FAR 30.602—Materiality.
Plain-English Summary
FAR 30.602 explains how the cognizant Federal agency official (CFAO) decides whether a cost impact is "material" for Cost Accounting Standards (CAS) purposes. It tells the CFAO to use the materiality criteria in 48 CFR 9903.305, requires the decision to be supported by adequate documentation, and allows the determination to be made either before or after a General Dollar Magnitude (GDM) proposal is submitted, depending on the facts. The section also distinguishes what happens when the cost impact is immaterial versus material: if immaterial, the Government takes no contract adjustment action, documents the rationale, and—when the issue is a noncompliance—puts the contractor on notice to correct it and warns that future adjustments may be made if the issue later becomes material. If material, the CFAO must move into the applicable procedures in FAR 30.603 through 30.606, which cover required, unilateral, and desirable changes and CAS noncompliances. In practice, this section is the gatekeeper between a cost impact being closed out administratively and being processed through the more formal CAS adjustment framework.
Key Rules
Use CAS materiality criteria
The CFAO must determine materiality using the criteria in 48 CFR 9903.305. This means the decision is not ad hoc; it must be grounded in the CAS materiality framework.
Timing is flexible
A materiality determination may be made before or after a General Dollar Magnitude proposal is submitted, depending on the facts and circumstances. The rule allows the CFAO to act when enough information exists, rather than waiting for a fixed procedural milestone.
Document the basis
Any CFAO materiality determination must be supported by adequate documentation. The record should show the facts considered, the reasoning used, and why the impact was treated as material or immaterial.
No adjustment if immaterial
If the CFAO determines the cost impact is immaterial, the Government makes no contract adjustments and closes the cost impact process. The decision should be documented so the file shows why no further action was taken.
Warn on noncompliance
For noncompliance issues found to be immaterial, the CFAO must tell the contractor to correct the noncompliance and reserve the Government’s right to make appropriate adjustments later if the issue becomes material. This preserves the Government’s position without taking immediate action.
Follow material-impact procedures
When the amount involved is material, the CFAO must proceed under the applicable provisions of FAR 30.603, 30.604, 30.605, and 30.606. Those sections govern the specific treatment of required, unilateral, and desirable changes, as well as CAS noncompliances.
Responsibilities
Cognizant Federal Agency Official (CFAO)
Determine whether the cost impact is material using 48 CFR 9903.305; make the determination before or after a GDM proposal as appropriate; ensure the decision is adequately documented; if immaterial, close the matter without contract adjustment and document the rationale; if the issue is a noncompliance, notify the contractor to correct it and reserve the Government’s rights; if material, follow the applicable procedures in FAR 30.603 through 30.606.
Contractor
Correct noncompliance issues when notified that the cost impact is immaterial but the underlying noncompliance still exists; maintain awareness that the Government may seek future adjustments if the issue later becomes material; provide information and support needed for the CFAO’s materiality analysis and documentation.
Government/Agency
Apply the CAS materiality framework consistently; preserve the administrative record supporting the CFAO’s decision; ensure that material impacts are processed under the correct FAR provisions and that immaterial impacts are closed appropriately without unnecessary contract adjustments.
Practical Implications
This section is often the decision point that determines whether a CAS issue ends with documentation only or proceeds to a formal contract adjustment process.
Contractors should not assume an immaterial finding means the underlying problem is acceptable; the Government can still require correction and may revisit the issue if it grows in significance.
A weak or incomplete record is a common pitfall. The CFAO needs enough documentation to show why the impact was treated as material or immaterial, especially if the decision is later challenged.
The timing rule matters in real life: the CFAO does not have to wait for a GDM proposal if the facts already support a materiality call, but the decision still must be well supported.
When materiality is found, the CFAO must switch to the specific procedures in FAR 30.603-30.606 rather than stopping at the threshold determination.
Official Regulatory Text
(a) In determining materiality, the CFAO shall use the criteria in 48 CFR 9903.305 . (b) A CFAO determination of materiality- (1) May be made before or after a general dollar magnitude proposal has been submitted, depending on the particular facts and circumstances; and (2) Shall be based on adequate documentation. (c) When the CFAO determines the cost impact is immaterial, the CFAO shall- (1) Make no contract adjustments and conclude the cost impact process; (2) Document the rationale for the determination; and (3) In the case of noncompliance issues, inform the contractor that- (i) The noncompliance should be corrected; and (ii) If the noncompliance is not corrected, the Government reserves the right to make appropriate contract adjustments should the cost impact become material in the future. (d) For required, unilateral, and desirable changes, and CAS noncompliances, when the amount involved is material, the CFAO shall follow the applicable provisions in 30.603 , 30.604 , 30.605 , and 30.606 .