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091262 1 (1979-02-16)

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                                              091262







                                        February  16, 1979



    The  Honorable Layton Chiles
    United  States Senate

    Dear  Layton:

          This letter is by way of followup on our  recent discussion with
    respect  to the provision included in Section 509(c)(3)  of fs.5, the
    proposed  Federal Acquisition Reform ACt  and  the concerns erpressed
    by  the Cost Accounting Standards Board wth  respect  to the inclusion
    of  cost accounting standards in the proposed exemption.

          The provilon  referred to above to substantially  the same as the
    corresponding  provision of 8.1264 which was  introduced in the Senate
    dusing  the 95th Congrecs and its predecessor Section  307 of S.3005 of
    the  94th Congress.  As noted in our commento on  the prior bills,
    Section  509(c)(3), if adopted, would result in duplicating  responet-
    bilitio   assigned to the Board by Public Law 91-379,  which established
    it  in 1970.

         As  you know, the Board has granted a number of  exemptions and
    waivers  under its authority in this statute.  These  exemptions, once
    approved,  have the effect of law.  Unless certain of  those were
    modified  or repealed, the confusion in tnduotry and  in the agencies
    would be  very considerable should Section 509(c)(3)  be enacted.  I
    believe  that you are well aware of other concerns which  we have with
    respect  to the provioioa in S.5.

          I continue to believe that Section 509(c)(3)  is not a workable
    approach  and would result in a far larger paperwork burden  than the
    exemption  provision which has been granted by the  Board to take into
    account  the problems of small business and commercial  establishments
    having a small  percentage of their total busineus devoted  to contracts
    coming within  the purview of cost accounting standards.





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