Start-up Grown to Need a Disclosure Statement?
Your small business lands more sales contracts. Your small business earns more gross income. Your small business hires more employees to keep up with sales. Eventually, your small business grows out of being “small.”
Which new GovCon contract or subcontract causes the need for a Disclosure Statement? See Full or Modified Cost Accounting Standards (CAS) requirements in Part 30 of the Federal Acquisition Regulations (FAR) and 48 Code of Federal Regulations 9903.201-1 and -2. A new sale might tip the business into CAS requirements. When deciding whether to vie for an award, start with the exemptions.
Click the button below for an easy-to-follow Decision Tree. This guide checks whether or not a particular award will launch your start-up into CAS coverage.
An award based on a sealed bid is always exempt from CAS coverage. The trick is to say, “Yes.” The buyer:
- The Contracting Officer for a Government prime, or
- The Subcontract Administrator for a prime contractor’s Government-funded subcontract
might want to negotiate. Negotiation of increased quantities, improved quality, lowered pricing – or anything else – changes the basis. A “sealed bid” becomes a “negotiation.”
An award to a small business never triggers CAS coverage. The trick is to remain “small” after acceptance of the award. Most businesses offer more than one NAICS. The solicitation cover sheet (or text in the narrative) reveals the NAICS. The Small Business Administration website leads to a list of NAICS with:
- The maximum number of employees, or
- The maximum gross income in the previous Company fiscal year
to remain “small.” Because the subject award does not affect prior-year gross income, the small business status might not dissolve immediately. Consider its effect on the first day of the next fiscal year.
The head of the awarding agency controls the remaining exemption. A written waiver with justification, in certain circumstances (See 30.201-4.) can exempt CAS coverage. This waiver, for vital needs of the Government, happens rarely.
Foreign concerns that are not governments (See the clause at 52.230-4.) and educational institutions (See the clause at 52.230-5.) apply different regulations for exemptions.
Unless exempt, receipt of an award of $750,000 or more exposes your business to CAS coverage. With some exceptions (See the clause at 52.230-3.), Modified CAS applies for awards less than $50 Million. An award of $50 Million or more initiates Full CAS coverage.
What triggers the requirement for a Disclosure Statement? As soon as covered by – Modified or Full – CAS, your business needs a Disclosure Statement. The Disclosure Statement describes procedures used Company-wide. Descriptions are not just for one Government-funded contract or subcontract and must be acceptable to the Government.