Senate OKs accounting revisions

The Senate has agreed to a proposal sought by Defense Department officials to revise cost accounting standards (CAS) that are designed to ensure that contractors do not overcharge the government. The proposal request was made in hopes of bringing more commercial information technology products into the federal marketplace.

The CAS require contractors to account for their costs on a consistent basis and are designed to prohibit the shifting of costs, such as overhead, from commercial contracts to government contracts. The latest version of the 19 standards has been in place since the early 1990s, and the process is overseen by a five-member CAS board within the Office of Management and Budget.

The proposed revisions, contained in an amendment to the Defense Authorization Act passed last month, would raise the threshold for the size of contracts covered by the standards from $500,000 to $5 million.

The amendment also would raise the threshold for full CAS coverage from $25 million worth of government contracts to $50 million, meaning that a company with a total of $50 million or more in contracts would have to comply with all 19 standards in all of its contracts.

While the Federal Acquisition Streamlining Act and the Clinger-Cohen Act of 1996 took steps to exempt commercial items from CAS, DOD, other agencies and the federal contractor community still point to CAS as a barrier to bringing more commercial items to the government marketplace.

The change would mean that more small and medium-size businesses will have an opportunity to offer their IT products, said Ellen Brown, a staff member of the Senate Committee on Governmental Affairs. CAS still cover the vast majority of contracts that are awarded in noncompetitive situations, she added.

But Marcus Corbin, defense specialist at the Project on Government Oversight, said there is a danger in weakening the CAS board, which helps save the government about $6 billion annually, according to a rough estimate prepared by POGO.

"We think this will provide more opportunity for corporations to play accounting games, and the taxpayer will end up paying more," Corbin said.