(a) 41 U.S.C. chapter 15, Cost Accounting Standards, requires certain contractors and subcontractors to comply with Cost Accounting Standards (CAS) and to disclose in writing and follow consistently their cost accounting practices.

(b) Contracts that refer to part 30 for the purpose of applying the policies, procedures, standards, and regulations promulgated by the CASB pursuant to 41 U.S.C. chapter 15, must be deemed to refer to the CAS, and any other regulations promulgated by the CASB (see 48 CFR chapter 99, https://www.ecfr.gov/current/title-48/chapter-99), all of which are hereby incorporated in this part 30.

(c)(1) See 48 CFR 9903.201-7 for cognizant Federal agency responsibilities.

(2) The CFAO is responsible for issuing determinations of adequacy and compliance of the Disclosure Statement

(d)(1) See 48 CFR 9903.202-1 to 9903.202-7 for disclosure requirements.

(2) The cognizant auditor is responsible for conducting reviews of Disclosure Statements for adequacy and compliance.

(e) See 48 CFR 9903.3 for CAS rules and regulations.

(f) See 48 CFR 9904 for cost accounting standards.

(g) See 48 CFR 9905 for cost accounting standards for educational institutions.

During acquisition planning the contracting officer must determine if the contract will be a CAS covered contract.

(a) Rules for determining applicability of CAS are found at 48 CFR 9903.201-1.

(b) CAS-covered contracts may be subject to either full or modified coverage. See 48 CFR 9903.201-2 for guidance on determining whether full or modified coverage applies.

(c) Negotiated contracts must be subject to CAS, unless exempt in accordance with 48 CFR 9903.201-1(b).

(d) In accordance with 41 U.S.C. 1502(b)(1)(B), the threshold for determining the tentative applicability of CAS at the contract level is the amount set forth in 10 U.S.C. 3702(a)(1)(A), as adjusted for inflation in accordance with 41 U.S.C. 1908. (See 48 CFR 9903.201-1)

(a) The head of the agency-

(1) May waive the applicability of CAS for a particular contract or subcontract under the conditions listed in paragraph (b) below; and

(2) Must not delegate this waiver authority to any official in the agency below the senior contract policymaking level.

(b) The head of the agency may grant a waiver when one of the following conditions exists:

(1) The contract or subcontract value is less than 15 million, and the head of the agency determines, in writing, that the segment of the contractor or subcontractor that will perform the contract or subcontract-

(i) Is primarily engaged in the sale of commercial products or commercial services; and

(ii) Has no contracts or subcontracts that are subject to CAS.

(2) The head of the agency determines that exceptional circumstances exist whereby a waiver of CAS is necessary to meet the needs of the agency. Exceptional circumstances exist only when the benefits to be derived from waiving the CAS outweigh the risk associated with the waiver. The determination that exceptional circumstances exist must-

(i) Be in writing; and

(ii) Include a statement of the specific circumstances that justify granting the waiver.

(c) When one of the conditions in paragraph (b) of this section exists, the request for waiver must include the following:

(1) The amount of the proposed award.

(2) The contract or subcontract type.

(3) Whether the segment(s) that will perform the contract or subcontract has CAS-covered contracts or subcontracts.

(4) A description of the item(s) being procured.

(5) A statement why the contractor or subcontractor will not accept the contract or subcontract if CAS applies.

(6) Whether certified cost or pricing data will be obtained, and if so, a discussion of how the data will be used in negotiating the contract or subcontract price.

(7) The benefits to the Government of waiving CAS.

(8) The potential risk to the Government of waiving CAS.

(9) The date by which the waiver is needed.

(10) Any other information that may be useful in evaluating the request.

(d) When neither of the conditions in paragraph (b) of this section exists, the waiver request must be prepared in accordance with 48 CFR 9903.201-5(e) and submitted to the CAS Board.

(e) Each agency must report any waivers granted under paragraph (a) of this subsection to the CAS Board, on a fiscal year basis, not later than 90 days after the close of the Government’s fiscal year.

This part does not apply to sealed bid contracts or to contracts with a small business concern (see 48 CFR 9903.201-1(b) for these and other exemptions).

(a) Insert the provision at 52.230-1, Cost Accounting Standards Notices and Certification, in solicitations for proposed contracts subject to CAS as specified in 48 CFR 9903.201.

