Tuesday, April 3, 2012

Plant Protection Costs

There is a FAR cost principle devoted specifically to plant protection costs. FAR 31.205-29 states that the costs of such items as wages, uniforms, and equipment of personnel engaged in plant protection, depreciation on plant protection capital assets, and necessary expenses to comply with military requirements are allowable costs. This provision has been around since 1959. Its surprising to us that a cost principle was needed to address these costs as protecting a contractor's plant has always been considered necessary and therefore allowable.

Whenever a "plant protection" issue arises, it is usually an allocation issue rather than an allowability issue. The Government will often distinguish between general plant protection and that allocable to a specific cost objective. General plant protection would normally be charged through an indirect rate however, if it could be identified to a specific job, contract, product line, etc., the costs would be charged direct to those cost objectives.

For example, the ASBCA ruled that the costs of providing an additional security guard at the plant gate during a strike were not properly chargeable to a ship repair contract because the ships being repaired had their own security guards.

The cost of plant protection is certainly increasing at a rapid pace in this post 9/11 era. It is very likely that as costs become more significant, Government auditors will increase their oversight by looking into how these costs are allocated to Government contracts. Look for more attempts by auditors to push plant protection costs out of indirect cost pools onto non-Governmental cost objectives.

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