Unallowable Costs Under Federal Government Contracts

“SMALLTOFEDS” By Ken Larson

“Certain costs cannot be allowed in prices, cost reimbursements or settlements under contracts with the US Government.

The government is unwilling to pay for these costs as direct charges to federal government contracts or through indirect expense pools applied to federal government contracts.”

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“A company is not prohibited from incurring unallowable costs, but they cannot be recovered either directly or indirectly under federal government contracts. 

 UNALLOWABLE COST CATEGORIES:

The following cost categories are generally unallowable under federal government contracts:

A. Advertising Costs are allowable only if they are necessary to meet the requirements of the contract performance.

B. Public Relations Costs are unallowable except for (1) costs specifically required by government contracts, (2) cost of communicating with the public and press pertaining to specific accomplishments which result from government contracts or (3) costs of conducting communication and liaison necessary to keep the public informed on matters of public concern such as notices of awards, financial matters, etc.

C. Alcoholic Beverage Costs are unallowable.

D. Bad Debt Costs are unallowable.

E. Automobile Costs for Personal Use are unallowable.

F. Defense and Prosecution of Criminal and Civil Proceedings, Claims Appeals and Patent Infringement are generally unallowable.

G. Donations and Contributions are unallowable.

H. Entertainment Costs are unallowable.

I. Executive Lobbying Costs Incurred in Attempting to Improperly Influence either Directly or Indirectly an Employee or Officer of the Federal Government Regarding a Contract are unallowable.

J. Fines and Penalties resulting from failure of the company to comply with federal, state, local or foreign laws and regulations are unallowable.

K. Goods and Services Cost for Personal Use are unallowable.

L. Personal Housing and Living Expenses are unallowable. (Not to be confused with direct travel costs which are allowable)

M. Insurance Costs to Protect Against Defects in Materials or Workmanship are unallowable.

N. Interest and Investment Management Costs are unallowable except for cost related to the physical custody and control of monies and securities and for interest cost paid to external parties for assets (buildings and equipment) used to support government contracts.

O. Losses on Government or Other Contracts are unallowable.

P. Membership Costs in Civic, Community Organizations, Country Clubs or Social or Dining Clubs are unallowable.

Q. Pre-Contract Costs, unless approved by the Contracting Agency are unallowable.

R. Airfare Travel Costs in Excess of the Lowest Available Commercial Discount or Standard Coach Airfare are unallowable.

Please see the following link for further details:

2 CFR Part 200 Excerpts: Unallowable Costs

To manage unallowable costs, separate accounts must be established for these type expenses and they must not be priced directly into federal government contracts during the proposal process. 

Such costs cannot be made a part of the expense pools which are applied to federal government contracts through an overhead, material handling or G&A cost allocation at accounting period close or during forward pricing rate planning.”

Managing Unallowable Costs Under Federal Government Contracts

How Business Partnering Can Help You Become A Government Contractor

“FEDERAL TIMES” By Melissa Rayworth

“For entrepreneurs, it’s part of the central mythology: You launch your own business because you want to be your own boss. To thrive as a business owner, it helps to have an independent streak and be comfortable going it alone.

But when small and mid-sized companies begin pursuing government contracts, it can help — immensely — if they strategically collaborate with other businesses.”

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“There are several ways to make this happen:

• Getting work as a subcontractor is one good possibility.
• You can also seek mentoring from more experienced companies already working with the government and use that knowledge as you pursue your first contract.
• Some companies break into the industry through a true partnership, pairing up with another applicant to submit a joint bid.

“One new entrant might complement a gap or a void that another existing business may have, and together they have a better opportunity moving forward,” says Antonio Doss, deputy associate administrator for government contracting and business development at the Small Business Administration.

What kind of matches can work?

If you’re considering working as a subcontractor, ask yourself: How might your product or service be used by a larger company to help fulfill a contract they’ve won or they’re pursuing?

Building a relationship with a prime contractor “can be a great place to start and learn,” says Lauren Weiner, co-founder of WWC Global. She has worked as a government contractor since 2006.

One key to landing a contract: really understanding the needs of a particular government department or agency, Weiner says. While working as a subcontractor, you can learn about a particular sector and really come to understand those needs – while getting paid.

Going in on a joint bid with another company can give you the same advantage. If you’re partnering with someone who has a bit of experience, it can help speed up your learning curve.

But whether you’re seeking to be an equal partner on a contract or looking to be a subcontractor, the key is building relationships.

Where does a company find potential partners?

Your local SBA office may be able to help you connect with potential partners or folks who would need you as a subcontractor.

SBA district offices do their own training and also do training in partnership with local chambers of commerce and economic development organizations “to help demystify the whole government contracting space,” says Antonio Doss, deputy associate administrator for government contracting and business development.

