Practices  |  Government Contracts

Cost Accounting and Cost Allowability


Many contracts with the federal government are subject to special cost accounting and allowability rules under the Federal Acquisition Regulation (FAR) and the Cost Accounting Standards (CAS).  Understanding the rules for determining the allowability and allocability of costs to government contracts is critical to maximizing legitimate cost recovery and complying with the myriad cost allowability and allocability requirements imposed by these regulations and standards.  Government contractors are also subject to increasingly rigorous and comprehensive audits of their accounting practices and policies, particularly by the Defense Contract Audit Agency (DCAA). 

Our Government Contracts attorneys are experts in cost accounting matters and are routinely called upon by clients of all sizes to assist with cost allowability and allocability rules and to counsel clients in how best to respond to audit findings and concerns.  We regularly work with our clients to resolve cost accounting and related disputes before litigation occurs.  Our expertise includes: 

  • Advising clients and providing contractor training on the intricacies of the FAR cost accounting principles and the CAS, including all aspects of cost allowability and allocability, CAS Disclosure Statements, changes in disclosed accounting practices, and incurred cost submissions.
  • Representing clients in connection with DCAA audits and audits by other federal agencies and Inspectors General, including preparing responses to auditor questions, findings, document requests, and audit reports, and advising clients on DCAA requests for contractor internal audit reports.
  • Advising clients on compliance with Department of Defense business systems rules, Defense Contract Management Agency (DCMA) Contractor Purchasing System Reviews, and DCAA business systems audits.
  • Representing clients in connection with government and contractor claims relating to disallowed costs, CAS noncompliance, and accounting change cost impacts, including litigating government and contractor cost claims at the boards of contract appeal.
  • Preparing termination settlement proposals in convenience terminations and counseling clients on the special cost accounting rules related to terminations.
  • Advising clients and litigating claims relating to executive compensation issues, including the successful representation of J.F. Taylor in its appeal of a government claim for allegedly unreasonable executive compensation.  See J.F. Taylor, Inc.,ASBCA 56105, January 18, 2012, 12-1 BCA ¶ 34920.
  • Assisting clients in responding to allegations of defective cost or pricing data and advising clients regarding the Truthful Cost or Pricing Data Act (formerly TINA).
  • Advising clients regarding pension accounting rules under CAS, including segment closing adjustments.
  • Analyzing cost accounting issues that may arise in other contexts, such as allegations under the False Claims Act (FCA), debarment proceedings, and bid protests.

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