Monday, February 22, 2016

Cost of Political Campaign Activities at Contractor Facilities

Election season is upon us (and has been forever, it seems) and so it would be a good time to review the allowability of costs associated with candidate campaign stops at contractor facilities.

Political candidates pose at diners to show their ordinariness and ability to mingle with common folk, on college campuses among throngs of energetic student bodies to demonstrate their youthful appeal, and at rallies among throngs of diverse sign-waving supporters to show their broad-based appeal. Candidates have even been know to show up at Government contractor facilities. Such visits take up resources in time and money. Are such costs allowable under Government contracts? Does it matter whether the candidate was invited to attend or asked to visit?

The Federal Acquisition Regulations (FAR) do not address such activities directly. However, the Government, namely contracting officers and contract auditors, have taken strong positions against allowing such costs be charged to Government contracts.

DCAA's (Defense Contract Audit Agency) audit guidance on this matter follows:
Costs associated with political campaign activities, such as candidates' appearances and speeches at contractor facilities, are unallowable in accordance with FAR 31.205­ 22(a)(1), Legislative Lobbying Costs, when such activities are clearly an attempt by the contractor to influence the outcome of an election by soliciting votes. The key considerations in this determination are how the candidate is portrayed by the contractor and the subject matter of the candidate's speech. When questioning such an event all costs associated with these activities including applicable burdens should be questioned (see DCAA Audit Manual 7-1102.5)
We're not quite sure how a visit by a "presidential" candidate fits into the "Legislative Lobbying" cost principle but don't expect contract auditors to try and make such a distinction. In the Government's view, the only reason a candidate would be invited to a contractor facility is to influence the outcome of an election.

In one case involving a political candidate and the assembling of contractor employees, the auditors were very aggressive in tallying up unallowable costs. They asked for a listing of every employee who attended and the time it took for them to drive to the event. In some cases, a 30 minute event turned into two hours of down-time. The auditors also asked the contractor to compile the administrative costs for hosting the activities including publicizing and disseminating the event, refreshments, protocols, and clean-up and tear-down.

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