Tuesday, January 23, 2018

B&P Effort Can Be Direct and Indirect, Depending ...

B&P (Bid and Proposal) costs is one of those rare cost elements that can be charged both direct and indirect at the same contractor.

The definition of Bid and Proposal (B&P) costs is found in FAR 31.205-18(a):
“Bid and proposal (B&P) costs” means the costs incurred in preparing, submitting, and supporting bids and proposals (whether or not solicited) on potential Government or non-Government contracts. The term does not include the costs of effort sponsored by a grant or cooperative agreement, or required in the performance of a contract. (underscore added).
B&P costs are normally indirect. They are burdened with appropriate fringe and overhead and added to the G&A (General and Administrative) pool for allocating over all final cost objectives. If B&P effort is required by the terms of a contract however, the costs are not indirect but are charged direct to the specific contract.

So for example, a contract might have two line items. Line Item 1 calls for the production of 10 Widgets and Line Item 2 requires the contract to submit a follow-on proposal for 10 more Widgets. B&P costs incurred in preparing, submitting and supporting the proposal for Line Item 2 must be charged direct to that contract and may not be charged indirect.

There may be circumstances where contractors would like the option to choose whether to charge B&P costs direct or indirect.  For example, to charge the costs of a contractually required follow-on proposal indirect might preserve (or enhance) the profit margin on that contract. However, CAS (Cost Accounting Standard 402, Consistency in Allocating Costs Incurred for the Same Purpose, and by extension, FAR 31.203, Indirect Costs, does not allow that flexibility.

It is often in a contractor's interest to have a line item for proposal effort related to follow-on work. It probably carries profit or fee and doesn't increase indirect costs that would otherwise be allocated to a contractors other work.

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