Questionnaire on Method and Allocation of Costs (QMAC)

US Background

Cost Accounting Standards Board; Applicability of Cost Accounting Standards Coverage

SUMMARY: The Cost Accounting Standards (CAS) Board is revising the criteria applicable to United Kingdom (UK) contractors for filing a Disclosure Statement, Form No. CASB DS–1. This rulemaking is authorized pursuant to section 26 of the Office of Federal Procurement Policy Act. The Board is promulgating this interim rule in order to comply with a specific request by the UK Ministry of Defence to simplify the compliance process with CAS Board disclosure requirements for UK contractors.

DATES: Effective Date: This rule is effective May 23, 2005.

A. Background

Unlike certain other foreign contractors (e.g., German and Canadian), UK contractors currently have to file a regular CAS Board Disclosure Statement (DS–1) in accordance with CAS regulations. The UK Ministry of Defence initially approached the Board with a request to use the corresponding UK form ‘‘Questionnaire on Method of Allocation of Costs’’ (QMAC), in lieu of the DS–1. After a review of the content of the QMAC, the UK and U.S. representatives agreed that it did not have the same scope as the DS–1. Therefore, it was agreed that to cover the gap in the coverage a ‘‘Supplemental QMAC’’ was needed. The CAS Board has approved a Supplemental QMAC that is acceptable to the UK Ministry of Defence, and the CAS Board has received a request from the UK Ministry of Defence to allow UK contractors to submit their basic QMAC, together with the Supplemental QMAC, in lieu of the DS–1. At its meeting on February 23, 2005, the Board agreed to this change in the CAS requirements so that UK contractors with CAS-covered contracts will be allowed to file the UK QMAC together with its Supplement in lieu of the DS–1 required of U.S. contractors.

The Board believes that an interim rule with request for comment is an appropriate mode for the promulgation of this rule. It is based on a request by the UK Ministry of Defense for a specific action regarding the CAS disclosure statement to be used by the UK defense contractors. The Board believes that its response to this request as incorporated in this rule is straight forward and, in essence, non controversial. Therefore, the Board believes that in this instance the Board’s usual ‘‘four step’’ promulgation process is not necessary or appropriate. To effect this change, the interim rule includes the following revisions:

(1) The deletion of 9903.201–1(b)(12) (all foreign contractors, including UK contractors, are subject to the requirements at 9903.201–1(b)(4));

(2) The deletion of 9903.201–4(d); and

(3) An amendment to 9903.202–1(e) to add the U.K. to the list of the countries whose contractors may file a disclosure form adopted by an agency of their own Government in lieu of the DS–1.

■ For the reasons set forth in this preamble, chapter 99 of title 48 of the Code of Federal Regulations is amended as set forth below:

PART 9903—CONTRACT COVERAGE

Subpart 9903.2—CAS Program Requirements

9903.201–1 [Amended]

■ 1. Section 9903.201–1 is amended by removing and reserving paragraph (b)(12).

9903.201–4 [Amended]

■ 2. Section 9903.201–4 is amended by removing and reserving paragraph (d).

■ 3. Section 9903.202–1 is amended by revising paragraph (e) to read as follows:

9903.202–1 General requirements.

• * * * *

(e) Foreign contractors and subcontractors who are required to submit a Disclosure Statement may, in lieu of filing a Form No CASB–DS–1, make disclosure by using a disclosure form prescribed by an agency of its Government, provided that the Cost Accounting Standards Board determines that the information disclosed by that means will satisfy the objectives of Public Law 100–679. The use of alternative forms has been approved for the contractors of the following countries:

(1) Canada.

(2) Federal Republic of Germany.

(3) United Kingdom.

• * * * *

[FR Doc. 05–9847 Filed 5–20–05; 8:45 am]

UK - GENERAL ADVICE AND INSTRUCTIONS

1. The Questionnaire on the Method of Allocation of Costs (QMAC) is issued by the MOD CAS to support the pricing of (Her Majesty's Government) HMG non competitive contracts. A standard QMAC is used for all types of organisations whether they are in the manufacture or the service sector. The layout and content of the QMAC has been agreed between the MOD and the Joint Review Board Advisory Committee (on behalf of British Industry).

2. The QMAC has been designed to describe the contractor's cost accounting and estimating practices as they affect the pricing of all HMG non competitive work. It is therefore incumbent upon the persons completing it to give the document their earnest consideration and ensure that answers and explanations given are complete, accurate and up to date in every respect.

3. A QMAC should be submitted by the contractor before the commencement of the relevant financial year to support the totality of their H.M.G. non competitive work ( e.g. their claims for overhead rates, costs under Defcons 643 and 653 and post-costing under Defcon 648 or their equivalents) during the period covered by the QMAC. The QMAC forms an important part of the disclosure of information required for the pricing of non competitive contracts.

4. A full QMAC should be completed and submitted at least once every 3 years, or in exceptional circumstances annually at the request of H.M.G. For the intervening years an annual renewal booklet showing "changes" or "no changes" as appropriate should be submitted.

5. A separate QMAC must be submitted covering the practices at each of the contractor's divisions or organisational units involved in HMG non competitive work where the cost accounting practices are not similar. Where the practices are similar, only one QMAC need be submitted, but each organisational unit must be identified.

6. In addition to the UK QMAC, a UK Supplemental QMAC must be completed by U.K. contractors whose work with the U.S. Government meets the Cost Accounting Standards (CAS) board’s requirements for disclosure of cost accounting practices at 48 CFR 9903.202-1(b). Completion of both the UK QMAC and UK Supplemental QMAC will exempt U.K. Contractors from requirement to complete the U.S Disclosure Statement CASB-DS-1. All U.K. contractors performing U.S Government contracts must comply with applicable CAS Board rules and regulations as contained in CFR 9903. In addition, 48 CFR 9903.201-1(b)(4) requires that U.K. contractors comply with 48 CFR 9904.401 and 402 which cover consistency in estimating, accumulating and reporting of costs; and, consistency in estimating, accumulating and reporting of costs; and, consistency in allocating costs incurred for the same purpose.

7. Any proposed changes to the accounting or costing systems or procedures must be formally notified to CAS prior to the change allowing sufficient time for discussion and comment. MOD will not necessarily accept liability for any costs incurred unless proper consultation has taken place.

8. Full use should be made of the "Remarks" column to amplify or explain any allocation, or when an answer to a "yes" or "no" question needs further clarification. The contractor's costing system should be the same for H.M.G. and commercial work. If it is proposed that the allocation on Government work should differ from that on commercial work this should be clearly stated and full explanations provided.

9. Clear definitions must be used to avoid ill-defined allocations such as "D/X". "D/X" allocations will only be accepted in exceptional circumstances, and where the segregation of costs can be clearly defined.

10. Where space on the printed schedules is insufficient to give the required information extra schedules or appendices to schedules, as appropriate should be used. Spare sheets are available for such use. With the electronic version of this QMAC use the toolbar button to insert additional sheets for recording the information.

11. All extra schedules and appendices must be numbered and listed in the summary of schedules.

12. In the case of questions dealing with accounting, costing and estimating systems and procedures, reference should be made to the relevant sections of the contractor's procedure manual(s).

13. If any difficulty is experienced in completing the QMAC or if there are any queries or matters requiring prior discussion, contact should be made with the CAS investigating accountant.

QMAC Document

To see an actual QMAC form, click the link below.

File:MoD QMAC.pdf