(b) Insert the provision at 52.230-7, Proposal Disclosure—Cost Accounting Practice Changes, in solicitations for contracts subject to CAS as specified in 48 CFR 9903.201.

(a) Cost Accounting Standards.

(1) Insert the clause at 52.230-2, Cost Accounting Standards, in negotiated contracts, unless the contract is exempted (see 48 CFR 9903.201-1), the contract is subject to modified coverage (see 48 CFR 9903.201-2), or the clause prescribed in paragraph (c) of this subsection is used.

(2) The clause at 52.230-2 requires the contractor to comply with all CAS specified in 48 CFR part 9904, to disclose actual cost accounting practices (applicable to CAS-covered contracts only), and to follow disclosed and established cost accounting practices consistently.

(b) Disclosure and consistency of cost accounting practices.

(1) Insert the clause at 52.230-3, Disclosure and Consistency of Cost Accounting Practices, in negotiated contracts when the contract amount is over $2 million but less than $50 million, and the offeror certifies it is eligible for and elects to use modified CAS coverage (see 48 CFR 9903.201-2), unless the clause prescribed in paragraph (c) of this subsection is used.

(2) The clause at 52.230-3 requires the contractor to comply with 48 CFR 9904.401, 9904.402, 9904.405, and 9904.406 to disclose (if it meets certain requirements) actual cost accounting practices, and to follow consistently its established cost accounting practices.

(c) Disclosure and Consistency of Cost Accounting Practices—Foreign Concerns.

(1) Insert the clause at 52.230-4, Disclosure and Consistency of Cost Accounting Practices—Foreign Concerns, in negotiated contracts with foreign concerns, unless the contract is otherwise exempt from CAS (see 48 CFR 9903.201-1). Foreign concerns do not include foreign governments or their agents or instrumentalities.

(2) The clause at 52.230-4 requires the contractor to comply with 48 CFR 9904.401 and 48 CFR 9904.402 to disclose (if it meets certain requirements) actual cost accounting practices, and to follow consistently its disclosed and established cost accounting practices.

(d) Administration of Cost Accounting Standards.

(1) Insert the clause at 52.230-6, Administration of Cost Accounting Standards, in contracts containing any of the clauses prescribed in paragraphs (a), (b), (c), or (e) of this subsection.

(2) The clause at 52.230-6 specifies rules for administering CAS requirements and procedures to be followed in cases of failure to comply.

(e) Cost Accounting Standards—Educational Institutions.

(1) Insert the clause at 52.230-5, Cost Accounting Standards—Educational Institution, in negotiated contracts awarded to educational institutions, unless the contract is exempted (see 48 CFR 9903.201-1), the contract is to be performed by an FFRDC (see 48 CFR 9903.201-2(c)(5)), or the provision at 48 CFR 9903.201-2(c)(6) applies.

(2) The clause at 52.230-5 requires the educational institution to comply with all CAS specified in 48 CFR part 9905, to disclose actual cost accounting practices as required by 48 CFR 9903.202-1(f), and to follow disclosed and established cost accounting practices consistently.

Prior to awarding a CAS covered contract, the contracting officer must—

(a)Ensure that the offeror has made the required solicitation certifications and that the required Disclosure Statements are submitted (also see 48 CFR 9903.201-3 and 9903.202); and

(b) Have received from the CFAO a written determination that the submitted Disclosure Statement is adequate, subject to the exception below.

(1) In order to protect the Government’s interest, the head of the agency, without power of delegation, may authorize proceeding with award prior to receiving submission of the required Disclosure Statement (see 48 CFR 9903.202-2).

(2) In this event, the contracting officer must ensure the contractor submits the required Disclosure Statement and the CFAO must make a determination of adequacy as soon as possible after the award.

(a) The CFAO must perform CAS administration for all contracts and subcontracts in a business unit, even when the contracting officer retains other administration functions. The CFAO must make all CAS-related required determinations and findings for all CAS-covered contracts and subcontracts, including—

(1) Whether a change in cost accounting practice or noncompliance has occurred; and

(2) If a change in cost accounting practice or noncompliance has occurred, how any resulting cost impacts are resolved.

