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8260 Federal Register / Vol. 73, No.

30 / Wednesday, February 13, 2008 / Proposed Rules

ACTION: Notice of Discontinuation of regulations and standards were also participation in the U.S. Government
Case. applicable only within the United procurement process prohibitive.
States. In 1980, the original CAS Board Another commenter expressed
SUMMARY: The Office of Federal concern that eliminating the exemption
ceased to exist under the DPA and
Procurement Policy (OFPP), Cost administration of the standards was would result in applying CAS to foreign
Accounting Standards (CAS) Board, is undertaken by the Department of contractors that would otherwise be
providing public notification of the Defense until the CAS Board was re- small businesses, since the CAS small
decision to discontinue its review of the established in 1988 under the Office of business exemption applies only to
exemption for contracts that are Federal Procurement Policy (OFPP) Act. firms that have a place of business
executed and performed outside the In 1991, the new CAS Board retained located in the United States.
United States, its territories, and the exemption when it recodified its While the CAS Board does not
possessions. rules and regulations at 48 CFR necessarily share each of the views
FOR FURTHER INFORMATION CONTACT: 9902.201–1(b)(14) on April 17, 1992 (57 expressed in these comments, the Board
Laura Auletta, Manager, Cost FR 14148). The SDP published on agrees with the conclusion not to delete
Accounting Standards Board, 725 17th September 15, 2005 invited public or revise the exemption, especially with
Street, NW., Room 9013, Washington, comments on whether the Board should the absence of any commenter support
DC 20503 (telephone: 202–395–3256). revisit the exemption. for any such revision or elimination.
SUPPLEMENTARY INFORMATION: D. Conclusion
C. Public Comments
A. Regulatory Process Based on the public input and Board
The Board received three sets of
The Cost Accounting Standards public comments in response to the staff discussions of this issue, the Board
Board’s rules, regulations and Standards discussion paper (available at http:// finds that the exemption should be
are codified at 48 CFR Chapter 99. The www.whitehouse.gov/omb/ retained without change.
Office of Federal Procurement Policy procurement/casb/ Paul A. Denett,
Act, 41 U.S.C. 422(g)(1), requires the index_public_comments.html). None of Administrator, Office of Federal Procurement
Board, prior to the establishment of any the comments supported the Board Policy.
new or revised Cost Accounting revising or eliminating the exemption. [FR Doc. E8–2668 Filed 2–12–08; 8:45 am]
Standard, to complete a prescribed In fact, all three of the comments offered BILLING CODE 3110–01–P
rulemaking process. The process arguments for why the CAS Board
generally consists of the following four should retain the exemption.
steps: One commented that while the OFPP OFFICE OF MANAGEMENT AND
1. Consult with interested persons Act, unlike the DPA, does not BUDGET
concerning the advantages, specifically limit CAS to contracts and
disadvantages, and improvements subcontracts executed and performed Office of Federal Procurement Policy
anticipated in the pricing and within the United States, when
administration of government contracts Congress intends for laws to have extra- 48 CFR Part 9904
as a result of the adoption of a proposed territorial effect, it would expressly state
Standard. that intention. Additionally, the Cost Accounting Standards Board;
2. Promulgate an Advance Notice of Allocation of Home Office Expenses to
commenter notes that given the
Proposed Rulemaking (ANPRM). Segments
dynamic nature of international
3. Promulgate a Notice of Proposed
relations and bilateral agreements, the AGENCY: Cost Accounting Standards
Rulemaking (NPRM).
4. Promulgate a Final Rule. CAS Board would find it difficult to Board, Office of Federal Procurement
This notice announces the insure consistency of its regulations Policy, OMB.
discontinuation of a case after with international law and trade ACTION: Staff Discussion Paper (SDP).
completing step one of the four-step agreements. This commenter also
questioned the material impact of the SUMMARY: The Cost Accounting
process.
exemption, stating that, based on Standards Board (the Board), Office of
B. Background and Summary anecdotal evidence, contractors do not Federal Procurement Policy, invites
On September 15, 2005, the CAS invoke the exception frequently. The public comments on a staff discussion
Board issued a Staff Discussion Paper value of the exemption, noted the paper (SDP) addressing potential
inviting comments regarding whether commenter, includes putting foreign revisions to Cost Accounting Standard
the exemption at 48 CFR 9903.201– and U.S. companies on an equal footing (CAS) 403, ‘‘Allocation of Home Office
1(b)(14) should be revised or eliminated by applying the same local accounting Expenses to Segments.’’ This SDP
(70 FR 53977). The SDP discussed the requirements; facilitating government addresses whether the current
history of the exemption. In summary, procurements in the context of war thresholds that require use of the three
this discussion stated that the original readiness, other military action or factor formula for allocating residual
CAS Board was established by Section disaster relief. home office expenses require revision.
2168 of the Defense Production Act of Another commenter discussed the DATES: Comments must be in writing
1950 (DPA). Section 2163 of the DPA, impracticality of applying CAS to and must be received by April 14, 2008.
entitled ‘‘Territorial Application of contracts and subcontracts performed ADDRESSES: Due to delays in receipt and
Act,’’ provided that Sections 2061 entirely outside the United States, processing of mail, respondents are
through 2170 of the Act ‘‘shall be noting, in part, that a contractor would strongly encouraged to submit
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applicable to the United States, its be expected to follow the accounting comments electronically to ensure
territories and possessions, and the conventions (rules and regulations) of timely receipt. Electronic comments
District of Columbia’’ (United States). the country where the contract is being may be submitted to
Therefore, because the provisions of the performed. Requiring contractors and casb2@omb.eop.gov. Please include
DPA were applicable only within the those in their supply chain to follow your name, title, organization, and
United States, the CAS Board rules, CAS instead would likely make reference case ‘‘CAS–2008–01S.’’

