Cost Accounting Standards

Cost Accounting Standards (popularly known as CAS) are a set of 19 standards and rules promulgated by the United States Government for use in determining costs on negotiated procurements. CAS differs from the Federal Acquisition Regulation (FAR) in that FAR applies to substantially all contractors, whereas CAS applies primarily to the larger ones.

In 1970, Congress established the original Cost Accounting Standards Board (CASB) to 1) promulgate cost accounting standards designed to achieve uniformity and consistency in the cost accounting principles followed by defense contractors and subcontractors in excess of $100,000 and 2) establish regulations to require defense contractors and subcontractors, as a condition of contracting, to disclose in writing their cost accounting practices, to follow the disclosed practices consistently and to comply with promulgated cost accounting standards. After adopting 19 standards, the original CASB was dissolved on September 30, 1980; the standards, though, remained active.

However, CASB was revived in 1988 within the Office of Federal Procurement Policy (OFPP). The current CASB consists of five members: the OFPP Administrator (who serves as Chairman) and one member from the United States Department of Defense (this position is held by the Director of the Defense Contract Audit Agency), the General Services Administration, industry, and the private sector.

The original CASB adopted 19 standards, numbered 401 through 420 (419 was never assigned). The new CASB readopted the original 19 standards with only minor modifications, and has yet to adopt any new standards.

CAS applies to contracts, not contractors, though Federal Acquisition Regulation clauses. A company may have contracts that are subject to "full" CAS coverage (be required to follow all 19 standards), "modified" CAS coverage (required to follow only Standards 401, 402, 405, and 406), simultaneously have contracts that are subject to either modified or full coverage, or be exempt from coverage. However, a company under "full" coverage is not subject to a standard where it does not apply (e.g., a company which does not use standard costing does not have to comply with CAS 407).

"Modified" coverage applies to contracts when a company receives a single CAS-covered award of US$7.5 million or more; this is known as the "Trigger" contract; modified coverage applies to all contracts that are not exempt from CAS until the company meets the criteria for "Full" coverage.

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