(b) Within 30 days after the award of any new contract subject to CAS, the contracting officer making the award must request the CFAO to perform administration for CAS matters (see subpart 42). For subcontract awards, the contractor awarding the subcontract must follow the procedures at 52.230-6(l), (m), and (n).

(c)In performing CAS administration, the CFAO must request and consider the advice of the auditor as appropriate.

(a) In determining materiality, the CFAO shall use the criteria in 48 CFR 9903.305. 

(b) A CFAO determination of materiality—

(1) May be made before or after a general dollar magnitude proposal has been submitted, depending on the particular facts and circumstances; and

(2) Shall be based on adequate documentation.

(c) When the CFAO determines the cost impact is immaterial, the CFAO shall-

(1) Make no contract adjustments and conclude the cost impact process;

(2) Document the rationale for the determination; and

(3) In the case of noncompliance issues, inform the contractor that—

(i) The noncompliance should be corrected; and

(ii) If the noncompliance is not corrected, the Government reserves the right to make appropriate contract adjustments should the cost impact become material in the future.

(d) For required, unilateral, and desirable changes, and CAS noncompliances, when the amount involved is material, the CFAO must follow the applicable provisions in this part.

(a) See subpart 30.3 above for required, unilateral, and desirable changes.

(b) GDM proposal.

(1) The GDM proposal—

(i) Provides information to the CFAO on the estimated overall impact of a change in cost accounting practice on affected CAS-covered contracts and subcontracts that were awarded based on the previous cost accounting practice;

(ii) Assists the CFAO in determining whether individual contract price or cost adjustments are required;

(iii) The contractor may submit a detailed cost-impact (DCI) proposal in lieu of a GDM proposal provided the DCI proposal is in accordance with paragraph (d) of this section;

(iv) Must calculate the cost impact in accordance with paragraph (e) of this section;

(v) May use one or more of the following methods to determine the increase or decrease in cost accumulations:

(A) A representative sample of affected CAS-covered contracts and subcontracts.

(B) The change in indirect rates multiplied by the total estimated base computed for each of the following groups:

(1) Fixed-price contracts and subcontracts.

(2) Flexibly-priced contracts and subcontracts.

(C) Any other method that provides a reasonable approximation of the total increase or decrease in cost accumulations for all affected fixed-price and flexibly-priced contracts and subcontracts.

(vi) May be in any format acceptable to the CFAO but, as a minimum, must include the following data: and

(A) A GDM estimate of the total increase or decrease in cost accumulations by Executive agency, including any impact the change may have on contract and subcontract incentives, fees, and profits, for each of the following groups:

(1) Fixed-price contracts and subcontracts.

(2) Flexibly-priced contracts and subcontracts.

(B) For unilateral changes, the increased or decreased costs to the Government for each of the following groups:

(1) Fixed-price contracts and subcontracts.

(2) Flexibly-priced contracts and subcontracts.

(vii) When requested by the CFAO, must identify all affected CAS-covered contracts and subcontracts.

(c) GDM proposal evaluation. The CFAO must promptly evaluate the GDM proposal. If the cost impact is immaterial, the CFAO must notify the contractor in writing and conclude the cost-impact process with no contract adjustments. Otherwise, the CFAO must—

(1) Negotiate and resolve the cost impact (see 30.405). If necessary, the CFAO may request that the contractor submit a revised GDM proposal by a specified date with specific additional data needed to resolve the cost impact; or

(2) Request that the contractor submit a DCI proposal by a specified date if the CFAO determines that the GDM proposal is not sufficient to resolve the cost impact.

(d) Detailed cost-impact proposal. If the contractor is required to submit a DCI proposal, the CFAO must promptly evaluate the DCI proposal and follow the procedures at 30.405 to negotiate and resolve the cost impact. The DCI proposal—

(1) Must calculate the cost impact in accordance with paragraph (e) of this section;

(2) Must show the estimated increase or decrease in cost accumulations for each affected CAS-covered contract and subcontract unless the CFAO and contractor agree to—

(i) Include only those affected CAS-covered contracts and subcontracts exceeding a specified amount; and

(ii) Estimate the total increase or decrease in cost accumulations for all affected CAS-covered contracts and subcontracts.

(3) May be in any format acceptable to the CFAO but, as a minimum, must include the requirements at paragraphs (b)(1)(vi) of this section; and

(4) When requested by the CFAO, must identify all affected contracts and subcontracts.