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Federal Register / Vol. 73, No. 30 / Wednesday, February 13, 2008 / Proposed Rules 8261

Comments may also be submitted via 1. Consumer Price Index: A proposal the CPI from 1973 to 2003. The staff
facsimile to (202) 395–5105. Comments from the Aerospace Industries believes the AIA recommendation offers
via regular mail should be addressed to Association (AIA) recommends that the the advantage of a simple and quick
the Office of Federal Procurement operating revenue thresholds be raised revision to the out-of-date thresholds. It
Policy, 725 17th Street, NW., Room by 400 percent to reflect the changes in is also an objective measure of the
9013, Washington, DC 20503, ATTN: the consumer price index (CPI) from economic escalation that has occurred
Laura Auletta. Please note that any 1973 to 2003. since the thresholds were initially
comments received will be posted in 2. Conduct Staff Study: A proposal promulgated. A significant disadvantage
their entirety, including any personal from the Department of Defense (DoD) is that the increase in the CPI may not
and/or business confidential recommends that the Board obtain be a good measure of increases
information provided, at http:// actual statistics of various companies necessary to the three factor formula.
www.whitehouse.gov/omb/ and conduct a staff study similar to that For example, the number of home
procurement/casb.html after the close of performed by the original Board. This offices have significantly increased due
the comment period. proposal recommends that the study to the proliferation of intermediate
FOR FURTHER INFORMATION CONTACT: update the thresholds to reflect the home offices. The increase in home
Laura Auletta, Manager, Cost impact that economic changes, industry offices may warrant a smaller increase
Accounting Standards Board, 725 17th changes, and the advent of acquisition in the three factor formula than the CPI
Street, NW., Room 9013, Washington, reform have had in the years since the would provide. A second disadvantage
DC 20503 (telephone: 202–395–3256). thresholds were established. is that the Board will not be aware of the
exact impact the revision will have on
SUPPLEMENTARY INFORMATION: C. Staff Discussion Paper the number of companies covered by the
A. Regulatory Process I. Background three factor formula.
The CPI represents changes in prices
The Board’s rules, regulations and • 48 CFR 9904.403–40(c)(2) requires of all goods and services purchased for
standards are codified at 48 CFR that home office residual expenses be consumption by urban households. User
Chapter 99. The Office of Federal allocated to segments using the three fees (such as water and sewer service)
Procurement Policy Act, 41 U.S.C. factor formula if the residual expenses and sales and excise taxes paid by the
422(g)(1), requires the Board, prior to exceed: consumer are also included. Income
the establishment of any new or revised Æ 3.35 percent of the first $100
taxes and investment items (like stocks,
Standard, to complete a prescribed million of operating revenue; bonds, and life insurance) are not
rulemaking process. The process Æ .95 percent of the next $200 million
included. It is an objective measure of
generally consists of the following four of operating revenue;
Æ .30 percent of the next $2.7 billion the economic escalation that has
steps: occurred since the thresholds were
1. Consult with interested persons of operating revenue; and
Æ .20 percent of all amounts over $3 initially promulgated.
concerning the advantages, A potential problem concerning the
disadvantages and improvements billion of operating revenue.
• The operating revenue thresholds at use of the CPI is that historical values
anticipated in the pricing and are not revised when there are
administration of government contracts 48 C.F.R 9904.403–40(c)(2) were
promulgated in December 1972 and improvements in the index.
as a result of the adoption of a proposed Consequently, past errors in
Standard (i.e., prepare and publish have not been revised in the 35 years
methodology are only corrected
SDP). since.
• The Board has decided to initiate a prospectively (i.e., the historical data is
2. Promulgate an Advance Notice of not corrected). Most of the major
Proposed Rulemaking (ANPRM). case to determine if the current
thresholds require revision. This case improvements in the CPI have tended to
3. Promulgate a Notice of Proposed reduce measured inflation. As a result,
Rulemaking (NPRM). will analyze all aspects of this issue. For
example, in addition to the inflation of the increase in the CPI since 1972
4. Promulgate a Final Rule. overstates inflation.
The SDP published with this notice is the dollar, the last 35 years have also
The overstatement in the CPI can be
issued by the Board in accordance with seen a change in the nature of home
mitigated by using alternative versions
the requirements of 41 U.S.C. offices. In particular, the number of
that incorporate current methodology in
422(g)(1)(B), and is the first of the four- home offices have significantly
measuring past price movements. From
step process. increased due to the proliferation of
1972 to 1978, the best alternative
The Board has received two intermediate home offices. In
version is the CPI–U–X1, which
recommendations to revise the CAS 403 determining whether to revise the
provides an adjustment to the CPI that
operating revenue thresholds used in current thresholds, the Board will need
computes housing costs using rental
determining if a contractor is required to to analyze if and to what extent such a
equivalents (this method was adopted
apply the three factor formula to proliferation impacts the thresholds. In
for the official CPI in the early 1980s).
allocate residual home office expenses addition, the Board will need to
However, the CPI–U–X1 does not
to segments. The research accomplished determine if and to what extent a data
include other improvements to the CPI
to date by the Board staff is the basis for call is needed to obtain information
that were adopted in the early 1980s.
the SDP being released today. necessary to reach an informed decision The CPI–U–RS, which was developed
on this issue. in the late 1990s, incorporates changes
B. Background
II. Staff Research in methodology implemented since
Over the past few years, the Board has 1978. Thus, it can be used to analyze
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received two proposals to revise the Comments on Alternatives inflationary trends in the CPI without
CAS operating revenue thresholds for 1. Use Consumer Price Index (CPI): interference from changes in
determining if a contractor is required to On August 26, 2003, AIA sent a letter methodology. New values based on
use the three factor formula to allocate to the Board recommending that the current methods are released each April.
residual home office expenses to operating revenue thresholds be raised From December 1972 through
segments. by 400 percent to reflect the changes in December 1977, the CPI–U–X1

