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T3.2.3 Cost and Price Methodology
FAA Procurement Toolbox GuidanceT3.2.3 Cost and Price MethodologySection/Topics in the Section (Guidance Issued June 1996) A. Proposal Analysis
B. Cost Accounting Standards
A. PROPOSAL ANALYSIS a. Requirement Decision. Contracting Officer (CO) has the discretion to require cost and/or pricing data (Defined in App. E of FAA Acquisition Management System (AMS)) to assure that negotiated prices are fair and reasonable. Cost and pricing data should be requested ONLY when the CO does not have reasonable assurance that the costs or prices are fair and reasonable based on price analysis or other means of evaluation. When considering the extent to which cost and pricing data may be required the CO should consider the cost and schedule burden on the contractor to provide the information. (1) When the CO determines adequate price competition exists, cost and pricing data should not be requested. (2) Adequate price competition may exist when: (a) two or more responsible offerors competing independently submit priced offers responsive to the Agency expressed requirement; (b) there was a responsible expectation based on market research or other assessment that two or more responsible offerors competing independently would submit priced offers responsive to the screening information request's expressed requirement even though only one offer is received from a responsible responsive offeror; (c) price analysis clearly demonstrates that the proposed price is reasonable in comparison with current or recent prices for the same or similar items purchased in comparable quantities, under comparable terms and conditions under contracts that resulted from adequate price competition. (3) If the CO determines that the level of competition does not support the determination of price reasonableness, or the otherwise successful offeror's price cannot be determined to be reasonable, the CO may require cost and price data or information other than cost and price data (Defined in App. E of the FAA AMS) to the extent necessary to support a determination of fair and reasonable price. (4) In situations where adequate price competition does not exist, the decision to require cost and pricing data and the level of data required should be based on the specific circumstances of the procurement taking into account the factors for consideration described in Subparagraph c. Factors to Consider. b. Types Of Information and Evaluation Method. The CO may require information to support proposal analysis in any of the following degrees of detail: (1) No cost data, in which case a price analysis is conducted; (2) Information other than cost and pricing data, in which a price analysis and cost analysis appropriate to the data submitted are conducted, or; (3) Cost and pricing data, the offeror certifies to the accuracy, completeness and currency of the data and both price and cost analyses are conducted. c. Factors To Consider. The CO has the flexibility to: (1) determine whether or not to require cost and pricing data, (2) to what degree or level of detail data should be requested, and (3) whether or not the data should be certified. The CO may consider the following factors to determine the appropriate data requirement: (1) Recent Price Data. Availability of information on prices for the same or similar goods or services procured on a competitive basis. (2) Degree of competition attained. Level to which competitive market forces can be expected to influence submission of reasonable prices. (3) Uncertainty of the market place. How volatile market prices or technological changes may impact vendor prices or costs. (4) Availability of independent cost estimate/data. The degree of confidence the CO has in the internal estimate or other data which would provide an effective means to objectively evaluate proposed costs or prices. (5) Technical complexity of procurement. The degree to which developmental effort or technical complexity is inherent in the requirement. (6) Contract type. The degree to which the decision of contract type mitigates the risk to the agency. d. Requirement for Cost and Price Data. When cost and pricing data are necessary, the contractor shall submit the following information: (1) The cost or pricing data; (2) Any update to previous data submissions required with the latest information currently available; and (3) A certificate of current cost or pricing data certifying that to the best of the contractor's knowledge and belief, the cost or pricing data were accurate, complete, and current as of the date of agreement on price. Use of the Standard Form 1411 is recommended when requesting cost and pricing data. e. Requesting Information. When requesting information other than cost or pricing data, the information should be limited to the extent necessary to determine price reasonableness or the cost realism. The level of detail and format of the data requested will be determined by the CO. f. Subcontracts. Contractors are required to submit cost or pricing data for proposed subcontracts or subcontract modifications only when necessary to determine the reasonableness of the proposed contract or subcontract price, including negotiated final pricing actions. The contractor is responsible for performing cost or price analysis when determining price reasonableness on subcontract proposals and for submitting the subcontract cost or pricing data if requested by the CO. The Integrated Product Team (IPT) is responsible for