The Federal government may soon adopt new rules for when indefinite delivery contracts and orders are subject to the Cost Accounting Standards. According to a June 18, 2024 notice, the CAS Board is considering multiple different approaches to this issue, and it has invited comments from the public.

In determining whether a contract is subject to CAS, a key factor is the dollar value of the agreement. In general, negotiated awards are exempt from CAS when not in excess of the TINA threshold. CAS 9903.201-1(b)(2). So are awards of less than $7.5 million, provided that the business unit is not currently performing any CAS-covered awards valued at $7.5 million or greater at the time of award. CAS 9903.201-1(b)(7). Moreover, a contractor’s business unit must apply “full” CAS coverage after receiving a single CAS-covered award of at least $50 million, or after receiving $50 million or more in net CAS-covered awards in its preceding cost accounting period. CAS 9903.201-2(a). 

However, indefinite delivery vehicles (IDVs), which include basic ordering agreements and indefinite delivery / indefinite quantity contracts (IDIQs), often do not provide a stated dollar value for CAS purposes. Determining the value of these “IDVs” or their “orders” for CAS purposes can at times be a fact-specific exercise. Federal contractors and procurement officials have taken various approaches to this issue under the circumstances.

The CAS Board is now looking to write new rules about CAS coverage for IDVs. The Board is considering at least six different approaches, and it has invited public comment on each, which we have quoted in part here:

  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.
  2. Maximum award value. CAS would apply to all orders under an IDV, no matter the value of the individual 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).

Contractors that currently perform CAS-covered contracts, as well as companies looking to pursue CAS-covered work, should take note and consider submitting responses to the CAS Board. The CAS Board has set a deadline of August 19, 2024 for comments. 

Photo of Evan R. Sherwood Evan R. Sherwood

Evan Sherwood counsels federal contractors on Contract Disputes Act (CDA) claims, the cost accounting standards (CAS), cost allowability, requests for equitable adjustment (REAs), contract terminations for convenience/default, and related audits, litigations, and investigations. He also advises on contract compliance and formation issues, including TINA/defective pricing…

Evan Sherwood counsels federal contractors on Contract Disputes Act (CDA) claims, the cost accounting standards (CAS), cost allowability, requests for equitable adjustment (REAs), contract terminations for convenience/default, and related audits, litigations, and investigations. He also advises on contract compliance and formation issues, including TINA/defective pricing, data rights, mandatory disclosure rules, ethics, conflicts of interest, teaming arrangements, and other transaction agreements (OTAs). He has litigated matters before the Court of Federal Claims, the Armed Services Board of Contract Appeals, the Government Accountability Office, and the Federal District Courts.

In his work for defense and civilian agency contractors, Evan:

  • Prepares CDA claims and REAs;
  • Litigates matters involving CAS compliance, cost accounting practice changes, and cost allowability under the FAR and grant rules;
  • Defends contractors during audits and investigations involving the Defense Contract Audit Agency (DCAA), Defense Contract Management Agency (DCMA), and the Office of the Inspector General (OIG);
  • Advises on constructive changes, work delays, defective specifications, stop-work orders, government-furnished property, CPARS, warranty matters, data rights, and quality controls;
  • Counsels on disputes between primes and subcontractors, including teaming disputes; and
  • Conducts internal investigations and defends clients in federal investigations involving whistleblower allegations and retaliation claims.

Evan is a Vice Chair of the ABA Public Contract Law Section’s Contract Claims & Disputes Resolution Committee. He routinely writes and speaks about legal issues in federal contracting.

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Photo of Peter B. Hutt II Peter B. Hutt II

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui…

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui tam matters brought under the False Claims Act, including matters alleging noncompliance with cybersecurity requirements, cost mischarging, CAS violations, quality assurance deficiencies, substandard products and services, defective pricing, health care fraud, reverse false claims, and inadequate subcontractor oversight.

Peter has also conducted numerous internal investigations and frequently advises clients on whether to make disclosures of potential wrongdoing.

Peter also represents clients in a wide range of accounting, cost, and pricing matters, as well as other contract and grant matters. He is experienced in addressing issues concerning pensions and post-retirement benefits, contract formation, TINA and defective pricing, claims and terminations, contract financing, price reduction clauses, subcontracting and supply chain compliance, specialty metals compliance, and small business and DBE compliance. He has litigated significant cost, accounting, and contract breach matters in the Court of Federal Claims and the Armed Services Board of Contract Appeals.

Peter is recognized for his work both in government contracts and in False Claims Act disputes by Chambers USA, which notes that “He is absolutely outstanding. He is thoughtful and client-focused.” Chambers also notes that “Peter’s judgment and problem solving ability is unique. He is a very good False Claims Act lawyer.”

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