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8262 Federal Register / Vol. 73, No. 30 / Wednesday, February 13, 2008 / Proposed Rules

increased by a factor of 1.43. From performed by the original Board. DoD commenters may have. Key questions
January 1978 through February 2007, recommended that the study update the for consideration include, but are not
the CPI–U–RS increased by a factor of thresholds to reflect the impact that limited to, the following:
3.26. To compute the increase for the economic changes, industry changes, 1. Should the operating revenue
period December 1972 through February and the advent of acquisition reform thresholds be revised? Why or why not?
2007, the factor for the CPI–U–X1 is have had in the years since the 2. If the threshold should be revised,
multiplied by the factor for the CPI–U– thresholds were established. The staff what should be the basis of that revision
RS (1.43 x 3.26) to obtain an inflation believes that the DoD recommendation (e.g., CPI, staff study, other)?
factor of 4.66. offers the Board an opportunity to 3. What are the advantages and
Applying this factor to the current understand the impact that various disadvantages of the two alternatives
thresholds at 48 C.F.R 9904.403–50 revisions would have on the number of described above?
yields the following revised thresholds companies subject to the three factor
for application of the three factor 4. What type of data is currently
formula before drafting an ANPRM. The available for performance of the staff
formula: disadvantage is that the analysis will
Æ 3.35 percent of the first $470 study?
require significant time and effort to
million of operating revenue; 5. Is the administrative burden of
accomplish, and it is possible that such
Æ .95 percent of the next $930 million collecting the data associated with the
an analysis would not yield useful data
of operating revenue; staff study commensurate with risk?
for determining the appropriate
Æ .30 percent of the next $12.6 billion 6. To what extent does the
thresholds.
of operating revenue; and proliferation of intermediate home
Æ .20 percent of all amounts over III. Public Input offices impact any potential revision of
$14.0 billion of operating revenue. the operating revenue thresholds?
2. Conduct Staff Study: On September The Board is requesting public input
26, 2002, DoD sent a letter to the Board on whether the thresholds should be Paul A. Denett,
recommending that, as part of the raised, the potential advantages and Administrator, Office of Federal Procurement
comprehensive review, the Board obtain disadvantages of the two alternatives Policy.
actual statistics of various companies described above, and any additional [FR Doc. E8–2666 Filed 2–12–08; 8:45 am]
and conduct a staff study similar to that recommended alternatives the BILLING CODE 3110–01–P
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