evaluating proposals using the methods of price and cost analysis appropriate to the procurement. The Contracting Officer is responsible for determining whether contract prices are fair and reasonable. Price analysis is a process of examining and analyzing a proposed price without evaluating separate cost elements and proposed profit/fee. Price analysis is the most commonly used method of proposal analysis and should be performed on all contractor proposals. Even when cost analysis is performed to evaluate individual cost elements of a contractor's proposal, some form of price analysis is needed to ensure that the proposed price is fair and reasonable. There are several techniques that may be used in performing price analysis: a. Comparison of proposed prices received in response to the screening information request. b. Comparison of prior proposed prices and contract prices with current proposed prices for the same or similar end items and services in comparable quantities. c. Application of rough yardsticks (such as dollars per pound or per horsepower, or other units) to highlight significant inconsistencies that warrant additional pricing inquiry. d. Comparison with competitive published catalogs or lists, published market prices or commodities, similar indexes, and discount or rebate arrangements. e. Comparison of proposed prices with independent cost estimates. f. Ascertaining that the price is set by law or regulation. a. Cost analysis is the review and evaluation of the separate cost elements and proposed profit/fee of an offeror's proposal. The Contracting Officer will determine whether cost analysis is appropriate. Cost analysis is not required to evaluate established catalog or market prices, prices set by law or regulation, and commercial items. If there are significant disparities in proposed prices, a limited form of cost analysis may be used to investigate the cause of the disparities. Cost analysis involves examining data submitted by the contractor and the judgmental factors applied in projecting estimated costs. Cost analysis also includes: verification that the contractor's cost submissions are in accordance with disclosed cost accounting procedures, comparisons with previous costs, and forecasts of future costs based on historical cost experience. b. Cost analysis is appropriate when factors affecting the procurement will not ensure a fair and reasonable price based on price analysis alone, and/or the agency needs an understanding of the cost buildup of the proposal to verify cost realism and reasonableness. The data required to perform the cost analysis should be limited to those cost elements that are necessary to ensure a fair and reasonable price determination. c. Cost analysis involves the following techniques and procedures: (1) Verification of cost or pricing data and evaluation of cost elements. (2) Evaluating the effect of the offeror's current practices on future costs. (3) Comparison of the costs proposed by the offeror with historical and actual costs, previous cost estimates for the same or similar items. (4) Analysis of the contractor's evaluation in determining the reasonableness of the subcontract costs. (5) Verification of the offeror's proposed cost to ensure that it reflects cost realism and reasonableness. (6) Review to determine whether any cost or pricing data that is necessary to make the contractor's proposal accurate, complete, and current have been submitted or identified in writing. a. Field pricing support is independent support intended to give the Contracting Officer a detailed analysis report of the contractor cost proposal. The field pricing support personnel include, but are not limited to, administrative Contracting Officers, contract auditors, price analysts, quality assurance personnel, and engineers. b. The Contracting Officer may request field pricing support when such support is deemed necessary before negotiating any contracts or modifications. Methods of field pricing support may include: (1) rate verifications, (2) third party audit, (3) estimating system audit, and (4) proposal analysis. a. The FAA may audit contractors records of actual costs or records of cost or pricing data when the information relates to the contract price. Audits do not apply to commercial-off-the-shelf (COTS) procurements. An audit clause is advised for placement in all negotiated contracts except credit card purchases and third-party agreements. In cost reimbursement, incentive, time-and-material, labor hours, and price redeterminable contracts, the audit clause gives the FAA the right to examine and audit information and accounting practices sufficient to reflect costs claimed or anticipated to be incurred in performance of the contract. Under contracts for which cost or pricing data are required, the FAA's right to examine and audit extends to data,( including computations and projections), that are necessary for adequate evaluation of the cost or pricing data. b. Retention of records by the contractor is required for three years from final payment. This does not apply to COTS procurements. Records of terminated contracts must be kept for three years after final settlement, and records of contracts involved in a dispute must be available as long as the dispute continues. Failure to keep records as required by a contract may affect a contractor's right to receive payment. c. If FAA or its representative is not allowed to audit the contractors records, the IPT may deny contract award or payments. a. Defective cost and pricing data