March 15, 2007
The Federal Acquisition Regulation, as amended in 2005, prohibits contractors from combining multiple cost accounting changes that take effect on the same day unless all of the changes result in increased costs to the government. Put another way, the government ignores changes that result in decreased costs, yet expects the contractor to repay the government for changes that result in increased costs, even if all of the changes are part of the same corporate restructuring. By statute, the Cost Accounting Standards Board has the exclusive authority to define the term "increased costs" and the government is prohibited from recovering more than the "increased costs in the aggregate." The CAS Board met in February for the first time since July 2005, and all five of the board members are new. As the board begins to function, it is likely to take up this contentious issue. The attached article analyzes the phrase, increased costs in the aggregate, and concludes that the FAR violates the statutory requirements. Gibson Dunn partner Karen Manos is the author of "Defining ‘Increased Costs in the Aggregate,’" which appears in the March 2007 issue of Government Contracts Costs, Pricing & Accounting Report, published by Thomson/West.
Reprinted with permission, © March 2007, Thomson/West.
Karen L. Manos is a partner in the Washington, DC office of Gibson, Dunn & Crutcher LLP and a member of the firm’s Litigation Department and the Government and Commercial Contracts Practice Group. To learn more about the issues discussed in this article, please contact the Gibson Dunn attorney with whom you work or Karen Manos (202-955-8536; [email protected]).
© 2007 Gibson, Dunn & Crutcher LLP
The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.