Cost Accounting Standards Board (CAS) Exemption for Contracts Executed and Performed Outside the United States, Its Territories, and Possessions, 8259-8260 [E8-2668]

Agencies

• Office of Management and Budget
• Office of Federal Procurement Policy
• Federal Procurement Policy Office

[Federal Register Volume 73, Number 30 (Wednesday, February 13, 2008)]
[Proposed Rules]
[Pages 8259-8260]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2668]


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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

48 CFR Parts 9901 and 9903


Cost Accounting Standards Board (CAS) Exemption for Contracts 
Executed and Performed Outside the United States, Its Territories, and 
Possessions

AGENCY: Cost Accounting Standards Board, Office of Federal Procurement 
Policy, OMB.

[[Page 8260]]


ACTION: Notice of Discontinuation of Case.

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SUMMARY: The Office of Federal Procurement Policy (OFPP), Cost 
Accounting Standards (CAS) Board, is providing public notification of 
the decision to discontinue its review of the exemption for contracts 
that are executed and performed outside the United States, its 
territories, and possessions.

FOR FURTHER INFORMATION CONTACT: Laura Auletta, Manager, Cost 
Accounting Standards Board, 725 17th Street, NW., Room 9013, 
Washington, DC 20503 (telephone: 202-395-3256).

SUPPLEMENTARY INFORMATION:

A. Regulatory Process

    The Cost Accounting Standards Board's rules, regulations and 
Standards are codified at 48 CFR Chapter 99. The Office of Federal 
Procurement Policy Act, 41 U.S.C. 422(g)(1), requires the Board, prior 
to the establishment of any new or revised Cost Accounting Standard, to 
complete a prescribed rulemaking process. The process generally 
consists of the following four steps:
    1. Consult with interested persons concerning the advantages, 
disadvantages, and improvements anticipated in the pricing and 
administration of government contracts as a result of the adoption of a 
proposed Standard.
    2. Promulgate an Advance Notice of Proposed Rulemaking (ANPRM).
    3. Promulgate a Notice of Proposed Rulemaking (NPRM).
    4. Promulgate a Final Rule.
    This notice announces the discontinuation of a case after 
completing step one of the four-step process.

B. Background and Summary

    On September 15, 2005, the CAS Board issued a Staff Discussion 
Paper inviting comments regarding whether the exemption at 48 CFR 
9903.201-1(b)(14) should be revised or eliminated (70 FR 53977). The 
SDP discussed the history of the exemption. In summary, this discussion 
stated that the original CAS Board was established by Section 2168 of 
the Defense Production Act of 1950 (DPA). Section 2163 of the DPA, 
entitled ``Territorial Application of Act,'' provided that Sections 
2061 through 2170 of the Act ``shall be applicable to the United 
States, its territories and possessions, and the District of Columbia'' 
(United States). Therefore, because the provisions of the DPA were 
applicable only within the United States, the CAS Board rules, 
regulations and standards were also applicable only within the United 
States. In 1980, the original CAS Board ceased to exist under the DPA 
and administration of the standards was undertaken by the Department of 
Defense until the CAS Board was re-established in 1988 under the Office 
of Federal Procurement Policy (OFPP) Act. In 1991, the new CAS Board 
retained the exemption when it recodified its rules and regulations at 
48 CFR 9902.201-1(b)(14) on April 17, 1992 (57 FR 14148). The SDP 
published on September 15, 2005 invited public comments on whether the 
Board should revisit the exemption.

C. Public Comments

    The Board received three sets of public comments in response to the 
staff discussion paper (available at https://www.whitehouse.gov/omb/
procurement/casb/index_public_comments.html). None of the comments 
supported the Board revising or eliminating the exemption. In fact, all 
three of the comments offered arguments for why the CAS Board should 
retain the exemption.
    One commented that while the OFPP Act, unlike the DPA, does not 
specifically limit CAS to contracts and subcontracts executed and 
performed within the United States, when Congress intends for laws to 
have extra-territorial effect, it would expressly state that intention. 
Additionally, the commenter notes that given the dynamic nature of 
international relations and bilateral agreements, the CAS Board would 
find it difficult to insure consistency of its regulations with 
international law and trade agreements. This commenter also questioned 
the material impact of the exemption, stating that, based on anecdotal 
evidence, contractors do not invoke the exception frequently. The value 
of the exemption, noted the commenter, includes putting foreign and 
U.S. companies on an equal footing by applying the same local 
accounting requirements; facilitating government procurements in the 
context of war readiness, other military action or disaster relief.
    Another commenter discussed the impracticality of applying CAS to 
contracts and subcontracts performed entirely outside the United 
States, noting, in part, that a contractor would be expected to follow 
the accounting conventions (rules and regulations) of the country where 
the contract is being performed. Requiring contractors and those in 
their supply chain to follow CAS instead would likely make 
participation in the U.S. Government procurement process prohibitive.
    Another commenter expressed concern that eliminating the exemption 
would result in applying CAS to foreign contractors that would 
otherwise be small businesses, since the CAS small business exemption 
applies only to firms that have a place of business located in the 
United States.
    While the CAS Board does not necessarily share each of the views 
expressed in these comments, the Board agrees with the conclusion not 
to delete or revise the exemption, especially with the absence of any 
commenter support for any such revision or elimination.

D. Conclusion

    Based on the public input and Board discussions of this issue, the 
Board finds that the exemption should be retained without change.

Paul A. Denett,
Administrator, Office of Federal Procurement Policy.
[FR Doc. E8-2668 Filed 2-12-08; 8:45 am]
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