is data which was provided to the Government in support of a proposal and which was not current, accurate, or complete. It may only occur when cost and pricing data is provided. If, before agreement in price, the Contracting Officer learns that any cost or pricing data the contractor provided are inaccurate, incomplete, or noncurrent, the contractor must be notified immediately to determine if the defective data increase or decrease the contract price. The Contracting Officer must then negotiate using any new data submitted or making allowance for the incorrect data. b. If, after award, cost or pricing data are found to be inaccurate, incomplete, or noncurrent as of the date of agreement, the Contracting Officer should give the contractor an opportunity to support the accuracy, completeness, and currency of the questioned data. In addition, the Contracting Officer may obtain an audit to evaluate the accuracy, completeness, and currency of the data. The contractor should reimburse the FAA for any payments issued based on defective cost or pricing data during the contract period. The reimbursement should include the amount identified by the CO including profit or fee and interest accrued from the date of the payment. If defective pricing is determined to exist, this fact should be noted in future past performance evaluations. c. If a contractor and subcontractor submitted cost or pricing data, the Contracting Officer has the right, under the clause prescribed in the contract to reduce the contract price if it significantly increased due to contractor submitted defective data. This right applies whether the data supported subcontractor cost estimates or firm agreements between subcontractors and contractors. In order to afford an opportunity for corrective action, the Contracting Officer should give the contractor reasonable advanced notice before determining to reduce the contract price when: (1) A contractor includes defective subcontract data in arriving at the price but later awards the subcontract to a lower priced subcontractor ( or does not subcontract for work). Any adjustment in the contract price due to defective subcontract data is limited to the difference , plus applicable indirect cost and profit/fee, between the subcontract price used for pricing the contract and either the actual subcontract or the actual cost to the contractor. (2) Under cost-reimbursement contracts and fixed price incentive contracts, payments to subcontracts that are higher than they would be had there been no defective subcontractor cost or pricing data will be the basis for disallowance or nonrecognition of costs. a. When price analysis techniques are sufficient to ensure a fair and reasonable price, analysis of profit/fee is not appropriate. b. When cost analysis is required for price negotiation, profit/fee must be analyzed. Profit/fee should be analyzed with the objective of rewarding contractors for financial and other risks they assume; for resources they use; and for organization, performance, and management capabilities they employ. Consideration should be given to the ratio of indirect costs to direct costs, extent of subcontracting, complexity of materials requirements, and the commitment of capital investments to contract performance. c. For the purposes of establishing a negotiation position the CO may use some structured method (e.g. agency-mandated weighted guidelines) for determining the profit/fee appropriate for the work to be performed. The CO is encouraged to establish a structured mechanism under cost reimbursable contracts which relates performance to fee amounts earned. The key estimates required by and for cost and pricing evaluations are called Independent Cost Estimates (ICE). An ICE is developed early in a procurement cycle and should be used to validate and enhance the program estimate. This estimate will grow with the program and will be employed as a basis for the ICE during source selection. This estimate is an assessment of the total cost to be incurred by the offeror if the contract is to be awarded. These are used to determine the reasonableness and completeness of the proposals and to detect buy-ins, unbalanced pricing or other gaming techniques. Additionally, independent estimates can be used for future budget estimates and procurement planning and decision-making. The IPT will determine when an ICE is appropriate. The Contracting Officer may request an ICE prior to issuance an any SIR. a. Cost realism means the costs in an offeror's proposal are: (1) realistic for the work to be performed; (2) reflect a clear understanding of the requirements; and (3) are consistent with the various elements of the offeror's technical proposal. The emphasis of a cost realism analysis is to determine whether costs may be overstated or understated. Cost realism helps to ascertain the potential risk to the Government as a result of the offeror being unable to meet contract requirements. b. Cost realism analysis is an objective process of identifying the specific elements of a cost estimate or a proposed price and comparing those elements against reliable and independent means of cost measurement. This analysis judges whether or not the estimates under analysis are verifiable, complete, and accurate, and whether or not the offeror's estimating methodology is logical, appropriate, and adequately explained so that the cost or prices proposed fairly represent the costs likely to be incurred for the proposed services, utilizing the offeror's technical and management