Revised Guidance Clarifies Cost-Reimbursement Contract Precedence

Jerry Ashworth
September 10, 2020 at 08:37:10 ET
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So much to cover, so little space! In our various articles we have written on the Aug. 13 revisions to the uniform guidance — which go into effect for new awards and modifications to existing awards issued on or after Nov. 12 — we couldn’t find a good spot to cover the updated discussion in §200.101(c) of the revised guidance addressing cost-reimbursement contracts made under the Federal Acquisition Regulations (FAR) to nonfederal entities in which the Cost Accounting Standards (CAS) apply. Therefore, we'll discuss it here.

The Office of Management and Budget (OMB) in the revisions sought to make clear that the FAR applies to federal contracts awarded to nonfederal entities and that these requirements supersede those under the uniform guidance (2 C.F.R. Part 200) in a federal contract. While OMB maintained language from the existing guidance stating that only the uniform guidance requirements under the subrecipient monitoring and management provisions in Subpart D, the Subpart E cost principle provisions and the Subpart F single audit provisions would be incorporated by reference into the contract, OMB in the revised guidance added that these requirements are supplementary to the FAR and the contract. “Note that when a nonfederal entity is awarded a FAR contract, the FAR applies, and the terms and conditions of the contract shall prevail over the requirement of this part,” OMB adds in new language at §200.101(c).

When OMB proposed revisions to the uniform guidance in January, commenters questioned whether an audit conducted for a CAS-applicable contract will take the place of a Subpart F single audit. They also queried how an entity with multiple grants, and only one CAS contract, would meet the requirements of the single audit. OMB in the revised guidance clarified the language in the revised guidance to state that for CAS-covered contracts, the CAS requirement regarding audit would superseded the audit requirements in subpart F, and in the case where an entity received many grants and only one CAS-covered contract, the entity must comply with both the single audits for its grants and the CAS audit requirement for the CAS-covered contract.

Hopefully this clarification will assist recipients of both grants and contracts going forward in understanding their responsibilities. Thompson 360 subscribers can find more discussion about cost-reimbursement contracts in the Federal Grants Management Handbook.

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