These training events can be opportunities for networking with other entrepreneurs who are curious about government contracting or already pursuing contracts.

The current administration is making it a priority to increase the number of American small businesses working as government contractors, Doss says, and supporting business owners in networking with others is part of their plan. “Not only can you be a part of that space,” Doss says, but “as a newer entrant into the environment, you can learn from the other people.”

Seek mentors, even among competitors

The SBA points businesses to mentorship through organizations like score.org. But Doss also recommends reaching out directly to companies that are more experienced and thriving in the government space.

You might be surprised how many people – even competitors – are willing to share their knowledge about breaking into contracting within a specific industry.

“Those persons are often a season or two or three further down the path of where you are right now,” Doss says. “Often they’re willing to share with you, because sometimes they’re also realizing that you might be a good teaming partner at some point.”

One way to avoid stepping on toes as you seek advice: Since companies usually choose a particular government agency to do business with, you might learn from a competitor and then target a different area of the government.

As you pursue subcontracting jobs, partnerships and mentorship, Weiner says, keep this in mind: There are as many ways of earning a government contract as there are businesses that do it.

“So don’t get discouraged if another business owner says, ‘it was impossible,’” she says. “It may not be impossible for you, given what you offer.”

How Business Partnering Can Help You Become A Government Contractor

For More on Federal Government Contact Teaming please see:

Small Business Teaming In Federal Government Contracting

Techniques to Profile Your Government Contract Competition

“SMALLTOFEDS” By Ken Larson

“An effective competitor profile is a key tool in performing risk analysis and making related trade off judgments in the final submission of your bid or proposal.”

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“Even though small businesses enjoy set aside opportunities in government competition, the majority of set-aside procurement bids are populated with several competitors.

Early market research, industry teaming and customer relations are necessary on the road to a set-aside win.  Marketing to Achieve a Set aside Government Contract

Once a bid target is selected, competitive analysis is vital. This is particularly true in service contracting.  As the small enterprise moves on into the full and open market, it is even more vital to know who else is bidding and their relative strengths and weaknesses.

Make a bid/no bid decision. Making an Astute Bid/No Bid Decision

If you decide to bid, develop a model of your competition as a validating tool for your proposal approach.  Develop a profile of your competitor’s likely technical solution, past performance, personnel qualifications and cost buildup.

WHO IS THE COMPETITION?

If the government is offering a bidder’s conference, go to the meeting and attend any tours offered. Then obtain the list of attendees from the solicitation contracting officer.

Examine the contract award history on the agency web site and award notices under the “Agency Listing” at The System For Award Management (SAM). Determine who has been awarded previous contracts by the agency and who the present incumbent may be for your bid if the requirement is not a new one and is presently being performed by another company.

Make inquiries regarding the competitor through industry partners and prime contractors with whom you are associated and with whom you hold Non-Disclosure Agreements. Question them regarding the pending procurement who they believe are the bidding companies.

PROFILE YOUR COMPETITOR

Check the Competitor’s  General Services Administration (GSA) Schedule.  Most government contractors who have been in business long enough to qualify for a significant procurement also establish a GSA Schedule.  Virtually all of them post that schedule at their web site.  For products it will contain the prices through profit for items the company wishes to sell off the schedule to the government.  For services the schedule usually contains fully loaded labor rates through overhead, G&A and profit.  Examine the schedule and note the prices, comparing them to your cost build ups. GSA schedules are usually projected for a 5 year period.  Achieving and Utilizing a GSA Schedule

Consider A Freedom of Information Act (FOIA) Request. Note from company web sites, SAM award announcements, press releases and other public data the contract numbers your competitor has been awarded by the agency to whom you are bidding.  Consider similar program history in other agencies if the present bid has no recent competitor history. Then submit a FOIA request to the agency FOIA Point of Contact listed at the government web site, identifying the document or documents you are requesting specifically by name and identifying number (s).  When requesting contracts, RFP’s, change orders and similar data, always include the contract number and be specific with regard to references to all changes.  If proposals are requested include a specific request for management, technical and cost volumes. The more detail you provide the more likely the response will supply what you wish to have. Utilizing the Freedom of Information Act

Obtain Competitor Dunn and Bradstreet (D&B) and Better Business Bureau (BBB) Reports. You have a D&B Number.  So do your competitors.  Use your registration at the Dunn and Bradstreet web site to order a D&B report on your competition.  Its will provide detailed history of the company, its ownership, the length it has been in existence, its credit and payment history, as well as other useful information.  D&B charges a fee for the reports, but you can order them as needed and pay by the report.   Dunn and Bradstreet  A BBB report is free and may provide insights into complaints, problem resolutions and related matters from the buying public.Better Business Bureau

Make a Physical Visit. Visit your competitor’s location, particularly if it is local.  Make sure you are viewing the cost center out of which the job will be bid.  Many businesses have multiple cost centers at multiple locations to maximize competitive factors on government contracts.  Cost Center Strategic Planning  Without entering the facility, assess the size of the operation, the traffic entering and leaving and relative indirect cost factors that can be generally observed, such as square footage, headcount of badged employees, the size and content of the parking lot and related matters.

