Question: Do company websites meet the FAR 31.205-1(b) definition of "advertising". The definition does not explicitly list "websites" as advertising media but the listing of included media is not an all-inclusive listing. If company websites meet the definition of advertising, it would have to meet the primary purpose criteria discussed in FAR 31.205-1(f) to be unallowable. It seems to us that most websites have multiple purposes. Advertising is certainly one purpose but there are others such as communications with shareholders, customer ordering, customer support, and contact information.We recommend that contractors assess the purpose of their websites and if there is a component of advertising involved, apply a logical (defensible) method apportioning the costs between the relevant cost accounts.
Response: FAR 31.205-1 defines advertising to mean:
the use of media to promote the sale of products or services and to accomplish the activities referred to in paragraph (d) of this subsection, regardless of the medium employed, when the advertiser has control over the form and content of what will appear, the media in which it will appear, and when it will appear. Advertising media include but are not limited to conventions, exhibits, free goods, samples, magazines, newspapers, trade papers, direct mail, dealer cards, window displays, outdoor advertising, radio, and television.
The phrase, “regardless of medium employed,” is sufficiently broad enough to make the definition of advertising include company websites. As stated by the questioner, “advertising is certainly one purpose” of company websites. In accordance with the requirement of FAR 31.204(d), the cost to develop and maintain company websites should be apportioned among the contractor’s accounts that best capture their essential nature to the extent company websites are used for multiple purposes. FAR 31.204(d) states:
When more than one subsection in 31.205 is relevant to a contractor cost, the cost shall be apportioned among the applicable subsections, and the determination of allowability of each portion shall be based on the guidance contained in the applicable subsection.
Tuesday, August 24, 2010
Cost of Developing and Maintaining Company Websites
Not too long ago while conducting one of our training sessions, we were asked whether the cost of developing and maintaining contractor websites could be considered unallowable advertising under FAR 31.205-1. We hadn’t encountered this question before so we did not have a complete answer. The cost of developing and maintaining a company website is significant in many cases. Medium sized companies can spend tens of thousands of dollars and larger companies, significantly more. So, we sent the question on to DPAP (Defense Procurement Acquisition Policy), the DoD organization responsible for all acquisition and procurement policy matters in the Department of Defense (DoD). Here is the question and the response.