In the June 18, 2024 Federal Register, the Cost Accounting Standards Board (CASB) put out a notification that it was looking for input on how Cost Accounting Standards (CAS) applicability should be handled when it comes to Indefinite Delivery Vehicles (IDVs) (i.e., Indefinite Delivery Indefinite Quantity (IDIQ) contracts). This goes back to an old CASB case from three years ago – CASB Case 2021-01, Application of Cost Accounting Standards (CAS) to Indefinite Delivery Vehicles (IDVs).
How Did This Concern Come Up?
Back in June of 2018, the Section 809 Panel raised a concern that there was some confusion and inconsistency in the application of CAS to IDIQ contracts. The 809 Panel noted that a 2017 GAO analysis found that approximately half of the annual federal contract spend was placed using IDVs. The 809 Panel recommended the CASB consider guidance from the DoD CAS Working Group [76-2] related to basic ordering agreements and blanket purchase agreements that determination of CAS applicability be made at the time of order placement.
The CASB did some research and found little regulatory guidance or case law addressing the application of CAS to IDIQs.
Cost Accounting Standards Board (CASB) Request for Input
The CASB is looking for input on the following alternatives for addressing CAS coverage to IDIQs:
- Order-by-Order - Each task order and delivery order would be treated as an individual contract and CAS would apply only to those orders whose values met the coverage thresholds.
- Maximum Award Value - CAS would apply to all orders under an IDV, no matter the value of the order, if the ceiling amount of the IDV met the coverage thresholds.
- Minimum Award Value - CAS would not apply to any orders under an IDV unless its minimum guarantee amount met the CAS coverage thresholds, in which case CAS would apply to all orders.
- Cumulative Threshold - CAS would apply at the point where the cumulative value of the orders awarded crosses the dollar threshold for CAS coverage. At that point, the current order and all subsequent orders awarded would be covered by CAS.
- Order-by-Order for Multiple Award IDVs and Maximum Award Value for Single Award IDVs - For multiple award IDVs each order would be regarded as if it were an individual contract for CAS coverage (see alternative no. 1). For single-award IDVs, coverage would be based on the maximum award value (see alternative no. 2).
- Order-by-Order for Multiple Award IDVs and Cumulative Threshold for Single Award IDVs - For multiple award IDVs each order would be regarded as if it were an individual contract for CAS coverage (see alternative no. 1). For single-award IDVs, CAS would apply at the point where the cumulative value of the orders awarded crosses the dollar threshold for CAS coverage. At that point, the current order and all subsequent orders awarded would be covered by CAS (see alternative no. 4).
The CASB requested that commentors consider the following criteria when evaluating the alternatives:
- Help each contract party to manage risk, especially price risk to the Government and cost risk to the contractor.
- Reduce regulatory burden to both the Government (in the form of oversight) and to the contractor (in the form of compliance).
- Encourage competition and robust participation in the Federal marketplace.
- Minimize complexity by providing guidance that is clear and straightforward.
- Promote consistency in the application of CAS.
The Impact of the Current Confusion Redstone GCI Has Seen
Redstone GCI has had several clients impact by Defense Contract Audit Agency (DCAA) auditors coming in long after the award of a few small task orders under an IDIQ and claim the task orders are CAS covered. DCAA bases its position on FAR 1.108(c), which provides the convention for determining a “dollar threshold.” It states:
Dollar Thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options.
While I understand the literal reading of the convention, we find it less than reasonable to find a few task orders less than $2M each to be CAS covered simply because the maximum value of the multiple award IDIQ was $60M. The auditor then demands the disclosure statement that should have been submitted with the original proposal for the $60M multiple award IDIQ, with a little finger pointing at the contracting officer for failing to request the disclosure statement. I am not sure how the taxpayer is protected by driving greater cost into both the contractor and the government with little likelihood of return – OK, I know “be nice.”
