CAS Coverage Requirements and CAS Exemptions

The following subsections contain a summary of CAS coverage requirements:

Educational Institutions – CAS: Contracts and subcontracts with educational institutions are subject to special CAS coverage. Contracts and subcontracts performed by federally funded research and development centers operated by educational institutions are subject to CAS coverage for commercial companies.

CAS Exemptions: The following categories of contracts and subcontracts are exempt from all CAS requirements (48 CFR 9903.201-1):

a. Sealed bid contracts. b. Negotiated contracts and subcontracts (including interdivisional work orders) less than the Truth in Negotiations Act (TINA) threshold. c. Contracts and subcontracts with small businesses. FAR Subpart 19.3 addresses determination of status as a small business. A small business (offeror) is one which represents, through a written self-certification, that it is a small business concern in connection with a specific solicitation and has not been determined by the Small Business Administration (SBA) to be other than a small business. The contracting officer accepts an offeror's representation unless that representation is challenged or questioned. If the status is challenged, the SBA will evaluate the status of the concern and make a determination. (Specific standards appear in Part 121 of Title 13 of the Code of Federal Regulations.)d. Contracts and subcontracts with foreign governments or their agents or instrumentalities or, insofar as the requirements of CAS other than CAS 401 and CAS 402 are concerned, any contract or subcontract awarded to a foreign concern. e. Contracts and subcontracts in which the price is set by law or regulation. f. Firm-fixed-price contracts and subcontracts for the acquisition of commercial items. g. Contracts or subcontracts less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing Chapter 8 any CAS-covered contracts or subcontracts valued at $7.5 million or greater. “Currently performing” is defined in 48 CFR 9903.301, Definitions. A contract is being currently performed if the contractor has not yet received notification of final acceptance of all supplies, services, and data deliverable under the contract (including options). “Currently performing” is intended to reflect the period of time when work is being performed on contractual effort. The period ends when the Government notifies the contractor of final acceptance of all items under the contract. If a contractor is currently performing a CAS-covered contract of $7.5 million or greater, CAS coverage is triggered and new awards are subject to CAS (unless they meet another exemption under 9903.201-1(b)). h. Subcontracts under the NATO PHM Ship program to be performed outside the United States by a foreign concern. i. Firm-fixed-price contracts and subcontracts awarded on the basis of adequate price competition without submission of certified cost or pricing data. j. In cases where the prime contract is exempt from CAS under any of the exemptions at 9903.201-1 any subcontract under that prime is always exempt from

Types of CAS Coverage: a. Full coverage requires business units (as defined in CAS 410-30(a)(2)) comply with all of the CAS in effect on the contract award date and with any CAS that become applicable because of new standards (CAS clause at FAR 52.230-2). Full coverage applies to contractor business units that:

(1) Received a single CAS-covered contract award, including option amounts, of $50 million or more, or

(2) Received $50 million or more in CAS-covered contract awards during the immediately preceding cost accounting period. The $50 million threshold became effective April 2, 2000. The previous $25 million threshold was effective from November 4, 1993 through April 1, 2000. Prior to November 4, 1993 the threshold was $10 million.

b. Modified CAS coverage (CAS clause at FAR 52.230-3) requires only that the contractor comply with CAS 401, 402, 405, and 406. Contracts with modified CAS coverage awarded prior to November 4, 1993 are subject to CAS 401 and 402 only. Modified CAS coverage applies to contractor business units that received less than $50 million in net CAS-covered awards in the immediately preceding cost accounting period.

c. When any one contract is awarded with modified CAS coverage, all CAScovered contracts awarded to that business unit during that cost accounting period are also subject to modified coverage, except that when a business unit receives a single CAS-covered contract award of $50 million or more, that contract is subject to full Chapter 8 coverage. Thereafter, any covered contract awarded during that accounting period and the subsequent accounting period is subject to full CAS coverage.

d. The CAS status of a contract or subcontract (full coverage, modified coverage, or exempt from CAS), remains the same throughout its life regardless of changes in the business unit’s CAS status in the current or subsequent cost accounting periods (i.e., a contract awarded with modified coverage remains subject to such coverage throughout its life even if subsequent period contracts are awarded with full coverage).

e. Subcontract coverage. (1) When a subcontract is awarded under a CAS covered prime contract (and higher-tier

subcontract), CAS coverage of the subcontract is determined in the same manner as prime contracts awarded to the subcontractor's business unit; i.e., determine if any of the exemptions from CAS at 48 CFR 9903.201-1 apply to the subcontract (see 8-103.2).

(2) Working Group Paper 76-3, Policy for Application of CAS to Subcontracts, states that the standards applicable to the prime contract at the time it was awarded are also applicable to the subcontract.

Effect of Contract Modifications:

Contract modifications made under the terms and conditions of the contract do not affect its status with respect to CAS applicability. Therefore, if CAS was applicable to the basic contract, it will apply to the modification. Conversely, if the basic contract was exempt from CAS, the modification will also be exempt regardless of the amount of the modification. However, if the contract modification adds new work it must be treated for CAS purposes as if it were a new contract. In this case, if the modification exceeds the threshold, it will be CAS-covered (see CAS Working Group Paper 76-2).

Effect of Basic Ordering Agreements:

Basic agreements and basic ordering agreements (BOAs) are not considered contracts (FAR 16.702(a) and 16-703(a)). Since orders must be considered individually in determining CAS applicability, only orders that exceed the threshold will be CAS covered (see CAS Working Group Paper 76-2).

Effect of Letter Contracts:

CAS is applicable to letter contracts exceeding the threshold as of the date of the award. Definitizing the contract will not activate any new standards since definitization is a contract modification rather than a new contract (see CAS Working Group Paper 77-16).

CAS Flowdown Clause - FAR 52.230-2:

The CAS clauses at FAR 52.230-2(d) and FAR 52.230-3(d) (for full and modified coverage, respectively) require a contractor to include the substance of the CAS clause in all negotiated subcontracts (at any tier) into which the contractor enters. This is commonly referred to as the "CAS flow down clause”. However, if a subcontract meets one of the CAS exemptions at 48 CFR 9903.201-1 (see 8-103.2), the subcontract will not be subject to CAS. For example, a CAS-covered prime contractor could not place the requirement for CAS compliance on a subcontract with a small business because 9903.201-1(b)(3) specifically exempts contracts and subcontracts with small businesses from CAS requirements.