Basics For Contractors

Topic 1: Does CAS Apply to My Contract?

Compliance with Cost Accounting Standards (CAS) can be complex and confusing to many U.S. Government contractors. So, it is crucial for contractors to determine whether or not they have any CAS-covered contract or subcontract awards and to understand CAS implications to their organization.

The first step to understanding your organization’s CAS-related risks is to determine whether you hold any CAS-covered contracts.

  • Understanding CAS Applicability

CAS is applicable to negotiated contracts greater than $2M, unless the contract meets one of the following exemptions:

  • Contract is less than $7.5M and the contractor is not currently performing under any CAS-covered contracts of $7.5M or greater at the time of award
  • Contract is awarded to a small business
  • Contract is awarded under sealed-bid procedures
  • Award is firm-fixed price (FFP) contract for commercial item(s)
  • Price is set by law or regulation
  • Award is a firm-fixed-price contract awarded on the basis of adequate price competition without submission of cost or pricing data
  • Awardee is a foreign concern (must comply with CAS 401 and 402 only)

If none of the above exemptions apply, then the award is subject to either modified CAS-coverage or full CAS-coverage (with a $7.5 million award often referred to as a “CAS trigger contract”). 

  • CAS Coverage – Modified vs. Full CAS-Coverage

Modified CAS-coverage, which requires compliance with CAS 401, 402, 405 and 406, is triggered when:

  • A contractor receives a CAS-covered contract greater than $7.5M but less than $50M in current cost accounting period

Full CAS-coverage, which requires compliance with all 19 standards, is trigged when:

  • A contractor receives a CAS-covered award over $50M in the current cost accounting period, or
  • A contractor received an accumulation of CAS-covered awards in the previous cost accounting period that total $50M or more

Once your organization understands whether it is subject to modified or full CAS-coverage requirements, the next step is to understand whether your cost accounting practices are in compliance with applicable CAS standards.  Regulatory compliance considerations for both modified CAS-coverage and full CAS-coverage are explained in further detail in our next topic: How to Comply with Cost Accounting Standards (CAS).

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