§ 422. — Cost Accounting Standards Board.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 41USC422]
TITLE 41--PUBLIC CONTRACTS
CHAPTER 7--OFFICE OF FEDERAL PROCUREMENT POLICY
Sec. 422. Cost Accounting Standards Board
(a) Establishment; membership; terms
(1) There is established within the Office of Federal Procurement
Policy an independent board to be known as the ``Cost Accounting
Standards Board'' (hereinafter referred to as the ``Board''). The Board
shall consist of 5 members, including the Administrator, who shall serve
as Chairman, and 4 members, all of whom shall have experience in
Government contract cost accounting, and who shall be appointed as
follows:
(A) two representatives of the Federal Government--
(i) one of whom shall be a representative of the Department
of Defense and be appointed by the Secretary of Defense; and
(ii) one of whom shall be an officer or employee of the
General Services Administration appointed by the Administrator
of General Services; and
(B) two individuals from the private sector, each of whom shall
be appointed by the Administrator and--
(i) one of whom shall be a representative of industry; and
(ii) one of whom shall be particularly knowledgeable about
cost accounting problems and systems.
(2)(A) The term of office of each of the members of the Board, other
than the Administrator for Federal Procurement Policy, shall be 4 years,
except that--
(i) of the initial members, two shall be appointed for terms of
two years, one shall be appointed for a term of three years, and one
shall be appointed for a term of four years;
(ii) any member appointed to fill a vacancy in the Board shall
serve for the remainder of the term for which his predecessor was
appointed; and
(iii) no individual who is appointed under paragraph (1)(A) of
this subsection shall continue to serve after ceasing to be an
officer or employee of the agency from which he or she was
appointed.
(B) A vacancy on the Board shall be filled in the same manner in
which the original appointment was made.
(C) The initial members of the Board shall be appointed within 120
days after November 17, 1988.
(b) Senior staff
The Administrator, after consultation with the Board, may appoint an
executive secretary and two additional staff members without regard to
the provisions of title 5 governing appointments in the competitive
service, and may pay such employees without regard to the provisions of
chapter 51 and subchapter III of chapter 53 of such title relating to
classification and General Schedule pay rates, except that no individual
so appointed may receive pay in excess of the annual rate of basic pay
payable for GS-18 of the General Schedule.
(c) Other staff
The Administrator may appoint, fix the compensation, and remove
additional employees of the Board under the applicable provisions of
title 5.
(d) Detailed and temporary personnel
(1) The Board may use, without reimbursement, any personnel of a
Federal agency (with the consent of the head of the agency concerned) to
serve on advisory committees and task forces to assist the Board in
carrying out the functions and responsibilities of the Board under this
section.
(2) The Administrator, after consultation with the Board, may
procure temporary and intermittent services under section 3109(b) of
title 5 of personnel for the purpose of serving on advisory committees
and task forces to assist the Board in carrying out the functions and
responsibilities of the Board under this section.
(e) Compensation
Except as otherwise provided in subsection (a) of this section, the
members of the Board who are officers or employees of the Federal
Government, and officers and employees of other agencies of the Federal
Government who are used under subsection (d)(1) of this section, shall
receive no additional compensation for services, but shall continue to
be compensated by the employing Department or agency of such officer or
employee. Each member of the Board appointed from private life shall
receive compensation at a rate not to exceed the daily equivalent of the
rate prescribed for level IV of the Executive Schedule for each day
(including travel time) in which the member is engaged in the actual
performance of duties vested in the Board. Individuals hired under
subsection (d)(2) of this section may receive compensation at rates
fixed by the Administrator, but not to exceed the daily equivalent of
the rate prescribed for level V of the Federal Executive Salary Schedule
under section 5316 of title 5 for each day (including travel time) in
which such appointees are properly engaged in the actual performance of
duties under this section. While serving away from homes or the regular
place of business, Board members and other appointees serving on an
intermittent basis under this section shall be allowed travel expenses
in accordance with section 5703 of title 5.
(f) Cost accounting standards authority
(1) The Board shall have the exclusive authority to make,
promulgate, amend, and rescind cost accounting standards and
interpretations thereof designed to achieve uniformity and consistency
in the cost accounting standards governing measurement, assignment, and
allocation of costs to contracts with the United States.
