If your company no longer qualifies as a small business or is a company that wants to move from commercial contracts to negotiated contracts with the Federal Government, then this Vlog is for you. This Vlog explains how to determine when Cost Accounting Standards (CAS) apply and what are the different levels of coverage. It also discusses how to determine your CAS-covered universe and why it is important. There are three significant dollar amounts when dealing with CAS: $7.5M, $2M and $50M. Watch to find out why these are important numbers in the world of negotiated Government contracts.

Today we will discuss how you determine your company’s status under Cost Accounting Standards (CAS). The first thing to address is that there is no such thing as a CAS covered company, and there are only companies with CAS covered contracts and/or subcontracts.

CAS regulations are found in FAR Part 30 and FAR 99, also known as 48 CFR Chapter 99. In general, CAS relates to how your company accounts for cost on Federal Government contracts, more specifically, negotiated contracts with the Federal Government. However, there are several exemptions. The most common exemption is if the contract is with a small business. If you are a small business, you need to look no further – you have no CAS covered contracts.

Two other signs would indicate that you have no CAS covered contracts. If all the company’s contracts were awarded under FAR Part 12, Acquisition of Commercial Items, or under FAR Part 14, Sealed Bidding, the company will not have CAS covered contracts.

However, in most cases, a company must look at each individual contract to determine which ones are exempt from CAS. The first thing to look at is if a contract meets one of the following exemptions:

  • Sealed bid contracts
  • Contracts for commercial items
  • Contracts where the price is set by law or regulation
  • Contracts with foreign governments
  • Firm-fixed-price contracts awarded based on adequate price competition without submission of certified cost or pricing data.

Once you have narrowed down your universe of possible CAS covered contracts by excluding exempt contracts, the next consideration is the dollar value of the contract. This is the dollar value shown on SF 33 - Solicitation, Offer and Award in Section 20. This is very important because some contracts, especially indefinite-delivery-indefinite-quantity (IDIQ) contracts, vary widely in what they put in that block. Some contracts show a value of $0, and others show the entire possible value. You may get a $100M IDIQ contract, that you are only guaranteed $1M of work. But the contract would still be CAS covered because the total value is $100M.

You are looking for the first $7.5M “trigger” contract you were awarded that didn’t fall under an exemption. That is the date that you received your first CAS covered contract and should have started complying with the four basic standards that make up modified-CAS coverage.

The four basic standards are identified as:

Once you have that “trigger” contract, all contracts over the Truth in Negotiations Act (TINA) threshold, which is currently $2M, will be CAS covered – at least as long as you have a CAS covered contract. Let’s look at an example.

This company graduated from a small business program on 12/20/2019, and here is a graph of the contracts it was awarded in 2020 and 2021. Contract A was awarded on 1/1/20 and ended 12/15/21. This one was not CAS covered because it is under the $7.5M trigger. Contract B is the first CAS covered contract because it is over the trigger. Contract C is CAS covered because it is over the TINA threshold, and the company has a CAS covered contract. Contract D is also CAS covered for the same reasons. It doesn’t matter that the only CAS covered contract that existed when it was awarded was only a $2.5M contract; it was still CAS covered. Finally, Contract E is not CAS covered. It is under the $7.5M trigger, and the company finished its prior CAS covered contracts prior to its award.

The reason people talk about CAS covered contractors is that once you become subject to modified CAS coverage, your company must estimate, accumulate, and report costs in the same manner throughout the company, so it feels like the whole company is subject to CAS. As long as you remain under modified CAS coverage, whether a specific contract is CAS covered or not CAS covered may not matter much. What does matter is that you keep a universe of CAS covered contracts, so you are aware of whether you are approaching full CAS coverage. You reach full CAS coverage when a business unit receives more than $50 million in net CAS covered awards in the immediately preceding cost accounting period. Full CAS coverage means you are subject to 19 Standards, must file a Disclosure Statement, and may be subject to filing cost impact statements if you change a cost accounting practice. However, these concepts are for another day. If you want more information on filing a Disclosure Statement, please read our Cost Accounting Standards Disclosure Statement Tips article.

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions, including leadership roles in the DCAA. Our new talents bring significant accounting, contract administration, and human resources experience specific to government contracting. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor for compliance for our clients.

CAS Applicability Information and Resources DOWNLOAD NOW

Written by Cheryl Anderson

Cheryl Anderson Cheryl Anderson has been a Director with Redstone Government Consulting, Inc., since 2013. She provides Government Contract Consulting services to our government contractors primarily related to equitable adjustment claims, terminations, CAS Disclosure Statements, and DCAA audit expectations. Prior to joining Redstone Government Consulting, Cheryl served in a number of capacities with DCAA for more than 35 years. Upon her retirement, she was a regional audit manager with DCAA. Professional Experience Cheryl began her DCAA career in 1978 as an auditor-trainee with the Ingalls Resident Office in Pascagoula, Mississippi. After instructing at the Defense Contract Audit Institute for four years, Cheryl returned to the Eastern Region in 1990, holding various audit positions before ultimately becoming a Regional Audit Manager in August, 2005. Cheryl had overall management responsibility for audits performed by approximately 200 employees. During her tenure with DCAA, Cheryl was involved in conducting or managing a variety of compliance audits; to include cost proposals, incurred cost submissions, systems, Cost Accounting Standards, claims, defective pricing, financial capability and agreed-upon procedures. Cheryl directly supported the government litigation team on a contract dispute and has prepared and presented various lectures and seminars to DCAA staff. In addition, Cheryl served as an instructor for the Government Audit Training Institute for more than 20 years. Cheryl currently specializes in preparing clients for more complex DCAA audits, providing advice on FAR cost principles and contracts regulatory provisions, and in assisting clients in anticipating and addressing audit. Education Cheryl earned a Bachelor of Science degree in Accounting from Auburn University at Montgomery and a Master of Business Administration degree from Wichita State University. Cheryl also has completed courses at OPM’s management and executive development centers, and at the Federal Executive Institute. Certifications State of Georgia Certified Public Accountant State of Alabama Certified Public Accountant

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Vlog, Cost Accounting Standards (CAS)