FAR 31.201-4, Allocability, provides that a cost is allocable if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits, received or other equitable relationship. Here's a Board case that touches on this concept.
The U.S. Agency for International Development (AID) issued a cost reimbursable contract to Bearing Point, Inc. for for economic recovery, reform and sustained growth in Iraq. Bearing Point in turn, subcontracted security services from Custer Battles. Custer Battles lost its contemporaneous records related to labor and transportation costs incurred under the subcontract so the AID contracting officer disallowed about $3.85 million based on lack of adequate supporting documentation, concluding that the costs were not allocable to the contract/subcontract because there was no evidence that they were incurred in support of the AID contract.
Bearing Point appealed the decision relying on testimony from three employees who were present in Iraq, personally knew the Custer Battles security forces, and reviewed the Custer Battles invoices. Bearing Point argued that the contract did not specify any particular documentation to support the invoices, and that it had "adduced" credible evidence of allocability of the disputed costs.
AID countered that Bearing Point was required to maintain records or other sufficient evidence of costs to obtain reimbursement and argued that the disputed costs were not allocable to the contract because they do not meet the contractual standard of contemporaneous documents or other supporting evidence.
The Board sided with Bearing Point. The Board ruled that the contract clauses do not impose the stringent requirements of either "nice neat little files" expected by the contracting officer or the contemporaneous records for which AID desired. The ASBCA determined that Bearing Point had met its burden of supporting claimed costs.