(2)(A) Cost accounting standards promulgated under this section
shall be mandatory for use by all executive agencies and by contractors
and subcontractors in estimating, accumulating, and reporting costs in
connection with pricing and administration of, and settlement of
disputes concerning, all negotiated prime contract and subcontract
procurements with the United States in excess of $500,000.
(B) Subparagraph (A) does not apply to the following contracts or
subcontracts:
(i) Contracts or subcontracts for the acquisition of commercial
items.
(ii) Contracts or subcontracts where the price negotiated is
based on prices set by law or regulation.
(iii) Firm, fixed-price contracts or subcontracts awarded on the
basis of adequate price competition without submission of certified
cost or pricing data.
(iv) A contract or subcontract with a value of less than
$7,500,000 if, at the time the contract or subcontract is entered
into, the segment of the contractor or subcontractor that will
perform the work has not been awarded at least one contract or
subcontract with a value of more than $7,500,000 that is covered by
the cost accounting standards.
(C) In this paragraph, the term ``subcontract'' includes a transfer
of commercial items between divisions, subsidiaries, or affiliates of a
contractor or subcontractor.
(3) The Administrator, after consultation with the Board, shall
prescribe rules and procedures governing actions of the Board under this
section. Such rules and procedures shall require that any cost
accounting standard promulgated, amended, or rescinded (and
interpretations thereof) shall be adopted by majority vote of the Board
members.
(4) The Board is authorized--
(A) to exempt classes or categories of contractors and
subcontractors from the requirements of this section; and
(B) to establish procedures for the waiver of the requirements
of this section with respect to individual contracts and
subcontracts.
(5)(A) The head of an executive agency may waive the applicability
of the cost accounting standards for a contract or subcontract with a
value less than $15,000,000 if that official determines in writing that
the segment of the contractor or subcontractor that will perform the
work--
(i) is primarily engaged in the sale of commercial items; and
(ii) would not otherwise be subject to the cost accounting
standards under this section, as in effect on or after the effective
date of this paragraph.
(B) The head of an executive agency may also waive the applicability
of the cost accounting standards for a contract or subcontract under
exceptional circumstances when necessary to meet the needs of the
agency. A determination to waive the applicability of the cost
accounting standards under this subparagraph shall be set forth in
writing and shall include a statement of the circumstances justifying
the waiver.
(C) The head of an executive agency may not delegate the authority
under subparagraph (A) or (B) to any official in the executive agency
below the senior policymaking level in the executive agency.
(D) The Federal Acquisition Regulation shall include the following:
(i) Criteria for selecting an official to be delegated authority
to grant waivers under subparagraph (A) or (B).
(ii) The specific circumstances under which such a waiver may be
granted.
(E) The head of each executive agency shall report the waivers
granted under subparagraphs (A) and (B) for that agency to the Board on
an annual basis.
(g) Requirements for standards
(1) Prior to the promulgation under this section of cost accounting
standards and interpretations thereof, the Board shall--
(A) take into account, after consultation and discussions with
the Comptroller General and professional accounting organizations,
contractors, and other interested parties--
(i) the probable costs of implementation, including
inflationary effects, if any, compared to the probable benefits;
(ii) the advantages, disadvantages, and improvements
anticipated in the pricing and administration of, and settlement
of disputes concerning, contracts; and
(iii) the scope of, and alternatives available to, the
action proposed to be taken;
(B) prepare and publish a report in the Federal Register on the
issues reviewed under paragraph (1)(A);
(C)(i) publish an advanced notice of proposed rulemaking in the
Federal Register in order to solicit comments on the report prepared
pursuant to subparagraph (B);
(ii) provide all parties affected a period of not less than 60
days after such publication to submit their views and comments; and
(iii) during this 60-day period, consult with the Comptroller
General and consider any recommendation the Comptroller General may
make; and
(D) publish a notice of such proposed rulemaking in the Federal
Register and provide all parties affected a period of not less than
60 days after such publication to submit their views and comments.