(e) Calculating cost impacts. The cost impact calculation must—

(1) Include all affected CAS-covered contracts and subcontracts regardless of their status or the fiscal year(s) in which the costs are incurred;

(2) Combine the cost impact for all affected CAS-covered contracts and subcontracts for all segments if the effect of a change results in costs flowing between those segments;

(3) For unilateral changes—

(i) Determine the increased or decreased cost to the Government for flexibly-priced contracts and subcontracts as follows:

(A) When the estimated cost to complete using the changed practice exceeds the estimated cost to complete using the current practice, the difference is increased cost to the Government.

(B) When the estimated costs to complete using the changed practice is less than the estimated cost to complete using the current practice, the difference is decreased cost to the Government.

(ii) Determine the increased or decreased cost to the Government for fixed-price contracts and subcontracts as follows:

(A) When the estimated cost to complete using the changed practice is less than the estimated cost to complete using the current practice, the difference is increased cost to the Government.

(B) When the estimated cost to complete using the changed practice exceeds the estimated cost to complete using the current practice, the difference is decreased cost to the Government.

(iii) Calculate the total increase or decrease in contract and subcontract incentives, fees, and profits associated with the increased or decreased cost to the Government in accordance with 48 CFR 9903.306(c). The associated increase or decrease is based on the difference between the negotiated incentives, fees, and profits and the amounts that would have been negotiated had the cost impact been known at the time the contracts and subcontracts were negotiated; and

(iv) Calculate the increased cost to the Government in the aggregate.

(4) For required or desirable changes, negotiate an equitable adjustment as provided in the Changes clause of the contract.

(f) Remedies. If the contractor does not submit the accounting change description or the proposals required in paragraph (b) or (d) of this section within the specified time, or any extension granted by the CFAO, the CFAO must—

(1) Estimate the GDM of the cost impact on affected CAS-covered contracts and subcontracts; and

(2) Take one or both of the following actions:

(i) Withhold an amount not to exceed 10 percent of each subsequent payment related to the contractor's CAS-covered contracts (up to the estimated GDM of the cost impact), until the contractor furnishes the required information.

(ii) Issue a final decision in accordance with part 33 and unilaterally adjust the contract(s) by the estimated amount of the cost impact.

(a) General. Prior to making any contract price or cost adjustments under the applicable paragraph(s) addressing noncompliance at 52.230-2, 52.230-3, or 52.230-5, the CFAO must determine that—

(1) The contemplated contract price or cost adjustments will protect the Government from the payment of increased costs, in the aggregate;

(2) The net effect of the contemplated contract price or cost adjustments will not result in the recovery of more than the increased costs to the Government, in the aggregate;

(3) The net effect of any invoice adjustments made to correct an estimating noncompliance will not result in the recovery of more than the increased costs paid by the Government, in the aggregate; and

(4) The net effect of any interim and final voucher billing adjustments made to correct a cost accumulation noncompliance will not result in the recovery of more than the increased cost paid by the Government, in the aggregate.

(b) Notice and determination.

(1) Within 15 days of receiving a report of alleged noncompliance from the auditor, the CFAO must—

(i) Notify the auditor that the CFAO disagrees with the alleged noncompliance; or

(ii) Issue a notice of potential noncompliance to the contractor and provide a copy to the auditor.

(2) The notice of potential noncompliance must—

(i) Notify the contractor in writing of the exact nature of the noncompliance; and

(ii) Allow the contractor 60 days or other mutually agreeable date to-

(A) Agree or submit reasons why the contractor considers the existing practices to be in compliance; and

(B) Submit rationale to support any written statement that the cost impact of the noncompliance is immaterial.

(3) The CFAO must—

(i) If applicable, review the reasons why the contractor considers the existing practices to be compliant or the cost impact to be immaterial;

(ii) Make a determination of compliance or noncompliance consistent with part 1; and

(iii) Notify the contractor and the auditor in writing of the determination of compliance or noncompliance and the basis for the determination.

