Cost Accounting Standards

Also known as: CAS

framework · accounting · regulatory-standard

Accounting standards established by the Cost Accounting Standards Board governing US government contractor cost allocation and measurement.

Cost Accounting Standards are 19 detailed standards governing cost measurement, assignment, and allocation by US government contractors performing covered contracts above the CAS threshold. CAS is administered by the Cost Accounting Standards Board (CASB), an independent board within the Office of Federal Procurement Policy (OFPP) of the Office of Management and Budget. The original CASB was established by Public Law 91-379 in 1970 in response to congressional concern about defense contractor cost reporting; that board issued the original 19 standards and was sunset in 1980. The CASB was re-established in 1988 by Public Law 100-679 with continuing authority. Coverage applies to negotiated contracts and subcontracts above $2 million (with full-coverage and modified-coverage thresholds), with significant exemptions for sealed-bid, commercial-item, and small-business contracts. CAS coexists with the Federal Acquisition Regulation (FAR) Part 31 cost principles.

Originators

Cost Accounting Standards Board (originally 1970, revived 1988); intellectual antecedents in 1960s defense contractor cost-allowability disputes and the Renegotiation Board work high

Year / Decade

1970 (original CASB, PL 91-379); 1980 (sunset); 1988 (revival, PL 100-679); ongoing high

Primary sources

48 CFR Chapter 99 (Cost Accounting Standards), Public Law 91-379 (1970, Defense Production Act amendments creating original CASB), Public Law 100-679 (1988, Office of Federal Procurement Policy Act amendments reviving CASB), Cost Accounting Standards Board. CAS 401-420 standards (continuously available via CASB and acquisition.gov) high

Core components

19 Cost Accounting Standards (CAS 401-420, with CAS 419 reserved)
Disclosure Statement (DS-1 commercial, DS-2 educational) describing contractor cost accounting practices
Cost impact and equitable adjustment for changes in cost accounting practice
Full coverage vs modified coverage thresholds
Exemptions (sealed-bid, commercial-item, small-business, etc.)
Coordination with FAR Part 31 Contract Cost Principles and Procedures
Coordination with DCAA (Defense Contract Audit Agency) audits

Primary use case

Cost accounting by major US government contractors (Lockheed, Boeing, RTX, Northrop Grumman, General Dynamics, etc.); basis for incurred-cost submissions, indirect-cost rate negotiation, and contract pricing; input to DCAA audit and Defense Contract Management Agency (DCMA) oversight; applicable to educational institutions performing federal research above CAS thresholds (with CAS 505-507 educational-institution variants under DS-2).

Common criticisms

CAS compliance produces substantial cost-accounting infrastructure and compliance personnel that critics argue is disproportionate to the underlying cost-allowability concerns it addresses, particularly for non-traditional contractors entering the defense industrial base
the cost-impact and equitable-adjustment mechanism for changes in cost accounting practice has been criticized as creating incentives to delay legitimate practice improvements
DCAA audit backlogs (documented in GAO reports across the 2010s) have produced long incurred-cost-proposal close-out delays affecting contractor working capital
commercial-item exemption boundaries are persistently litigated, with FAR and DFARS amendments oscillating across administrations
the CASB itself has had extended periods of vacancy and limited substantive standard-setting, reducing the framework's responsiveness to changing contracting environments
CAS-FAR interaction produces overlap and occasional conflict that practitioners argue should be resolved through consolidation
non-traditional defense contractors (commercial firms entering DoD work) cite CAS as a structural barrier to entry, contributing to defense industrial base concentration concerns.

Lineage

Siblings: US GAAP, FASAB