CAS-Covered Contract

A CAS-covered contract is a negotiated government contract that exceeds the Cost Accounting Standards (CAS) coverage thresholds, currently $2M for modified CAS coverage and $50M (or $50M cumulative in a year) for full CAS coverage, requiring the contractor to comply with applicable CASB standards for measuring, assigning, and allocating costs.

What is a CAS-Covered Contract?

CAS coverage is triggered by the contract's negotiated price, not by whether it is cost-type or fixed-price. Even an FFP contract above $2M can be CAS-covered if it was the result of negotiation rather than sealed bidding. The critical distinction is between negotiated contracts (where CAS may apply) and sealed-bid contracts (which are CAS-exempt regardless of value).

The coverage thresholds create three tiers. Below $2M: CAS-exempt, no standards apply. Between $2M and $50M: modified CAS coverage, requiring compliance with only CAS 401 and CAS 402 (consistency in estimating and allocating). Above $50M single award, or $50M in a year from CAS-covered contracts: full CAS coverage, requiring compliance with all 19 standards and mandatory Disclosure Statement submission.

CAS coverage attaches at the contract level. When a contractor receives its first full-coverage contract, all of its CAS-covered contracts going forward become subject to full coverage. The contractor cannot selectively apply full coverage to some contracts and modified coverage to others in the same period, once the full threshold is met, all covered contracts that year are fully covered.

Certain contract types are exempt from CAS regardless of value: firm-fixed-price and fixed-price with economic price adjustment contracts awarded through sealed bidding; contracts with small businesses; foreign government contracts; contracts for commercial items under FAR Part 12; and contracts with educational institutions governed by OMB Circular A-21.

Why CAS Coverage Status Matters for Government Contractors

Growing contractors face a significant compliance inflection point when they approach the CAS coverage thresholds. Below the threshold, accounting system requirements are minimal. Crossing into modified coverage requires demonstrably consistent cost accounting practices and documentation. Crossing into full coverage requires a Disclosure Statement, compliance with all 19 standards, and DCAA audit exposure on the entire cost accounting system. Contractors pursuing large-dollar pursuits should model the CAS compliance investment before deciding to compete, as the administrative burden can materially affect the true cost of a win.

Example

A professional services firm wins a $6M CPFF task order, its first contract over $2M. The contract is CAS-covered at the modified level, triggering CAS 401 and CAS 402 compliance requirements. The firm's finance team reviews its estimating practices against its cost accumulation practices and discovers a minor inconsistency in how bid and proposal costs are classified during estimating versus how they are recorded in the general ledger. Correcting the discrepancy before the DCAA pre-award survey avoids a compliance finding that could have delayed contract award.

Frequently Asked Questions

Does CAS coverage apply to task orders under a CAS-covered IDIQ?

Yes. Task orders issued under a CAS-covered IDIQ vehicle are subject to the same CAS coverage level as the basic IDIQ contract. The contracting officer includes CAS clauses in the IDIQ that flow down to all task orders above the coverage threshold. Task orders below $2M (even under a CAS-covered IDIQ) may be individually exempt, but the determination is contract-specific and should be confirmed with the contracting officer.

Can a contractor request a CAS waiver?

Yes, but waivers are rarely granted. FAR 30.201-5 authorizes agency heads to waive CAS requirements when necessary to meet unusual needs or specific national security objectives. Routine cost-type contracts do not meet this standard. Waivers are most commonly sought for urgent sole-source acquisitions where CAS compliance would cause unacceptable delay to critical programs. Even with a waiver, the government typically negotiates contract terms requiring cost transparency equivalent to CAS.

What is a cost impact proposal under CAS?

When a CAS-covered contractor makes a voluntary or required change to its cost accounting practices, FAR 30.606 requires the contractor to submit a cost impact proposal to the contracting officer within 60 days. The cost impact proposal calculates, contract by contract, how the accounting change will increase or decrease the total costs paid by the government. Changes that benefit the government result in downward equitable adjustments; changes that benefit the contractor result in upward adjustments. The government's right to a favorable equitable adjustment when contractor accounting changes reduce costs is a key CAS protection.

How does CAS interact with the Truth in Negotiations Act?

Both CAS and TINA (now called the requirement for certified cost or pricing data under 10 U.S.C. 3701 and 41 U.S.C. 3501) apply to large negotiated contracts, but they address different issues. TINA requires the contractor to submit and certify current, accurate, and complete cost or pricing data before award, allowing the government to negotiate a fair price. CAS requires the contractor to use consistent cost accounting practices during performance, ensuring the cost data submitted under TINA is comparable to what will be incurred. Together, they form the government's defense against cost manipulation on large negotiated contracts.