(4) If the CFAO makes a determination of noncompliance, the CFAO must follow the procedures in paragraphs (c) through (h) of this section, as appropriate, unless the CFAO also determines the cost impact is immaterial. If immaterial, the CFAO must—

(i) Inform the contractor in writing that-

(A) The noncompliance should be corrected; and

(B) If the noncompliance is not corrected, the Government reserves the right to make appropriate contract adjustments should the noncompliance become material in the future; and

(ii) Conclude the cost-impact process with no contract adjustments.

(c) Correcting noncompliances.

(1) The clause at 52.230-6 requires the contractor to submit a description of any cost accounting practice change needed to correct a noncompliance within 60 days after the earlier of-

(i) Agreement with the CFAO that there is a noncompliance; or

(ii) Notification by the CFAO of a determination of noncompliance.

(2) The CFAO should review the proposed change to correct the noncompliance concurrently for adequacy and compliance. The CFAO must—

(i) When the description of the change is both adequate and compliant-

(A) Notify the contractor in writing;

(B) Request that the contractor submit by a specified date a GDM proposal, unless the CFAO determines the cost impact is immaterial; and

(C) Follow the procedures at paragraph (b)(4) of this section if the CFAO determines the cost impact is immaterial.

(ii) If the description of the change is inadequate, request a revised description of the new cost accounting practice; or

(iii) If the disclosed practice is noncompliant, notify the contractor in writing that, if implemented, the CFAO will determine the cost accounting practice to be noncompliant and process it accordingly.

(d) GDM proposal content. The GDM proposal-

(1) Must calculate the cost impact in accordance with paragraph (h) of this section;

(2) May use one or more of the following methods to determine the increase or decrease in contract and subcontract price or cost accumulations, as applicable:

(i) A representative sample of affected CAS-covered contracts and subcontracts affected by the noncompliance.

(ii) When the noncompliance involves cost accumulation, the change in indirect rates multiplied by the applicable base for flexibly-priced contracts and subcontracts.

(iii) Any other method that provides a reasonable approximation of the total increase or decrease in contract and subcontract prices and cost accumulations.

(3) The contractor may submit a DCI proposal in lieu of a GDM proposal provided the DCI proposal is in accordance with paragraph (f) of this section;

(4) May be in any format acceptable to the CFAO but, as a minimum, must include the following data: and

(i) The total increase or decrease in contract and subcontract prices and cost accumulations, as applicable, by Executive agency, including any impact the noncompliance may have on contract and subcontract incentives, fees, and profits, for each of the following groups:

(A) Fixed-price contracts and subcontracts.

(B) Flexibly-priced contracts and subcontracts.

(ii) The increased or decreased costs to the Government for each of the following groups:

(A) Fixed-price contracts and subcontracts.

(B) Flexibly-priced contracts and subcontracts.

(iii) The total overpayments and underpayments for fixed-price and flexibly-priced contracts made by the Government during the period of noncompliance.

(5) When requested by the CFAO, must identify all affected CAS-covered contracts and subcontracts.

(e) GDM proposal evaluation. The CFAO must promptly evaluate the GDM proposal. If the cost impact is immaterial, the CFAO must follow the requirements in paragraph (b)(4) of this section. Otherwise, the CFAO must—

(1) Negotiate and resolve the cost impact (see 30.405). If necessary, the CFAO may request the contractor submit a revised GDM proposal by a specified date, with specific additional data needed to resolve the cost impact; or

(2) Request that the contractor submit a DCI proposal by a specified date if the CFAO determines that the GDM proposal is not sufficient to resolve the cost impact.

(f) Detailed cost-impact proposal. If the contractor is required to submit a DCI proposal, the CFAO must promptly evaluate the DCI proposal and follow the procedures at 30.405 to negotiate and resolve the cost impact. The DCI proposal—

(1) Must calculate the cost impact in accordance with paragraph (h) of this section; and

(2) Must show the increase or decrease in price and cost accumulations, as applicable for each affected CAS-covered contract and subcontract unless the CFAO and contractor agree to—

(i) Include only those affected CAS-covered contracts and subcontracts having-

(A) Contract and subcontract values exceeding a specified amount when the noncompliance involves estimating costs; and

(B) Incurred costs exceeding a specified amount when the noncompliance involves accumulating costs; and

(ii) Estimate the total increase or decrease in price and cost accumulations for all affected CAS-covered contracts and subcontracts using the results in paragraph (f)(2)(i) of this section;

(3) May be in any format acceptable to the CFAO but, at a minimum, must include the information in paragraph (d)(4) of this section; and

(4) When requested by the CFAO, must identify all affected CAS-covered contracts and subcontracts.

