Construction Law: Cost Accounting Issues
When construction contracts are awarded by the United States Government on a competitive, fixed-price basis, the original contract award is generally not covered by the various Government accounting and pricing rules that required disclosure and negotiation based on the contractor's actual or estimated costs, but modifications to such contracts for more than $650,000 are typically negotiated based on cost information. Those modifications are almost always subject to the cost allowability rules in Part 31 of the Federal Acquisition Regulation (FAR) and to the stringent disclosure requirements in the Truth in Negotiations Act (TINA) and the implementing regulations in FAR Subpart 15.4. As a result of increased use in recent years of design/build contracts and other similar arrangements where some portion of the price of a Government contract is based on the contractor's actual costs, the Government is routinely awarding contracts for substantial projects where the original contract award is covered not only by the FAR requirements, but also by the Cost Accounting Standards (CAS).
Our practice includes substantial expertise about FAR and CAS accounting and pricing requirements in general, as well as their application to the particular kinds of problems that arise frequently in a construction context, including such issues as time-keeping and labor-charging practices, allocation of indirect costs, identification of unallowable costs, allowability and allocability of general and project-specific insurance costs, and joint venture accounting. We counsel clients, often in cooperation with accounting experts, about how to structure their accounting systems to comply with the Government requirements, how to prepare and support cost proposals, what to include in CAS Disclosure Statements, and how to present cost or pricing data in a way that complies with TINA. We also represent clients in disputes with the United States about the application of the accounting and pricing requirements.