The Defence Cost Principles are a comprehensive guidance document which provides clarity to Defence and Industry regarding what costs may be attributed to Defence contracts. The Cost Principles provide a well-defined, standard and commercial approach to Defence contract costs.
The Cost Principles identifies what costs can be recovered from Defence (allowable costs) and what costs cannot be passed to Defence (unallowable costs), however are not intended to mandate what costs Industry are able to incur or not incur. The Cost Principles focus on compliance of the accounting framework to the Principles, not the financial accounting system.
As part of Acquisition, Sustainment and Procurement Reform the revised Defence Cost Principles have been released (formerly the CASG Cost Principles). This version is applicable for contracts agreed on or after 1 August 2024.
The new release reflects changes since the CASG Cost Principles (2017) were promulgated, resulting from:
- legislative amendments
- changes to Accounting Standards
- Defence Policy
- research into contemporary best practice in both local and in international jurisdictions
- consultations with Defence and Industry stakeholders.
The Australian Standard for Defence Contracting (ASDEFCON) contracting suite implement the Cost Principles when they are included in the approach to market documentation. If not using the ASDEFCON contracting suite, the relevant clauses for these Principles can still be applied and/or inserted and are available in the ASDEFCON Contracting suite.
There are some exceptions and instances where there is no requirement to use the Cost Principles including, procurements less than $2m, Defence and whole of government panel arrangements, when purchasing some commercial off-the-shelf products and commodities and in certain circumstances for fixed price contracts where there is adequate price competition. Further detail regarding application is included in Annexure A of the Cost Principles.
The use of the Cost Principles may require guidance, for further information or assistance please contact Commercial and Financial Analysis at casg.cfa@defence.gov.au within Commercial Division (CASG).