DOT Position

DOT is concerned that some or all of Contractor’s marketing labor costs may be unallowable so has questioned all of the costs without stating why.

Contractor Response

With the exception of specific costs discussed below, all costs considered to be sales and marketing costs are allowable if they are reasonable. FAR 31.205-38, Selling costs identifies the types of costs that are considered to be sales and marketing costs – (1) advertising (2) corporate image enhancement (3) bid and proposal costs (4) market planning and (5) direct selling. Some costs in three of these categories – advertising, corporate image enhancement when they are public relations and direct selling when they are “influence” payments- are unallowable while all others are allowable. Contractor and the independent CPA firm identified transactions categorized as advertising or public relations and deleted those costs from the indirect cost pool. All other costs were direct selling expenses which are allowable in accordance with FAR 31.205-38.
 

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