approach. c. A practical example of the need for cost realism analysis is the tendency of some contractors to "buy-in" to a contract award. "Buying-in" refers to an offeror submitting an offer below anticipated contract costs. Contractors may "buy-in" for purely business reasons or may expect to recover losses through an increase of the contract price after award or through receiving follow-on contracts at artificially high prices. Buying-in may decrease competition or result in poor contract performance. The Contracting Officer should minimize the opportunity for buying-in through the following appropriate actions: (1) Use cost analysis in evaluating proposals for follow-on contracts and change orders; (2) Price contract options for additional quantities together with the firm contract quantity, that equal program requirements; (3) Develop an estimate of the proper price level or value of the supplies or services to be purchased; and (4) Contract type and price should be consistent with the uncertainty and risk to the FAA and contractor while at the same time providing the contractor with the greatest incentive for efficient and economical performance. d. The foregoing does not mean that the IPT should refuse to award a contract when a buy-in is apparent. The IPT should evaluate the attendant risks of costs escalating out of control or the contractor not being able to successfully complete performance. The FAA reserves the right to make an informed judgment and decide whether to award or not based on downstream consequences emanating from potential change orders, etc.. Offeror proposals should be analyzed to determine whether they are unbalanced with respect to prices or separately priced line items. This is particularly important when evaluating the prices for options in relationship to the prices for the basic requirements. An offer is mathematically unbalanced if it is based on prices which are significantly less than the cost of some contract line items and significantly overstated in relation to cost for others. An offer is materially unbalanced if it is mathematically unbalanced and if there is reasonable doubt that the offer would result in the lowest overall cost to the FAA (even though it is the lowest evaluated offer); or the offer is so grossly unbalanced that its acceptance would be tantamount to allowing an advance payment. Offers that are materially unbalanced may be rejected. Depending on the nature of the procurement, price analysis or cost analysis should be used in determining whether offers are materially unbalanced. B. COST ACCOUNTING STANDARDS Full or modified cost accounting standards (CAS) coverage, as appropriate, applies to all cost-type contracts and subcontracts, with the following exemptions: a. Contracts awarded on the basis on price competition alone; b. Contracts and subcontracts under $500,000; c. Contracts and subcontracts with small businesses; d. Contracts and subcontracts in which the price is set by law or regulation; e. Contracts and subcontracts for commercial items; f. Contracts and subcontracts to be executed and performed outside the United States, its territories, and possessions; g. Contracts and subcontracts with educational institutions other than those to be performed by Federally Funded Research and Development Centers; and h. Contracts and subcontracts awarded to the United Kingdom for performance substantially in the UK. (See 48 CFR 9903.201-1(12)). A CAS-covered contract may be subject to either full or modified coverage. The rules for determining whether full or modified coverage applies are in 48 CFR Chapter 99, Subpart 9903.201-2. In some instances, contractors or subcontractors may refuse to accept all or part of the requirements of the CAS clauses ("Cost Accounting Standards" and "Disclosure and Consistency of Cost Accounting Practices"). If the Contracting Officer determines that it is impractical to obtain the materials, supplies, or services from any other source, the Contracting Officer should prepare a request for waiver in accordance with 48 CFR Chapter 99, Subpart 9903.201-5. See 48 CFR Chapter 99, Subpart 9903.202. a. The Contracting Officer is responsible for determining when a proposed contract may require CAS coverage and for including the appropriate notice in the screening information request. The Contracting Officer must then ensure that the offeror has made the required certifications and that required Disclosure Statements are submitted. (Also see 48 CFR Chapter 99, Subparts 9903.201-3 and 9903.202.) b. The Contracting Officer should not award a CAS-covered contract until the Administrative Contracting Officer (ACO) has made a written determination that a required Disclosure Statement is adequate unless, in order to protect the Government's interest, the Contracting Officer waives the requirement for an adequacy determination before award. In this event, a determination of adequacy should be required as soon as possible after the award. c. The cognizant auditor is responsible for conducting reviews of Disclosure Statements for adequacy and compliance. d. The cognizant ACO is responsible for determinations of adequacy and compliance of the Disclosure Statement. a. Adequacy Determination. The contract auditor will conduct an initial review of a Disclosure Statement to ascertain whether it is current, accurate, and complete and will report the results to the cognizant ACO, who will determine whether or not it adequately describes the offeror's cost accounting practices. If the ACO identifies any areas