FAR 52.230-3—Disclosure and Consistency of Cost Accounting Practices.
Plain-English Summary
FAR 52.230-3, Disclosure and Consistency of Cost Accounting Practices, is the core CAS clause for certain negotiated contracts that are subject to Cost Accounting Standards. It addresses four major subjects: compliance with specific CAS standards on estimating, accumulating, and reporting costs; consistency in allocating costs incurred for the same purpose; accounting for unallowable costs; and the cost accounting period standard. It also requires disclosure of cost accounting practices for covered business units, protection of confidential disclosure statements when properly identified, and ongoing consistency in the contractor’s practices. The clause explains how changes to cost accounting practices may be proposed by either party, how those changes are negotiated and applied prospectively, and when an equitable adjustment is required if the Government finds the change desirable and not detrimental. It further provides for price or cost allowance adjustments, including interest, if noncompliance or inconsistent practices increase costs paid by the United States. Finally, it establishes dispute procedures under the Contract Disputes statute, audit/access rights for Government representatives, and mandatory flowdown of the clause to negotiated subcontracts with specified exceptions. In practice, this clause is both a compliance and pricing-risk provision: contractors must maintain disciplined CAS compliance and documentation, while contracting officers must monitor disclosures, changes, and potential cost impacts.
Key Rules
Comply with specified CAS standards
The contractor must follow the listed Cost Accounting Standards in effect on the award date: CAS 401, 402, 405, and 406. These standards govern consistency in estimating, accumulating, and reporting costs; allocation of costs incurred for the same purpose; treatment of unallowable costs; and the cost accounting period.
Disclose cost accounting practices
For CAS-covered contracts, a business unit required to submit a Disclosure Statement must disclose its cost accounting practices in writing under the CAS disclosure rules. If the contractor identifies the statement as containing privileged trade secrets or confidential commercial or financial information, the Government must protect it from outside release.
Maintain consistency unless changed properly
The contractor must consistently follow its disclosed cost accounting practices. Either the Government or the contractor may propose a change, but the parties must negotiate the terms and conditions for the change before it is implemented.
Apply approved changes prospectively
Once the parties agree on a cost accounting practice change, the change must be applied prospectively to the contract, and any affected Disclosure Statement must be updated. The clause does not permit retroactive application through this mechanism.
Equitable adjustment may be required
If the Contracting Officer makes the required finding that a change is desirable and not detrimental to the Government, the contractor must negotiate an equitable adjustment under the Changes clause. Without that finding, no agreement under this clause may increase costs paid by the United States.
Government may recover increased costs
If the contractor or a subcontractor fails to comply with applicable CAS or fails to follow a cost accounting practice and the Government pays increased costs, the contract price or cost allowance must be adjusted to recover those increased costs. The Government is also entitled to interest calculated under the Internal Revenue Code rate specified in the clause.
Disputes go under Contract Disputes
If the parties cannot agree on whether the contractor complied with CAS or on the amount of a demanded cost adjustment, the disagreement is treated as a dispute under the Contract Disputes statute.
Audit and records access required
The contractor must allow authorized Government representatives to examine and copy documents, papers, and records related to compliance with the clause. This supports audit, review, and cost-impact verification.
Flow down to subcontracts
The contractor must include the substance of this clause, except paragraph (b), in all negotiated subcontracts and require inclusion in all other subcontracts at any tier, subject to the stated exceptions for other CAS coverage, the lower CAS threshold, and exempt subcontracts.
Responsibilities
Contractor
Comply with the applicable CAS standards; disclose cost accounting practices when required; follow those practices consistently; propose or negotiate changes in good faith; apply approved changes prospectively; update the Disclosure Statement when affected; agree to price or cost adjustments for increased Government costs; permit Government examination of relevant records; and flow down the clause to required subcontracts.
Contracting Officer
Administer the clause; receive and evaluate proposed cost accounting practice changes; make the required finding that a change is desirable and not detrimental before an equitable adjustment can be negotiated; protect confidential Disclosure Statements when properly identified; and pursue cost adjustments when noncompliance increases Government costs.
Government representatives / auditors
Examine and copy documents, papers, and records relating to compliance with the clause, within the scope of authorized access, to verify CAS compliance and quantify any cost impact.
Subcontractors
Comply with the flowed-down CAS clause when required by the prime contractor, including any applicable alternative CAS clause if the subcontractor is subject to different CAS coverage.
