OFPP considers exempting accounting standards

Federal officials want comments on whether government contracts and subcontracts performed entirely outside of the United States should be subject to the cost accounting standards (CAS), according to a notice released today.

They are considering the advantages, disadvantages and any improvements in the pricing and administration of contracts if such an exemption rule were approved, the notice in the Federal Register states. The Office of Federal Procurement Policy (OFPP) wants to know if experts believe the standards should be retained, eliminated or simply revised.

Overseas federal contracts can be handled by a variety of companies with different legal statuses. OFPP’s request concerns contracts that would otherwise be subject to CAS, except for the fact that the contract is exempted because it’s performed entirely in other nations. However, contractors who were awarded the federal contracts are likely to be U.S. businesses or foreign entities authorized to do business with the U.S. government, the notice states.

The fiscal 2009 National Defense Authorization Act requires the OFPP to review the exemption issue. Congress wants a report by July on whether there are benefits that would justify a revision to the standards.

The government created the accounting standards to bring uniformity and consistency in measuring and auditing contractors’ costs on government contracts. The standards result from officials' concerns decades ago about the pricing and accounting practices of defense contractors. They had no consistency among contractors’ accounting practices, making it difficult to conduct standard audits. The standards were put in place in 1980.

Comments on the proposal can be made at Regulations.gov.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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