of inadequacy, the ACO should request a revised Disclosure Statement. If the Disclosure Statement is adequate, the ACO should notify the offeror in writing, with copies to the auditor and Contracting Officer. The notice of adequacy should state that a disclosed practice will not, by virtue of such disclosure, be considered an approved practice for pricing proposals or accumulating and reporting contract performance cost data. Generally, the ACO should furnish the contractor notification of adequacy or inadequacy within 30 days after the Disclosure Statement has been received by the Contracting Officer. b. Compliance Determination. After the notification of adequacy, the auditor must conduct a detailed compliance review to determine whether or not the disclosed practices comply with cost principles and the CAS and will advise the ACO of the results. The ACO should take action regarding noncompliance with CAS. The ACO may require a revised Disclosure Statement and adjustment of the prime contract price or cost allowance. Noncompliance with cost principles should be processed separately, in accordance with normal administrative practices. 7. SUBCONTRACTOR DISCLOSURE STATEMENTS a. When the Government requires determinations of adequacy or inadequacy, the ACO cognizant of the subcontractor will provide such determination to the ACO cognizant of the prime contractor or next higher tier subcontractor. ACO's cognizant of higher tier subcontractors or prime contractors must not reverse the determination of the ACO cognizant of the subcontractor. b. Any determination that it is impractical to secure a subcontractor's Disclosure Statement must be made in accordance with 48 CFR Chapter 99, Subpart 9903.202-2. The cognizant ACO will perform CAS administration for all contracts in a business unit notwithstanding retention of other administration functions by another ACO. Within 30 days after the award of any new contract or subcontract subject to CAS, the Contracting Officer, contractor, or subcontractor making the award should request the cognizant ACO to perform administration for CAS matters. 9. CHANGES TO DISCLOSED OR ESTABLISHED COST ACCOUNTING PRACTICES Adjustments to contracts and withholding amounts payable for CAS noncompliance, new standards, or voluntary changes are required only if the amounts involved are material. In determining materiality, the ACO will use the criteria in 48 CFR Chapter 99, Subpart 9903.305. The ACO may forego action to require that a cost impact proposal be submitted or to adjust contracts, if the ACO determines the amount involved is immaterial. However, in the case of noncompliance issues, the ACO should inform the contractor that: a. The Government reserves the right to make appropriate contract adjustments if, in the future, the ACO determines that the cost impact has become material and b. The contractor is not excused from the obligation to comply with the applicable Standard or rules and regulations involved. 10. EQUITABLE ADJUSTMENTS FOR NEW OR MODIFIED STANDARDS a. New or Modified Standards. (1) The provision "Cost Accounting Standards Notices and Certification" requires offerors to state whether or not the award of the contemplated contract would require a change to established cost accounting practices affecting existing contracts and subcontracts. The Contracting Officer must ensure that the contractor's response to the notice is made known to the ACO. (2) Contracts and subcontracts containing the clause "Cost Accounting Standards" may require equitable adjustments to comply with new or modified CAS. Such adjustments are limited to contracts and subcontracts awarded before the effective date of each new or modified standard. A new or modified standard becomes applicable prospectively to these contracts and subcontracts when a new contract or subcontract containing the clause "Cost Accounting Standards" is awarded on or after the effective date of the new or modified standard. (3) Contracting Officers should encourage contractors to submit to the ACO any change in accounting practice in anticipation of complying with a new or modified standard as soon as practical after the new or modified Standard has been promulgated by the CASB. b. Accounting Changes. (1) The clause "Administration of Cost Accounting Standards" requires the contractor to submit a description of any change in cost accounting practices required to comply with a new or modified CAS within 60 days (or other mutually agreed to date) after award of a contract requiring the change. (2) The ACO will review the proposed change concurrently for adequacy and compliance. If the description of the change meets both tests, the ACO will notify the contractor and request submission of a cost impact proposal. c. Contract Price Adjustments. (1) The ACO should promptly analyze the cost impact proposal with the assistance of the auditor, determine the impact, and negotiate the contract price adjustment on behalf of all Government agencies. The ACO should invite Contracting Officers to participate in negotiations of adjustments when the price of any of their contracts may be increased or decreased by $10,000 or more. At the conclusion of negotiations, the ACO will: (a) Execute supplemental agreements to contracts of the ACO's own agency (and, if additional funds are required, request them from the appropriate Contracting Officer); (b) Prepare a negotiation memorandum and send copies to cognizant auditors and Contracting Officers of other agencies having prime contracts affected by the