(2) Rules, regulations, cost accounting standards, and modifications
thereof promulgated or amended under this section shall have the full
force and effect of law, and shall become effective within 120 days
after publication in the Federal Register in final form, unless the
Board determines a longer period is necessary. Implementation dates for
contractors and subcontractors shall be determined by the Board, but in
no event shall such dates be later than the beginning of the second
fiscal year of the contractor or subcontractor after the standard
becomes effective. Rules, regulations, cost accounting standards, and
modifications thereof promulgated or amended under this section shall be
accompanied by prefatory comments and by illustrations, if necessary.
(3) The functions exercised under this section are excluded from the
operation of sections 551, 553 through 559, and 701 through 706 of title
5.
(h) Implementing regulations
(1) The Board shall promulgate rules and regulations for the
implementation of cost accounting standards promulgated or interpreted
under subsection (f) of this section. Such regulations shall be
incorporated into the Federal Acquisition Regulation and shall require
contractors and subcontractors as a condition of contracting with the
United States to--
(A) disclose in writing their cost accounting practices,
including methods of distinguishing direct costs from indirect costs
and the basis used for allocating indirect costs; and
(B) agree to a contract price adjustment, with interest, for any
increased costs paid to such contractor or subcontractor by the
United States by reason of a change in the contractor's or
subcontractor's cost accounting practices or by reason of a failure
by the contractor or subcontractor to comply with applicable cost
accounting standards.
(2) If the United States and a contractor or subcontractor fail to
agree on a contract price adjustment, including whether the contractor
or subcontractor has complied with the applicable cost accounting
standards, the disagreement will constitute a dispute under the Contract
Disputes Act [41 U.S.C. 601 et seq.].
(3) Any contract price adjustment undertaken pursuant to paragraph
(1)(B) shall be made, where applicable, on relevant contracts between
the United States and the contractor that are subject to the cost
accounting standards so as to protect the United States from payment, in
the aggregate, of increased costs (as defined by the Board). In no case
shall the Government recover costs greater than the increased cost (as
defined by the Board) to the Government, in the aggregate, on the
relevant contracts subject to the price adjustment, unless the
contractor made a change in its cost accounting practices of which it
was aware or should have been aware at the time of the price negotiation
and which it failed to disclose to the Government.
(4) The interest rate applicable to any contract price adjustment
shall be the annual rate of interest established under section 6621 of
title 26 for such period. Such interest shall accrue from the time
payments of the increased costs were made to the contractor or
subcontractor to the time the United States receives full compensation
for the price adjustment.
(i) Omitted
(j) Effect on other standards and regulations
(1) All cost accounting standards, waivers, exemptions,
interpretations, modifications, rules, and regulations promulgated by
the Cost Accounting Standards Board under section 2168 \1\ of title 50,
Appendix, shall remain in effect unless and until amended, superseded,
or rescinded by the Board pursuant to this section.
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\1\ See References in Text note below.
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(2) Existing cost accounting standards referred to in paragraph (1)
shall be subject to the provisions of this chapter in the same manner as
if promulgated by the Board under this chapter.
(3) The Administrator, under the authority set forth in section 405
of this title, shall ensure that no regulation or proposed regulation of
an executive agency is inconsistent with a cost accounting standard
promulgated or amended under this section by rescinding or denying the
promulgation of any such inconsistent regulation or proposed regulation
and taking such other action authorized under section 405 of this title
as may be appropriate.
(4) Costs which are the subject of cost accounting standards
promulgated under this section shall not be subject to regulations that
are established by another executive agency that differ from such
standards with respect to the measurement, assignment, and allocation of
such costs.
(k) Examinations
For the purpose of determining whether a contractor or subcontractor
has complied with cost accounting standards promulgated under this
section and has followed consistently the contractor's or
subcontractor's disclosed cost accounting practices, any authorized
representative of the head of the agency concerned, of the offices of
inspector general established pursuant to the Inspector General Act of
1978, or of the Comptroller General of the United States shall have the
right to examine and make copies of any documents, papers, or records of
such contractor or subcontractor relating to compliance with such cost
accounting standards.
(l) Authorization of appropriations
There are authorized to be appropriated such sums as may be
necessary to carry out the provisions of this section.