(g) Interest. The CFAO must—

(1) Separately identify interest on any increased cost paid, in the aggregate, as a result of the noncompliance;

(2) Compute interest from the date of overpayment to the date of repayment using the rate specified in 26 U.S.C. 6621(a)(2).

(h) Calculating cost impacts. The cost impact calculation must—

(1) Include all affected CAS-covered contracts and subcontracts regardless of their status or the fiscal year in which the costs are incurred;

(2) Combine the cost impact for all affected CAS-covered contracts and subcontracts for all segments if the effect of a change results in costs flowing between those segments;

(3) For noncompliances that involve estimating costs, determine the increased or decreased cost to the Government for fixed-price contracts and subcontracts as follows:

(i) When the negotiated contract or subcontract price exceeds what the negotiated price would have been had the contractor used a compliant practice, the difference is increased cost to the Government.

(ii) When the negotiated contract or subcontract price is less than what the negotiated price would have been had the contractor used a compliant practice, the difference is decreased cost to the Government.

(4) For noncompliances that involve accumulating costs, determine the increased or decreased cost to the Government for flexibly-priced contracts and subcontracts as follows:

(i) Determine when the noncompliant practice was first implemented.

(ii) Determine when the noncompliant practice was replaced with a compliant practice.

(iii) Calculate the cost using the compliant practice for the same time period.

(iv) Calculate the difference between the noncompliant practice costs and the calculated compliant practice costs.

(5) Calculate the total increase or decrease in contract and subcontract incentives, fees, and profits associated with the increased or decreased costs to the Government in accordance with 48 CFR 9903.306(c). The associated increase or decrease is based on the difference between the negotiated incentives, fees, and profits and the amounts that would have been negotiated had the contractor used a compliant practice;

(6) Determine the cost impact of each noncompliance that affects both cost estimating and cost accumulation by combining the cost impacts in paragraphs (h)(3), (h)(4), and (h)(5) of this section;

(7) Calculate the increased cost to the Government in the aggregate; and

(8) If the contractor does not correct the noncompliance or submit the proposal required in paragraph (d) or (f) of this section within the specified time, or any extension granted by the CFAO, the CFAO must follow the procedures at section 30.302-3.

(a) General.

(1) The CFAO must coordinate with the affected contracting officers before negotiating and resolving the cost impact when the estimated cost impact is at least $100,000. The CFAO has the sole authority for negotiating and resolving the cost impact.

(2) The CFAO may resolve a cost impact attributed to a change in cost accounting practice or a noncompliance by adjusting a contract, some contracts, all contracts, or by any other allowed method.

(3) In resolving the cost impact, the CFAO—

(i) Must not combine the cost impacts of any of the following:

(A) A required change and a unilateral change.

(B) A required change and a noncompliance.

(C) A desirable change and a unilateral change.

(D) A desirable change and a noncompliance.

(ii) Must not combine the cost impacts of any of the following unless all of the cost impacts are increased costs to Government:

(A) One or more unilateral changes.

(B) One or more noncompliances.

(C) Unilateral changes and nonconformances.

(iii) May consider the cost impacts of a unilateral change affecting two or more segments to be a single change if—

(A) The change affects the flow of costs between segments; or

(B) It implements a common cost accounting practice for two or more segments.

(4) For desirable changes, the CFAO should consider the estimated cost impact of associated management actions on contract costs in resolving the cost impact.

(b) Negotiations. The CFAO must—

(1) Negotiate and resolve the cost impact on behalf of all Government agencies; and

(2) At the conclusion of negotiations, prepare a negotiation memorandum and send copies to the auditor and affected contracting officers.

(c) Contract adjustments.

(1) The CFAO may adjust some or all contracts with a material cost impact, subject to the provisions in paragraphs (c)(2) through (c)(6) of this section.

(2) In selecting the contract or contracts to be adjusted, the CFAO should assure, to the maximum extent practical and subject to the provisions in paragraphs (c)(3) through (c)(6) of this section, that the adjustments reflect a pro rata share of the cost impact based on the ratio of the cost impact of each Executive agency to the total cost impact.