Redstone GCI’s Planned Input
Redstone GCI plans to submit that we support the 809 Panel position that, in most cases, determination of CAS applicability should be made when the specific orders under the IDV are placed. Alternative (1) Order-by-Order is most likely the point at which all the facts are known to properly apply the CAS exemptions outlined in CAS 9903-201-1(b). However, we do believe there are cases where the IDV can be determined exempt from CAS upon the original award of the IDV contract. These cases are the following:
- The award of an IDV to a small business.
- The prices in the IDV are set by law or regulation.
- The products or services in the IDV are commercial as defined in FAR part 2.
- The prices in the IDV are firm-fixed-prices based on adequate price competition without submission of certified cost or pricing data, where quantity is the only factor used to determine the future value of orders. We believe this should include both products at fixed unit prices and services sold on the basis of fixed labor rates by labor category.
We believe, in these cases, the IDV should clearly be exempt from future CAS applicability on an order-by-order basis. This will help support the CASB evaluation criteria related to helping the contracting parties manage risk, reduce regulatory burden on both the Government and the contractor, encourage additional commercial company support of the Federal marketplace, minimize complexity, and promote consistency. To support this original IDV determination, we suggest the CASB consider a new CAS Clause for these cases to eliminate future second guessing of the contracting officer’s intent and support consistency.
Public Comments are Due August 19, 2024
We recommend all middle-positioned contractors (i.e., Not a Major Contractor and Not a Small Business) put in public comments. Major contractors already have a significant number of CAS covered contracts so a few more are not a big deal and small businesses are exempt from being awarded CAS covered contracts, so it is the contractors in between that are at the greatest risk.
Your written comments should be emailed to OMBCASB@omb.eop.gov with your name, title, organization, and reference to CASB Case 2021–01.
Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Government’s requirements and maintaining compliance. We would be happy to be part of your team.
John is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to the DFARS business systems, CAS Disclosure Statements, and DCAA/DCMA compliance preparation, advisory, and defense. Prior to joining Redstone Government Consulting, John served in a number of capacities with DCAA/DCMA for more than 30 years. Upon his retirement, he was based in Texas as an SES-level Corporate Audit Director for DCAA, managing a staff of 300 auditors at one of the largest DOD programs. Professional Experience John began his career in the late 80s working in the Clearwater, FL audit office and over the next three decades he progressed through a number of positions within both DCAA and DCMA with career highlights as DCAA Program Manager at Ft. Belvoir, Chief of Technical Programs Division, Deputy Assistant Director-Policy, Director of the DCMA Cost and Pricing Center, the SES-level Lockheed Martin Corporate Audit Director, and Director of Integrity and Quality Assurance. John’s three decades of experience in performing and leading DCAA auditors and DCMA reviewers provides a wealth of expertise to our clients. John’s role, not only in the performance of audits, but also in the development of audit policy affords him unique insights into the defense of audit findings and the linkage of audit program steps to the underlying regulatory framework. He is an expert in FAR, DFARS, and other agency acquisition regulation, as well as a subject matter expert in the Cost Accounting Standards having reviewed and provided audit feedback on many of the largest and most complex cost accounting practices during his tenure with the DCAA. John’s tenure with DCAA and DCMA came at a critical time during each agency’s history where a number of changes were occurring such as the response to the ICS backlog, development of audit approaches to the DFARS Business Systems and implementation of new audit initiatives as a result of Congressional oversight through the NDAA process. John’s leadership at the DCMA Cost & Pricing center saw oversight of all major DOD pricing actions, leadership of should cost review teams, the Commercial Pricing group and many other areas of strategic value to our clients. His involvement in these and other Agency initiatives is of great value to our clients due to his in depth understanding of DCAA and DCMA’s internal policy directives. Education John holds a Master of Business Administration and a B.A. in Accounting from the University of South Florida. Certifications Certified Information Systems Auditor State of Alabama Certified Public Accountant