Redstone Government Consulting Blog | Government Regulations (10)

Many new government contractors are frustrated by being told they have a CAS 401 noncompliance, especially if they are not CAS covered. This is, of course, wrong terminology for non-CAS covered contractors, but is shorthand for saying the company is not estimating, accumulating, and reporting costs the same way. This is most frequently a difference between how a company estimates cost and then how the company accumulates and reports costs. This is not only important to the government, but to the company itself. A contractor cannot determine whether it is losing money on a contract if there is no way to compare what was bid to what was incurred. This is likely one of the first CAS standards a company encounters because even modified coverage calls this standard into play.

Organizations that have federal awards, whether that be grants, cooperative agreements or contracts, must comply with specific cost accounting regulations. Unfortunately, depending on the type of federal award, the regulations may not be the same. Both, both Grants or Cooperative Agreements awarded under 2 Code of Federal Regulations (CFR) 200 and Contracts awarded under 48 CFR Federal Acquisition Regulations (FAR) provide requirements for cost allowability, allocability, and reasonableness as well as the required cost accounting treatment for all cost:

Oftentimes when supporting the production of cost volumes and pricing exercises for clients, we’re given a basis of estimate (BOE) that has been written by someone on the technical team. Even being a group of accounting and compliance professionals who know little in areas such as cyber, engineering, or other technical areas of the scope of work, we’re left scratching our heads. This usually leads to several back-and-forth discussions centered around gleaning enough information from the technical team to pass the proverbial government “sniff test”.

The Office of Management and Budget (OMB) issued a proposed rule to add a new Part 184 in 2 CFR Chapter I and revisions to 2 CFR 200.322 Domestic preferences for procurements on Build America/Buy America Act for Grants and Agreements. The revision will address the Buy American Preference for awards with infrastructure expenditures. Comments to the proposed rule are due March 13, 2023.

On January 5, 2023, the Federal Trade Commission (FTC) voted 3-1 on proposed regulations that, if upheld, would ban employers from imposing non-competition agreements on their employees. Relying on Section 5 of the FTC Act, the FTC concluded that “non-compete clauses reduce competition in labor markets, suppressing earnings and opportunity even for workers who are not directly subject to a non-compete.” Commissioner Wilson dissented, stating that the FTC lacks the authority to engage in rulemaking, particularly with consequences of this significance. 

Executive Compensation Limit for Government Contractors

Yes, the door just opened for potential relief from unanticipated inflation on fixed-priced contracts, but what’s beyond the door is still unclear. This year’s National Defense Authorization Act (NDAA) includes Section 822, Modification of Contracts to Provide Extraordinary Relief Due to Inflation Impacts, which builds upon DoD’s September 9, 2022, inflation guidance through use of FAR Part 50, Extraordinary Contractual Actions and the Safety Act, requests submitted to your contracting officer to provide an upward adjustment (increase contract value) and this can be done for prime and subcontractors. Note that this NDAA section does not create an obligation for the Government to pay for unanticipated inflation, but it is a “discretionary” expenditure where the Government may pay for the effects of unanticipated inflation. What remains to be seen is exactly how and how much will be provided to your contract(s).

Apparently, nothing the Board found was to the liking of the judges at the United States Court of Appeals for the Federal Circuit in Case Number 21-2304, Secretary of Defense v. Raytheon Company, Raytheon Missile Systems, decided January 3, 2023. This was the appeal from the Armed Services Board of Contract Appeals in Nos. 59435, 59436, 59437, 59438, 60056, 60057, 60058, 60059, 60060, and 60061.

The Department of Defense (DoD) released new final rulings on October 28, 2022, but what are they and are they really important? Let’s look at significant ones and what’s important:

You pride yourself on working well and getting along with everyone, at least professionally. However, there is an auditor that seems to get under your skin. What do you do? Well, although there may not be a “magic bullet” to all make it better. I propose the following to get you through the situation at hand: