Thursday, April 19, 2012

Ask Before You Spend - Avoid Subsequent Disputes

Government contractors, like most businesses and individuals are asked to participate in community service projects. Some projects are regular and recurring while others are one-time events. Generally speaking, the cost of these projects  are allowable under FAR 31.205-1 which states that "allowable public relations costs include  cost of participation in community service activities (e.g. blood bank drives, charity drives, savings bond drives, disaster assistance).

Sometimes however, there is a fine line between allowable public relations activities and activities that are more closely aligned with advertising. Most kinds of advertising is unallowable under Government contracts.

There was a recent case involving a Government contractor who was asked to provide two employees to participate in a local Meals on Wheels program. The employees were to deliver meals for two to three hours every other week for one year. The contractor would pay their regular salaries and also reimburse them for their mileage. Before agreeing to take this project on, the contractor asked the contracting officer for advice on whether the costs would be allowable.

Requesting guidance on matters that could be controversial, or better yet, entering into an advance agreement with the Government on the allowability of such costs is a wise move. It precludes disputes later on. In this case, the contracting officer ruled that the cost of the Meals on Wheels project would be allowable as long as the costs were reasonable. The contracting officer also specified that the costs be charged indirect such as to a General and Administrative (G&A) account.

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