilian executive agency shall implement this regulation to ensure that (1) its cognizant contracting officers (if any) collect and report to a desig

nated office for consolidation all of the information required by paragraph (c) of this § 1-3.1210 and (2) its cognizant contract auditors (if any) and its purchasing activities also provide information to the designated office with respect to paragraph (c) (8) of this § 1-3.1210. If any agency has neither cognizant contracting officers nor cognizant contract auditors, its annual consolidated report to CASB would generally be limited to information from its purchasing activites with respect to paragraph (c) (8) of this § 1-3.1210.

(c) Information to be included in the report to CASB:

(1) Disclosure statement reviews for adequacy.

(1) Number of statements re

viewed..

(ii) Number of statements returned to contractors due to inadequacy.. (iii) Number of inadequate entries for each statement item:

(A) Item number.
(B) Item number.
(Continue as required)

SubmisInitial sions due to submissions changed practices

This portion of the report is intended to show the number of Disclosure Statements from prime contractors that have been reviewed by the cognizant contracting officer and the number that were found to be inadequate and returned to the contractor. Resubmissions will not be counted. Informal discussions with contractors concerning their Disclosure Statements and voluntary corrections furnished by contractors shall not be reported.

(2) Noncompliance with disclosed practices and standards.

Number of noncompliance determinations issued during the year: Preaward

Performance

Total

Noncompliances reported will include only those cases where the prime or subcontractor has been formally notified by the contracting officer. Each formal determination of noncompliance will be counted only once irrespective of the number of disclosed practices or Standards involved. If a formal determination of noncompliance involves one or