Agency / United States Government
Protect properly identified confidential disclosure information; recover increased costs and interest when noncompliance causes overpayment; and resolve disputes under the Contract Disputes framework when agreement cannot be reached.
Practical Implications
This clause is a major pricing and compliance risk driver for CAS-covered contractors because even small accounting practice changes can trigger disclosure updates, negotiations, and potential equitable adjustments.
Contractors should keep their Disclosure Statements, accounting policies, and actual practices aligned; mismatches between written practice and actual practice are a common audit and dispute problem.
A change in practice is not simply an internal accounting decision when CAS applies; it may require Government negotiation, prospective implementation, and a documented cost impact analysis.
Subcontract flowdown is easy to miss, especially for lower-tier negotiated subcontracts, so prime contractors need a subcontract compliance process that screens CAS applicability and exemptions.
If noncompliance increases Government costs, the contractor may owe not only the overpayment but also interest, so timely self-identification and correction can materially reduce exposure.
Official Regulatory Text
As prescribed in 30.201-4 (b)(1) , insert the following clause: Disclosure and Consistency of Cost Accounting Practices (Jun 2020) (a) The Contractor, in connection with this contract, shall- (1) Comply with the requirements of 48 CFR 9904.401 , Consistency in Estimating, Accumulating, and Reporting Costs; 48 CFR 9904.402 , Consistency in Allocating Costs Incurred for the Same Purpose; 48 CFR 9904.405 , Accounting for Unallowable Costs; and 48 CFR 9904.406 , Cost Accounting Standard-Cost Accounting Period, in effect on the date of award of this contract as indicated in 48 CFR Part 9904 . (2) (CAS-covered Contracts Only) If it is a business unit of a company required to submit a Disclosure Statement, disclose in writing its cost accounting practices as required by 48 CFR 9903.202-1 through 9903.202-5. If the Contractor has notified the Contracting Officer that the Disclosure Statement contains trade secrets and commercial or financial information which is privileged and confidential, the Disclosure Statement shall be protected and shall not be released outside of the Government. (3) (i) Follow consistently the Contractor’s cost accounting practices. A change to such practices may be proposed, however, by either the Government or the Contractor, and the Contractor agrees to negotiate with the Contracting Officer the terms and conditions under which a change may be made. After the terms and conditions under which the change is to be made have been agreed to, the change must be applied prospectively to this contract, and the Disclosure Statement, if affected, must be amended accordingly. (ii) The Contractor shall, when the parties agree to a change to a cost accounting practice and the Contracting Officer has made the finding required in 48 CFR 9903.201-6(c) , that the change is desirable and not detrimental to the interests of the Government, negotiate an equitable adjustment as provided in the Changes clause of this contract. In the absence of the required finding, no agreement may be made under this contract clause that will increase costs paid by the United States. (4) Agree to an adjustment of the contract price or cost allowance, as appropriate, if the Contractor or a subcontractor fails to comply with the applicable CAS or to follow any cost accounting practice, and such failure results in any increased costs paid by the United States. Such adjustment shall provide for recovery of the increased costs to the United States together with interest thereon computed at the annual rate established under section 6621(a)(2) of the Internal Revenue Code of 1986 ( 26 U.S.C. 6621(a)(2) ), from the time the payment by the United States was made to the time the adjustment is effected. (b) If the parties fail to agree whether the Contractor has complied with an applicable CAS, rule, or regulation as specified in 48 CFR 9903 and 9904 and as to any cost adjustment demanded by the United States, such failure to agree will constitute a dispute under 41 U.S.C. chapter 71 , Contract Disputes. (c) The Contractor shall permit any authorized representatives of the Government to examine and make copies of any documents, papers, and records relating to compliance with the requirements of this clause. (d) The Contractor shall include in all negotiated subcontracts, which the Contractor enters into, the substance of this clause, except paragraph (b), and shall require such inclusion in all other subcontracts of any tier, except that- (1) If the subcontract is awarded to a business unit which pursuant to 48 CFR 9903.201-2 is subject to other types of CAS coverage, the substance of the applicable clause set forth in section 30.201-4 of the Federal Acquisition Regulation (FAR) shall be inserted. (2) The requirement in this paragraph (d) shall apply only to negotiated subcontracts in excess of the lower CAS threshold specified in FAR 30.201-4 (b) on the date of subcontract award. (3) The requirement shall not apply to negotiated subcontracts otherwise exempt from the requirement to include a CAS clause as specified in 48 CFR 9903.201-1 . (End of clause)