When contractors want to make an accounting practice change the government wants to make sure it does not pay increased costs.  The cost accounting standards prescribes an often onerous cost impact process to demonstrate costs are not increased and even non-CAS covered contracts must informally follow similar steps.  A proposed governmentwide rule seeks to lessen the requirement to submit cost impact estimates or contract price adjustments for cost type contracts by using a three-step sequence of submissions where settlement is encouraged at the lowest step possible:

an initial evaluation to determine materiality of the changes
if the cost is material, a general dollar magnitude (GDM) proposal reflecting the minimum data needed to resolve the cost impact
if the GDM proposal is insufficient a detailed cost impact proposal.

For resolving the cost impact the rule will

Require the “cognizant federal agency official” (CFAO) to invite COs to participate in negotiation of their respective contracts if the impact is over $100,000 (currently $10,000).

Allow the CFAO to use an alternative method rather than adjusting all affected contracts as long as the government does not pay in the aggregate more that it would have paid without the accounting change.

The proposed procedure would apply to voluntary changes, mandatory changes or CAS noncompliances.  The current rule is intended to be a more simple version of a proposed change being put forth by the Cost Accounting Standards Board.

(Contractor's reimbursed for research and development costs, either as direct contracts or part of their indirect cost rates, have been concerned whether these expenditures apply for the R&D tax credit.  The following case clarifies that such costs do qualify.)

Under the IRS code, a company cannot include as "qualified research" those activities that are "funded" where "funded" depends on whether the contractor had "substantial rights" in the research - in other words, if a contractors conducts research for a government agency and the contractor retains no substantial rights in the research, the cost cannot quality for the R&D tax credit.  A lower Court ruled the contractor was not entitled to the R&D credit because the government had unlimited rights to use the contractor's technical data and computer software and to disclose it to other parties.

The Appeals Court overruled the lower court stating though the contractor did not have "exclusive" rights it still had "substantial rights".  The fact others (e.g. government) may have rights does not mean the contractor losses its rights, citing examples where the contraactor may still make or use the same or similar products in its own business.

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