Submitting an Incurred Cost Proposal After Being Acquired
Q. We were acquired by a larger defense contractor last week and are now a wholly owned subsidiary. Are we required to fi le two incurred cost submissions for 2015- one beginning with the sale date and another for costs / rates prior to the sale? Where can I find references to this situation?
A. FAR 31.203(g) and CAS 406 covers what is considered to be contractors’ fiscal periods. CAS 406 is one of the four standards that apply to modified CAS covered contracts. As for incurred cost submission requirements you would seem to have some flexibility. If there are no cost accounting changes then you could use the regular fiscal year. For example, if the only material difference is now your subsidiary receives a home office allocation from the large defense contractor that is considered to be a new cost where no accounting change has occurred. The FAR allows for a “different period” other than the normal 12 months while CAS 406 is more restrictive, allowing for a period less than one year (no less than 5 months) or a period more than one year, up to 15 months. So, for example, you could have an ICE for the previous fiscal year plus up to three more months in the new year (FY 2014-215), or a short period this year before the sale (up to five months) and another short period for the rest of FY 2015. If none of your contracts are CAS covered then you might be able to negotiate even different terms. Keep your eye out for any new accounting changes - they will need to be disclosed in the ICE submittal.
