Allowability

Though we agree that the referenced FAR 31.205.1 cost principle is the appropriate cost principle, we believe sections FAR 31.205-1(e)(2)(i), (ii), (iii) and (f)(3) are the relevant sections of the cost principle to consider. Specifically:

FAR 205-1(e)(2)(i). "Allowable public relations costs include costs of responding to inquiries on company policies and activities." Rather than respond to large numbers of inquiries with individualized responses, Contractor believes it is prudent to anticipate inquiry areas and have ready responses that can be selected and sent out quickly. All the material in question is material used to respond to inquiries about Contractor’s policies and activities.

FAR 205-1(e)(2)(ii). "Allowable public relations costs include costs of communicating with the public, press, stockholders, creditors and customers." The material in question is used frequently to communicate with each constituent identified in the above FAR section, especially customers and creditors (e.g. vendors).

FAR 205-1(e)(2)(iii). "Allowable public relations costs include costs of conducting general liaison with news media and Government public relations officers…" The material in question is also frequently distributed to representatives of various media (e.g. numerous industry publications, various media groups) and government representatives including government public relations officers, project managers, technical and contracting personnel. The material is provided either when requested or when Contractor decides the public needs to be informed about its experience or capabilities.

FAR 205-1(f)(3). "Costs (are unallowable) of sponsoring meetings, symposia, seminars, and other special events when the principal purpose of the event is other than dissemination of technical information." The nature of the material in question can most accurately be characterized as "dissemination of technical information."

Discussion of Material

IN OUR RESPONSE, WE DISCUSSED THE NATURE OF EACH TYPE OF PUBLICATION IN DETAIL DRAWING ON TECHNICAL REPRESENTATIONS, PREPARED DATA ON THE QUANTITY AND DOLLAR AMOUNT OF EACH TYPE AND PROVIDED MANY SAMPLES OF EACH. SINCE SOME ITEMS WERE CLEARLY RELATED TO DISSEMINATION OF TECHNICAL INFORMATION WHILE OTHERS NOT SO CLEAR, WE SOUGHT, AS A BACKUP POSITION, ALLOWABILITY OF AT LEAST A MAJORITY OF THE COSTS. WE HOPED TO THOUGH TOO DETAILED TO RECOUNT HERE, WE WILL SUMMARIZE THE MAIN ITEMS BELOW:

The item representing the majority of material, Statement of Qualification, clearly meets the allowable function of "dissemination of technical information." It is a drab product – plastic spirals, single color printed on simple paper (only the cover sheet is multi-colored and glossy) and is single spaced where the text simply describes Contractor’s services, projects and personnel relevant to a specific technical areas (e.g. geoanalytics, storage tanks, solid waste, hazardous waste, etc). There is no way the contents of this item could ever be confused with "splashy" public relations brochures.

Similarly, the Atlas and Contractor’s folder is purely functional. The atlas provides information on the locations of environmental agencies while the company folder is merely a vessel to hold other information distributed to constituents.

Only the Comprehensive Resources Strategic Solutions and some of the single sheet inserts contains some of the elements that may be associated with brochures like multi-colors, photographs and glossy paper. These items, however, are rarely distributed by themselves but are usually sent with other material where the overall intent of the entire package is consistent with the allowable sections of the FAR 205-1 sections (e.g. communications, liaison, etc.) Most commonly, a package of information consists of most, if not all, the items identified in the exhibit below and are almost always sent for at least one of the following purposes – to provide "technical information" to a constituent, liaison with news media or government and most commonly to either respond to inquiries on company activities and policies or communicate with various constituents such as the "public, press, stockholders, creditors and customers."

Penalty

IN RESPONSE TO COMMON DISTINCTIONS DCAA AUDITORS HAVE MADE IN THE PAST, NORMALLY GLOSSY PAPER, MULTI-COLOR ITEMS ARE FLAGGED AS ADVERTIZING ITEMS WHILE MORE PLAIN ITEMS ARE MORE AMENABLE ALLOWABLE CATEGORIES

The existence of glossy paper and multi-colors on a few of the items the vendor provides should not be confused with advertising and public relations material. The days when there was a significant price difference between one to three colors printed on nondescript paper and multi-colored, glossy paper where the later was reserved only for "advertising" are gone. Now, there is little price difference between the two types of material so the existence of material printed on glossy paper using multiple colors does not mean the material is for advertising – we maintain that different types of printed material can and is used for allowable communications purposes.

Though beyond the scope of this article to discuss in detail, we also argued the FAR and DFARS "expressly unallowable" condition for imposing penalties on unallowable costs was not met because the regulation provides for some adverstising and public relations costs to be allowable and the current circumstances are ambiguous at best which fails to meet the courts’ criteria of "clear beyond cavil" condition for a cost to be "expressly unallowable."

{TAG_FORM_TITLE}