The Adequacy of Settlements of Cost Accounting Standards Noncompliance Cases

PSAD-77-158: Published: Aug 17, 1977. Publicly Released: Aug 17, 1977.

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A limited survey of the settlement of cost accounting standards (CAS) noncompliance cases by Department of Defense contract administration personnel was conducted to determine whether timely and appropriate action was taken to settle noncompliance cases and whether contractor cost impact proposals were obtained, evaluated, and negotiated in accordance with applicable defense procurement regulations.

In 25 of 37 noncompliance cases reported by the Defense Contract Audit Agency (DCAA) to contracting officers, timely action was taken to settle the issues, but for the remaining 12 cases, it was believed that the officers could have taken more action to obtain a timely settlement. Appropriate actions were taken by contractors to comply with CAS on all settled cases through changes in cost estimating, accounting practice, or disclosure statements. Cost impact estimates were submitted by contractors or prepared by DCAA for 12 of the 32 settled cases reviewed. The small number of cost impact proposals was believed to be due to the lack of significance of most of the CAS noncompliance cases. At two contract administration offices, the largest number of reports of noncompliance involved failure to estimate and account for costs in a consistent manner. Changes in estimating practices were promised by contractors in 16 cases. At two offices, nine noncompliance reports involved issues identified during reviews of subcontract price proposals. Agency guidance may be too restrictive in requiring referrals to the administrative contracting officer cognizant of the prime contractor.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: Prompt settlement of noncompliance issues should be emphasized. The reporting of noncompliance should be reviewed with the objective of eliminating unnecessary duplication. Administrative contracting officers who are cognizant of subcontractors' plants should be permitted to settle noncompliance cases not involving monetary considerations.

    Agency Affected:


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