(3) For unilateral changes and noncompliances, the CFAO must—

(i) To the maximum extent practical, not adjust the price upward for fixed-price contracts;

(ii) If contract adjustments are made, prevent payment of aggregate increased costs by taking one or both of the following actions:

(A) Reduce the contract price on fixed-price contracts.

(B) Disallow costs on flexibly-priced contracts.

(iii) The CFAO may, after coordination with the affected contracting officers, increase or decrease individual contract prices, including contract cost ceilings or target costs on flexibly-priced contracts. In such cases, the CFAO must limit any upward contract price adjustments on affected contracts to the amount of downward price adjustments to other affected contracts (48 CFR 9903.201-6(b)).

(4) For noncompliances that involve estimating costs, the CFAO-

(i) Must, to the maximum extent practical, not adjust the price upward for fixed-price contracts;

(ii) Must, if contract adjustments are made, prevent payment of aggregate increased costs by reducing the contract price on fixed-price contracts;

(iii) May, after coordination with the affected contracting officers, increase or decrease individual contract prices, including cost ceilings or target costs on flexibly-priced contracts. In such cases, the CFAO must limit any upward contract price adjustments to affected contracts to the amount of downward price adjustments to other affected contracts, (48 CFR 9903.201-6(d));

(iv) Must require the contractor to correct the noncompliance, i.e., ensure that compliant cost accounting practices will now be utilized to estimate proposed contract costs; and

(v) Must require the contractor to adjust any invoices that were paid based on noncompliant contract prices to reflect the adjusted contract prices, after any contract price adjustments are made to resolve the noncompliance.

(5) For noncompliances that involve cost accumulation, the CFAO-

(i) Must require the contractor to—

(A) Correct noncompliant contract cost accumulations in the contractor’s cost accounting records for affected contracts to reflect compliant contract cost accumulations; and

(B) Adjust interim payment requests and final vouchers to reflect the difference between the costs paid using the noncompliant practice and the costs that should have been paid using the compliant practice.

(ii) Must adjust contract prices. In adjusting contract prices, the CFAO must prevent payment of aggregate increased costs by disallowing costs on flexibly-priced contracts.

(A) The CFAO may, after coordination with the affected contracting officers, increase or decrease individual contract prices, including cost ceilings or target costs on flexibly-priced contracts. In such cases, the CFAO must limit any upward contract price adjustments to affected contracts to the amount of downward price adjustments to other affected contracts (48 CFR 9903.201-6(d)).

(B) Must require the contractor to—

(1) Correct contract cost accumulations in the contractor’s cost accounting records to reflect the contract price adjustments; and

(2) Adjust interim payment requests and final vouchers to reflect the contract price adjustments.

(6) When contract adjustments are made, the CFAO must—

(i) Execute the bilateral modifications if the CFAO and contractor agree on the amount of the cost impact and the adjustments (see part 42); or

(ii) When the CFAO and contractor do not agree on the amount of the cost impact or the contract adjustments, issue a final decision in accordance with part 33 and unilaterally adjust the contract(s).

(d) Alternate methods.

(1) The CFAO may use an alternate method instead of adjusting contracts to resolve the cost impact if the Government and contractor agree on the use of an alternate method.

(2) The CFAO may not use an alternate method when application of the alternate method would result in—

(i) The Government paying more, in the aggregate, than would be paid if the CFAO did not use the alternate method;

(ii) An under recovery of monies by the Government; or

(iii) Distortions of incentive provisions and relationships between target costs, ceiling costs, and actual costs for incentive type contracts.

(3) When using an alternate method that excludes the costs from an indirect cost pool, the CFAO must—

(i) Apply such exclusion only to the determination of final indirect cost rates (see part 42); and

(ii) Adjust the exclusion to reflect the Government participation rate for flexibly-priced contracts and subcontracts.

When a negotiated CAS price adjustment or a determination of noncompliance is required at the subcontract level, the CFAO for the subcontractor must furnish a copy of the negotiation memorandum or the determination to the CFAO for the contractor of the next higher-tier subcontractor. The CFAO of the contractor or the next higher-tier subcontractor is not permitted to change such negotiation memorandum or determination. If the subcontractor refuses to submit a GDM or DCI proposal, contract remedies are made at the prime contractor level.