(Pub. L. 93-400, Sec. 26, as added Pub. L. 100-679, Sec. 5(a), Nov. 17,
1988, 102 Stat. 4058; amended Pub. L. 103-355, title II, Sec. 2453,
title VIII, Sec. 8301(d), Oct. 13, 1994, 108 Stat. 3326, 3397; Pub. L.
104-106, div. D, title XLII, Sec. 4205, title XLIII, Sec. 4321(h)(4),
Feb. 10, 1996, 110 Stat. 656, 675; Pub. L. 106-65, div. A, title VIII,
Sec. 802(a), (b), Oct. 5, 1999, 113 Stat. 701.)
References in Text
The provisions of title 5 governing appointments in the competitive
service, referred to in subsec. (b), are classified generally to section
3301 et seq. of Title 5, Government Organization and Employees.
Level IV of the Executive Schedule, referred to in subsec. (e), is
set out in section 5315 of Title 5.
For the effective date of this paragraph, referred to in subsec.
(f)(5)(A)(ii), as 180 days after Oct. 5, 1999, see section 802(i) of
Pub. L. 106-65, set out as an Effective Date of 1999 Amendment;
Regulations; Implementation; Construction note below.
The Contract Disputes Act, referred to in subsec. (h)(2), probably
means the Contract Disputes Act of 1978, Pub. L. 95-563, Nov. 1, 1978,
92 Stat. 2383, as amended, which is classified principally to chapter 9
(Sec. 601 et seq.) of this title. For complete classification of this
Act to the Code, see Short Title note set out under section 601 of this
title and Tables.
Section 2168 of title 50, Appendix, referred to in subsec. (j)(1),
was repealed by Pub. L. 100-679, Sec. 5(b), Nov. 17, 1988, 102 Stat.
4063.
The Inspector General Act of 1978, referred to in subsec. (k), is
Pub. L. 95-452, Oct. 12, 1978, 92 Stat. 1101, as amended, which is set
out in the Appendix to Title 5, Government Organization and Employees.
Codification
Subsec. (i) of this section, which required the Board to submit an
annual report to Congress on the activities and operations of the Board
under this section, terminated, effective May 15, 2000, pursuant to
section 3003 of Pub. L. 104-66, as amended, set out as a note under
section 1113 of Title 31, Money and Finance. See, also, page 42 of House
Document No. 103-7.
Amendments
1999--Subsec. (f)(2)(B)(iii), (iv). Pub. L. 106-65, Sec. 802(a),
added cls. (iii) and (iv).
Subsec. (f)(5). Pub. L. 106-65, Sec. 802(b), added par. (5).
1996--Subsec. (f)(2)(B)(i). Pub. L. 104-106, Sec. 4205(1), added cl.
(i) and struck out former cl. (i) which read as follows: ``Contracts or
subcontracts where the price negotiated is based on established catalog
or market prices of commercial items sold in substantial quantities to
the general public.''
Subsec. (f)(2)(B)(iii). Pub. L. 104-106, Sec. 4205(2), struck out
cl. (iii) which read as follows: ``Any other firm fixed-price contract
or subcontract (without cost incentives) for commercial items.''
Subsec. (f)(3). Pub. L. 104-106, Sec. 4321(h)(4), substituted ``The
Administrator'' for ``Not later than 180 days after November 17, 1988,
the Administrator''.
1994--Subsec. (f)(2). Pub. L. 103-355, Sec. 8301(d), designated
existing provisions as subpar. (A), substituted a period for ``, other
than contracts or subcontracts where the price negotiated is based on
(A) established catalog or market prices of commercial items sold in
substantial quantities to the general public, or (B) prices set by law
or regulation'', and added subpars. (B) and (C).
Subsec. (f)(3). Pub. L. 103-355, Sec. 2453, which directed
substitution of ``The Administrator'' for ``Not later than 180 days
after the date of the enactment of this section, the Administrator'',
could not be executed because those words did not appear in the
original.
Effective Date of 1999 Amendment; Regulations; Implementation;
Construction
Pub. L. 106-65, div. A, title VIII, Sec. 802(c)-(e), (g)-(i), Oct.