negotiation (those agencies must execute supplemental agreements in the amounts negotiated); and (c) Furnish copies of the memorandum indicating the effect on costs to the ACO of the next higher tier subcontractor or prime contractor, as appropriate, if a subcontract is to be adjusted. This memorandum will serve as the basis for negotiation between the subcontractor and the next higher tier subcontractor or prime contractor and for execution of a supplemental agreement to the subcontract. (2) If the parties fail to agree on the cost or price adjustment, the ACO may make a unilateral adjustment, subject to contractor appeal. d. Remedies for Contractor Failure to Make Required Submissions. (1) If the contractor does not submit the accounting change description or the general dollar magnitude of the change or cost impact proposal (in the form and manner specified), the ACO, with the assistance of the auditor, must estimate the general dollar magnitude of the cost impact on CAS-covered contracts and subcontracts. The ACO may then withhold an amount not to exceed 10 percent of each subsequent amount determined payable related to the contractor's CAS-covered prime contracts, up to the estimated general dollar magnitude of the cost impact, until the required submission is furnished by the contractor. (2) If the contractor has not submitted the cost impact proposal before the total withheld amount reaches the estimated general dollar magnitude and the ACO determines that an adjustment is required, the ACO shall request the contractor to agree to the cost or price adjustment. The contractor shall also be advised that in the event no agreement on the cost or price adjustment is reached within 20 days, the ACO may make a unilateral adjustment, subject to contractor appeal. 11. NONCOMPLIANCE WITH CAS REQUIREMENTS a. Determination of Noncompliance. (1) Within 15 days of the receipt of a report of alleged noncompliance from the auditor, the ACO shall make an initial finding of compliance or noncompliance and advise the auditor. (2) If an initial finding of noncompliance is made, the ACO shall immediately notify the contractor in writing of the exact nature of the noncompliance and allow the contractor 60 days within which to agree or to submit reasons why the existing practices are considered to be in compliance. (3) If the contractor agrees with the initial finding of noncompliance, the ACO shall review the contractor submissions required by paragraph (a) of the clause "Administration of Cost Accounting Standards." (4) If the contractor disagrees with the initial noncompliance finding, the ACO shall review the reasons why the contractor considers the existing practices to be in compliance and make a determination of compliance or noncompliance. If the ACO determines that the contractor's practices are in noncompliance, a written explanation shall be provided as to why the ACO disagrees with the contractor's rationale. The ACO shall notify the contractor and the auditor in writing of the determination. If the ACO makes a determination of noncompliance, the procedures in (b) through (d), as appropriate, shall be followed. b. Accounting Changes. (1) The clause "Administration of Cost Accounting Standards" requires the contractor to submit a description of any cost accounting practice change needed to correct a noncompliance. (2) The ACO shall review the proposed change concurrently for adequacy and compliance. If the description of the change meets both tests, the ACO shall notify the contractor and request submission of a cost impact proposal. c. Contract Price Adjustments. (1) The ACO shall request that the contractor submit a cost impact proposal within the time specified in the clause "Administration of Cost Accounting Standards." (2) Upon receipt of the cost impact proposal, the ACO shall then follow the procedures in paragraph (c)(1) under "equitable adjustments for new or modified standards". In accordance with the clause "Cost Accounting Standards," the ACO shall include and separately identify, as part of the computation of the contract price adjustment(s), applicable interest on any increased costs paid to the contractor as a result of the noncompliance. Interest shall be computed from the date of overpayment to the time the adjustment is effected. If the costs were incurred and paid evenly over the fiscal years during which the noncompliance occurred, then the midpoint of the period in which the noncompliance began may be considered the baseline for the computation of interest. An alternate equitable method should be used if the costs were not incurred and paid evenly over the fiscal years during which the noncompliance occurred. Interest should be computed pursuant to "Interest" clause. d. Remedies for Contractor Failure to Make Required Submissions. (1) If the contractor does not submit the accounting change description or the general dollar magnitude of the change or cost impact proposal (in the form and manner specified), the ACO, with the assistance of the auditor, shall estimate the general dollar magnitude of the cost impact on CAS-covered contracts and subcontracts. The Contracting Officer may then withhold an amount not to exceed 10 percent of each subsequent amount determined payable related to the contractor's CAS-covered prime contracts, up to the estimated general dollar magnitude of the cost impact until the required submission is furnished by the contractor. (2) If the contractor has not submitted the cost impact proposal before the total withheld amount