FAR 30.603-2—Unilateral and desirable changes.
Plain-English Summary
FAR 30.603-2 explains how the Government handles contractor cost accounting practice changes under CAS-covered contracts, focusing on unilateral changes, desirable changes, notice and proposal requirements, retroactive changes, and a special rule for changes tied to external restructuring activities under 10 U.S.C. 3761. It tells contractors when they may change disclosed or established practices, what advance notice they must give, and when they must support a claim that a change has no material cost impact. It also tells the CFAO how to decide whether a change is truly “desirable,” how to protect the Government from paying increased costs caused by a unilateral change, and how to avoid over-recovery. In practice, this section is about preserving fairness and consistency in CAS administration: contractors can change accounting practices, but the Government must be protected from paying more than it should, and any beneficial change must be affirmatively approved as desirable before it gets favorable treatment. The section also creates a process for retroactive treatment and clarifies that certain restructuring-related compliant changes are exempt from the usual price/cost adjustment rules, while still requiring disclosure under the CAS administration clause.
Key Rules
Unilateral changes allowed
A contractor may unilaterally change its disclosed or established cost accounting practices, but the Government cannot pay any increased cost in the aggregate because of that change. The rule is protective, not prohibitive: the change may occur, but the financial effect must not shift added cost to the Government.
Government adjustment limits
Before making any price or cost adjustment under the applicable CAS clauses, the CFAO must determine that the adjustment will protect the Government from estimated increased costs and will not recover more than those increased costs in the aggregate. This prevents both under-protection and over-collection.
Desirable change approval required
A change is treated as desirable only if the CFAO determines it is desirable and not detrimental to the Government’s interests. Until that determination is made, the change is treated as unilateral, which means the contractor does not get desirable-change treatment by default.
Desirable change factors
The CFAO may consider whether the change is needed to stay compliant with Part 31, whether it is tied to management actions that create cost savings reflected in forward pricing rates, and whether funds are available if the change would require an upward price or cost adjustment. These are examples, not an exclusive list.
Advance notice and support
For unilateral changes, the contractor must give the CFAO a description of the change at least 60 days before implementation, unless another mutually agreeable date is set, and must support any claim that the cost impact is immaterial. Failure to provide the required notice can lead the CFAO to treat the matter as a failure to follow a cost accounting practice consistently and process it as a noncompliance.
Retroactive change requests
If the contractor wants a unilateral change to apply retroactively, it must provide supporting rationale. The CFAO must evaluate the request promptly and respond in writing, and may not approve a retroactive date earlier than the start of the contractor’s fiscal year in which the request is made.
External restructuring exception
For compliant cost accounting practice changes directly associated with external restructuring activities that meet 10 U.S.C. 3761, the normal contract price and cost adjustment rules do not apply. Even so, the contractor must still follow the disclosure requirements in 52.230-6(b).
Responsibilities
Contractor
May implement unilateral cost accounting practice changes, but must ensure the Government does not incur increased cost in the aggregate from the change. Must provide advance written notice of the change at least 60 days before implementation unless another date is mutually agreed, and must submit rationale if claiming the cost impact is immaterial. If seeking retroactive treatment, must submit supporting rationale. Must continue to comply with disclosure requirements, including for restructuring-related changes.
Contracting Officer (CFAO)
Must evaluate unilateral-change adjustments to ensure the Government is protected from estimated increased costs and that any recovery does not exceed those costs. Must determine whether a change is a desirable change and not detrimental to the Government before granting desirable-change treatment. Must promptly evaluate retroactive requests and provide written approval or disapproval, and may not approve a retroactive date earlier than the start of the contractor’s fiscal year. May treat an unnotified implementation as a noncompliance issue under 30.605.
Government
Must be protected from paying increased costs caused by unilateral changes and from over-recovery through contract adjustments. In desirable-change situations, must ensure any upward adjustment is supported and that funds are available when required.
Contract Administration Office / CFAO staff
Must process notices, evaluate cost impact support, coordinate review of proposed adjustments, and document determinations regarding unilateral, desirable, and retroactive changes. Must ensure the applicable CAS clause procedures are followed consistently.
Practical Implications
Contractors can change accounting practices, but they should not assume the change will be treated favorably or that the Government will absorb any added cost.
The 60-day notice requirement is a common trap; missing it can turn a routine change into a noncompliance issue with broader consequences.
A contractor’s claim that a change is immaterial needs real support; unsupported assertions may be rejected or questioned by the CFAO.
Desirable-change treatment is discretionary and requires an affirmative CFAO determination, so contractors should build a strong business and compliance case before requesting it.
Retroactive treatment is limited and cannot go back before the start of the fiscal year in which the request is made, so timing matters for both pricing and recovery.
Official Regulatory Text
(a) Unilateral changes. (1) The contractor may unilaterally change its disclosed or established cost accounting practices, but the Government shall not pay any increased cost, in the aggregate, as a result of the unilateral change. (2) Prior to making any contract price or cost adjustments under the applicable paragraph (s) addressing a unilateral change at 52.230-2 , 52.230-3 , or 52.230-5 , the CFAO shall determine that- (i) The contemplated contract price or cost adjustments will protect the Government from the payment of the estimated increased costs, in the aggregate; and (ii) The net effect of the contemplated adjustments will not result in the recovery of more than the increased costs to the Government, in the aggregate. (b) Desirable changes. (1) Prior to taking action under the applicable paragraph (s) addressing a desirable change at 52.230-2 , 52.230-3 , or 52.230-5 , the CFAO shall determine the change is a desirable change and not detrimental to the interests of the Government. (2) Until the CFAO has determined a change to a cost accounting practice is a desirable change, the change is a unilateral change. (3) Some factors to consider in determining if a change is desirable include, but are not limited to, whether- (i) The contractor must change the cost accounting practices it uses for Government contract and subcontract costing purposes to remain in compliance with the provisions of part 31 ; (ii) The contractor is initiating management actions directly associated with the change that will result in cost savings for segments with CAS-covered contracts and subcontracts over a period for which forward pricing rates are developed or 5 years, whichever is shorter, and the cost savings are reflected in the forward pricing rates; and (iii) Funds are available if the determination would necessitate an upward adjustment of contract cost or price. (c) Notice and proposal preparation. (1) When a contractor makes a unilateral change, the clause at 52.230-6 , Administration of Cost Accounting Standards, requires the contractor to- (i) Submit a description of the change to the CFAO not less than 60 days (or other mutually agreeable date) before implementation of the change; and (ii) Submit rationale to support any contractor written statement that the cost impact of the change is immaterial. (2) If a contractor implements the change in cost accounting practice without submitting the notice as required in paragraph (c)(1) of this subsection, the CFAO may determine the change a failure to follow a cost accounting practice consistently and process it as a noncompliance in accordance with 30.605 . (d) Retroactive changes. (1) If a contractor requests that a unilateral change be retroactive, the contractor shall submit supporting rationale. (2) The CFAO shall promptly evaluate the contractor’s request and shall, as soon as practical, notify the contractor in writing whether the request is or is not approved. (3) The CFAO shall not approve a date for the retroactive change that is before the beginning of the contractor’s fiscal year in which the request is made. (e) Contractor accounting changes due to external restructuring activities . The requirements for contract price and cost adjustments do not apply to compliant cost accounting practice changes that are directly associated with external restructuring activities that are subject to and meet the requirements of 10 U.S.C. 3761 . However, the disclosure requirements in 52.230-6 (b) shall be followed.