On November 19, 2012, the Cost Accounting Standards (CAS) Board issued a proposed rule that would modify the existing exemption applicable to contracts for commercial items. 77 Fed. Reg. 69422 (Nov. 19, 2012). The current exemption applies to “[f]irm fixed-priced, fixed price with economic price adjustment (provided that price adjustment is not based on actual costs incurred), time-and-materials, and labor hour contracts and subcontracts for the acquisition of commercial items” 48 C.F.R §9903.201(b)(6). The proposed rule would extend the exemption more broadly to “[c]ontracts or subcontracts for commercial items.” 77 Fed. Reg. at 69426.  

Although not a controversial change, it does expand the scope of contracts exempt from CAS. The proposed rule includes a lengthy discussion of the notorious history of the “commercial item exemption.” The proposed rule explains the CAS Board’s attempt to keep pace with ever-changing procurement laws affecting contracts for commercial items. In the end, the CAS Board strayed from the original statutory language (and intent) requiring the exemption. The CAS Board, therefore, determined to return to the original and simple exemption to “contracts or subcontracts for commercial items.”  

Some contractors will find the historical discussion useful in debates about the applicability of the CAS to its existing contracts for commercial items. The discussion in the proposed rule explains that the language change is a clarification, because the evolved language led to the exclusion of contracts that should otherwise have benefitted from the exemption. Although this may not affect a wide universe of contractors, it could have substantial import for contractors and subcontractors operating largely in the commercial item space.  

Comments are due by January 18, 2013.