CAS Board Elicits Public Comment On Application Of Cost Accounting Standards To Indefinite Delivery Vehicles

Last week, the Cost Accounting Standards (CAS) Board issued a long-awaited notice for public comment regarding application of the CAS to indefinite delivery vehicles (IDVs). This is one of several important issues on the CAS Board's agenda, and an area that has been the subject of much debate over the years, with industry and procuring agencies seeking clarity and consistency regarding how to apply the CAS coverage thresholds. The CAS Board has not committed to amending its rules, but seeks input on whether it should and if so, how. Comments are due on August 19, 2024.

On June 18, 2024, the CAS Board issued a notice in the Federal Register "to elicit public views on whether and how to amend the CAS Board's rules to address the application of Cost Accounting Standards to indefinite delivery vehicles (IDVs)." The CAS Board published a standalone notice explaining that its request for public comment is borne, at least in part, out of the Section 809 Panel's recommendation that the CAS Board amend its rules to address when CAS applies to IDVs. The panel premised this recommendation on the uptick in popularity of IDVs, as well as its observation that the lack of regulatory guidance on this issue "has resulted in inconsistencies in determinations regarding when CAS applies to these vehicles."

Given the importance of contract value on assessing CAS coverage against the established thresholds, determining when the CAS apply to an IDV is especially challenging. Take an IDIQ contract, for instance, which by its very nature is "indefinite" — the base IDIQ contract may contain a minimum guaranteed order as well as a maximum ceiling amount, but work is awarded through task and delivery orders as requirements arise. The CAS rules do not specify which of these values ought to be used to assess coverage. And contractors have encountered varying interpretations from the government on this point. For its part, the Section 809 Panel recommended that the CAS Board "[e]valuate each order for CAS applicability on its own."

With that background, the CAS Board announced its plan to consider the benefits and drawbacks of revising its rules to address how the CAS coverage thresholds apply to IDVs, and presented the following alternative approaches to facilitate public feedback.

1. Order-by-order. Each task order and delivery order would be treated as an individual contract and CAS would apply only to those orders whose values met the coverage thresholds. (This is the approach described above that was recommended by the Section 809 Panel.)
2. Maximum award value. CAS would apply to all orders under an IDV, no matter the value of the order, if the ceiling amount of the IDV met the coverage thresholds.
3. Minimum award value. CAS would not apply to any orders under an IDV unless its minimum guarantee amount met the CAS coverage thresholds, in which case CAS would apply to all orders.
4. Cumulative threshold. CAS would apply at the point where the cumulative value of the orders awarded crosses the dollar threshold for CAS coverage. At that point, the current order and all subsequent orders awarded would be covered by CAS.
5. Order-by-order for multiple award IDVs and maximum award value for single award IDVs. For multiple award IDVs, each order would be regarded as if it were an individual contract for CAS coverage (see alternative no. 1). For single-award IDVs, coverage would be based on the maximum award value (see alternative no. 2).
6. Order-by-order for multiple award IDVs and cumulative threshold for single award IDVs. For multiple award IDVs, each order would be regarded as if it were an individual contract for CAS coverage (see alternative no. 1). For single-award IDVs, CAS would apply at the point where the cumulative value of the orders awarded crosses the dollar threshold for CAS coverage. At that point, the current order and all subsequent orders awarded would be covered by CAS (see alternative no. 4).

The CAS Board is seeking comments on these and any additional alternatives that the public wishes for it to consider.

For those of us advising on CAS compliance, the CAS Board's consideration of this important issue is both affirming and promising. Affirming, in that the CAS Board recognizes "six possible approaches for addressing CAS coverage to IDVs" and at least by implication, understands that contractors and the government have struggled to consistently navigate the competing interpretations. Promising, in that the CAS Board understands that both contractors and the government stand to benefit from clarity — including, on the contractor side, to manage cost risk and reduce compliance burdens. Contractors should strongly consider submitting comments in response to the CAS Board's notice, advocating for an approach that would further those interests, as well as the government's corollary interests in managing price risk and reducing oversight burdens.

In the meantime, this CAS Board notice is an important reminder for contractors to be intentional about how they apply the CAS coverage thresholds to their IDVs.

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