reaches the estimated general dollar magnitude and the Contracting Officer determines that an adjustment is required, the Contracting Officer shall notify the contractor and request agreement as to the cost or price adjustment together with any applicable interest. The contractor shall also be advised that in the event no agreement on the cost or price adjustment is reached within 20 days, the Contracting Officer may make a unilateral adjustment, subject to contractor appeal. (3) If the Contracting Officer determines that there is no material increase in costs as a result of the noncompliance, the Contracting Officer shall notify the contractor in writing that the contractor is in noncompliance, that corrective action should be taken, and that if such noncompliance subsequently results in materially increased costs to the Government, the provisions of the clause "Cost Accounting Standards" and/or the clause "Disclosure and Consistency of Cost Accounting Practices" will be enforced. a. General. (1) The contractor may voluntarily change its disclosed or established cost accounting practices. (2) The contract price may be adjusted for voluntary changes. However, increased costs resulting from a voluntary change may be allowed only if the Contracting Officer determines that the change is desirable and not detrimental to the interest of the Government. b. Accounting Changes. (1) The clause "Administration of Cost Accounting Standards" requires the contractor to notify the Contracting Officer and submit a description of any voluntary cost accounting practice change not less than 60 days (or such other date as may be mutually agreed to) before implementation of the voluntary change. (2) The Contracting Officer shall review the proposed change concurrently for adequacy and compliance. If the description of the change meets both tests, the Contracting Officer shall notify the contractor and request submission of a cost impact proposal. c. Contract Price Adjustments. (1) With the assistance of the auditor, the Contracting Officer shall promptly analyze the cost impact proposal to determine whether or not the proposed change will result in increased costs being paid by the Government. The Contracting Officer shall consider all of the contractor's affected CAS-covered contracts and subcontracts, but any cost changes to higher-tier subcontracts or contracts of other contractors over and above the cost of the subcontract adjustment shall not be considered. (2) The Contracting Officer shall then follow the procedures in above paragraph 10. "Equitable Adjustments for New or Modified Standards." d. Remedies for Contractor Failure to Make Required Submissions. (1) If the contractor does not submit the accounting change description or the general dollar magnitude of the change or cost impact proposal (in the form and manner specified), the Contracting Officer, with the assistance of the auditor, shall estimate the general dollar magnitude of the cost impact on CAS-covered contracts and subcontracts. The Contracting Officer may then withhold an amount not to exceed 10 percent of each subsequent amount determined payable related to the contractor's CAS-covered prime contracts up to the estimated general dollar magnitude of the cost impact, until the required submission is furnished by the contractor. (2) If the contractor has not submitted the cost impact proposal before the total withheld amount reaches the estimated general dollar magnitude and the Contracting Officer determines that an adjustment is appropriate, the Contracting Officer shall request the contractor to agree to the cost or price adjustment. The contractor shall also be advised that, in the event no agreement on the cost or price adjustment is reached within 20 days, the Contracting Officer may make a unilateral adjustment subject to contractor appeal. 13. SUBCONTRACT ADMINISTRATION When a negotiated CAS price adjustment or a determination of noncompliance is required at the subcontract level, the Contracting Officer cognizant of the subcontractor shall make the determination and advise the Contracting Officer cognizant of the prime contractor or next higher tier subcontractor of his decision. Contracting Officer's cognizant of higher tier subcontractors or prime contractors shall not reverse the determination of the Contracting Officer cognizant of the subcontractor. 3.2.2.3-8, Audits and Records 3.2.2.3-25, Price reduction for Defective Cost or Pricing Data 3.2.2.3-26, Price reduction for Defective Cost or Pricing Data - Modifications 3.2.2.3-27, Subcontractor Cost or Pricing Data 3.2.2.3-28, Subcontractor Cost or Pricing Data - Modifications 3.2.2.3-29, Integrity of Unit Prices 3.2.2.3-30, Termination of Defined Benefit Pension Plans 3.2.2.3-31, Facilities Capital Cost of Money 3.2.2.3-32, Waiver of Facilities Capital Cost of Money 3.2.2.3-36, Reversion or Adjustment of Plans for Postretirement Benefits Other Than Pensions (PRB 3.2.2.3-38, Requirements for Cost or Pricing Data or Information Other than Cost or Pricing Data & Alternate I, Alternate II 3.2.2.3-39, Requirements for Cost or Pricing Data or Information Other than Cost or Pricing Data-Modifications 3.2.2.3-40, Precontract Costs 3.2.3-1, Cost Accounting Standards Notices and Certification 3.2.3-2, Cost Accounting Standards 3.2.3-3, Disclosure and Consistency of Cost Accounting Practices 3.2.3-4, Consistency in Cost Accounting Practices 3.2.3-5, Administration of Cost Accounting Standards FAA1861, Facilities Capital Cost of Money FAA1547, Weighted Guidelines |