5, 1999, 113 Stat. 701, 702, provided that:
``(c) Regulation on Types of CAS Coverage.--(1) The Administrator
for Federal Procurement Policy shall revise the rules and procedures
prescribed pursuant to section 26(f) of the Office of Federal
Procurement Policy Act (41 U.S.C. 422(f)) to the extent necessary to
increase the thresholds established in section 9903.201-2 of title 48 of
the Code of Federal Regulations from $25,000,000 to $50,000,000.
``(2) Paragraph (1) requires only a change of the statement of a
threshold condition in the regulation referred to by section number in
that paragraph, and shall not be construed as--
``(A) a ratification or expression of approval of--
``(i) any aspect of the regulation; or
``(ii) the manner in which section 26 of the Office of
Federal Procurement Policy Act is administered through the
regulation; or
``(B) a requirement to apply the regulation.
``(d) Implementation.--The Administrator for Federal Procurement
Policy shall ensure that this section and the amendments made by this
section [amending this section] are implemented in a manner that ensures
that the Federal Government can recover costs, as appropriate, in a case
in which noncompliance with cost accounting standards, or a change in
the cost accounting system of a contractor segment or subcontractor
segment that is not determined to be desirable by the Federal
Government, results in a shift of costs from contracts that are not
covered by the cost accounting standards to contracts that are covered
by the cost accounting standards.
``(e) Implementation of Requirements for Revision of Regulations.--
(1) Final regulations required by subsection (c) shall be issued not
later than 180 days after the date of the enactment of this Act [Oct. 5,
1999].
``(2) Subsection (c) shall cease to be effective one year after the
date on which final regulations issued in accordance with that
subsection take effect.
``(g) Inapplicability of Standards to Certain Contracts.--The cost
accounting standards issued pursuant to section 26(f) of the Office of
Federal Procurement Policy Act (41 U.S.C. 422(f)), as amended by this
section, shall not apply during fiscal year 2000 with respect to a
contract entered into under the authority provided in chapter 89 of
title 5, United States Code (relating to health benefits for Federal
employees).
``(h) Construction Regarding Certain Not-For-Profit Entities.--The
amendments made by subsections (a) and (b) [amending this section] shall
not be construed as modifying or superseding, nor as intended to impair
or restrict, the applicability of the cost accounting standards
described in section 26(f) of the Office of Federal Procurement Policy
Act (41 U.S.C. 422(f)) to--
``(1) any educational institution or federally funded research
and development center that is associated with an educational
institution in accordance with Office of Management and Budget
Circular A-21, as in effect on January 1, 1999; or
``(2) any contract with a nonprofit entity that provides
research and development and related products or services to the
Department of Defense.
``(i) Effective Date.--The amendments made by subsections (a) and
(b) [amending this section] shall take effect 180 days after the date of
enactment of this Act [Oct. 5, 1999], and shall apply with respect to--
``(1) contracts that are entered into on or after such effective
date; and
``(2) determinations made on or after such effective date
regarding whether a segment of a contractor or subcontractor is
subject to the cost accounting standards under section 26(f) of the
Office of Federal Procurement Policy Act (41 U.S.C. 422(f)),
regardless of whether the contracts on which such determinations are
made were entered into before, on, or after such date.''
Effective Date of 1996 Amendment
For effective date and applicability of amendment by Pub. L. 104-
106, see section 4401 of Pub. L. 104-106, set out as a note under
section 251 of this title.
Effective Date of 1994 Amendment
For effective date and applicability of amendment by Pub. L. 103-
355, see section 10001 of Pub. L. 103-355, set out as a note under
section 251 of this title.
References in Other Laws to GS-16, 17, or 18 Pay Rates
References in laws to the rates of pay for GS-16, 17, or 18, or to
maximum rates of pay under the General Schedule, to be considered
references to rates payable under specified sections of Title 5,
Government Organization and Employees, see section 529 [title I,
Sec. 101(c)(1)] of Pub. L. 101-509, set out in a note under section 5376
of Title 5.
Section Referred to in Other Sections
This section is referred to in title 5 section 9009.