Post Generic Help Wanted Ads at Your Web Site and Elsewhere on the Web.  Without revealing the specific contract or program (unless you believe it will benefit you) publish job descriptions and openings for the skill sets necessary to perform the work required by the new program, even if you already have the personnel on board.  Look for interviewees who have worked for, or are presently on, the competitor’s payroll and invite them for a visit at a neutral location. Some companies even announce a job fair for the program.  Talent is fluid today. It is also being re-defined.  Thus, what used to be considered a “Pool” (either captive or available) is now a technologically-equipped, high speed resource of communicators with motivated skill sets seeking opportunity. Economic hardship has also put a hard, cynical edge on many.  Selling must occur both ways (employer and employee).  To an extraordinary degree the age in which we live is requiring us to redefine trust and the degree to which communication and expectation contribute to it. Loyalty has taken a back seat to the above.  Recruiters, companies and entrepreneurs must recognize these hard facts of life.  Is the term, “Talent Pool” Obsolete?

Develop A Cost Model of Your Competition. Make a copy of your cost model spreadsheet for the job and modify it to look like your competitor. To see examples, check the models labeled “Attachments A and B” in XLS spread sheets within the “Books by Ken” BOX in the right margin of the below site.  Plug your direct costs for labor, material, ODC (travel and the like) into the competitor model, then using information developed above, evolve estimated indirect cost factors for Overhead, G and A and Profit. Assume that all competitors will have to pay the same relative wage scale as you have determined by salary survey  to attract or retain talent and a fringe benefits package to meet government requirements for vacation, sick leave, holidays, taxes and similar expenses. Then focus on the overhead and G&A as key factors in winning the pricing criteria for the job, comparing your bid to the competitor cost model. Pricing Small Business Federal Government Contracts

SUMMARY

An effective competitor profile contains performance, historical, demographic, statistical, physical operations, human resource and cost information that is trending in nature and provides insights and comparative balance to a challenging bid. It is a key tool in performing risk analysis and making related trade off judgments in the final submission of your bid or proposal.”

Smalltofeds – Techniques to Profile Your Government Contract Competition

A Critical Channel For Establishing Credibility And Capturing Market Share

“In this new era, where federal agencies are seeing a massive shift in decision-makers, it’s more critical than ever for executives—CEOs, COOs, VPs, and others in the C-suite—to lead by example and establish a powerful presence on LinkedIn.”

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“LinkedIn is the lynchpin for engaging with the GovCon market. It’s where new influencers and decision-makers vet companies, assess areas of expertise, and gauge a leader’s commitment to the industry. As the most influential social platform for this sector, an executive’s active presence isn’t just about visibility; it’s a strategic asset for building trust and re-establishing your brand’s position.

So, what does it take to create a high-impact executive presence on LinkedIn? Here are the key tactics and content strategies that drive real results.

1. Humanize Your Brand Through Storytelling

Your LinkedIn profile is more than a digital resume; it’s a narrative of your professional journey and your company’s mission. B2B buyers and potential employees are more likely to trust a company with a human face. Use your posts to tell stories that are relatable and authentic.

• Behind-the-Scenes Moments: Share glimpses of your team at work, a new project kickoff, or a company event. This builds a sense of connection and makes your organization feel more accessible.
• Leadership Lessons: Go beyond the typical corporate announcement. Share a key lesson you’ve learned from a challenge, a mentor, or a success. This demonstrates vulnerability and expertise, resonating more deeply with your audience.

2. Position Yourself as a Thought Leader

The GovCon market values expertise and competence. Your content should be a constant stream of valuable insights, proving that you are a reliable source of information.

• Industry Insights: Post your analysis on new federal regulations, emerging technology trends, or significant contract awards. This positions you as an expert who is actively shaping the industry conversation.
• Client or Team Spotlights: Highlight a successful project or celebrate the accomplishments of your employees. This not only validates your team’s expertise but also showcases your company’s culture and commitment to its people.

3. Drive Engagement, Don’t Just Broadcast

The most effective executives on LinkedIn don’t just post content—they actively engage with their network. This two-way communication builds genuine relationships and extends your reach.

• Thought-Provoking Questions: End your posts with a question that encourages discussion. This prompts comments and boosts your post’s visibility to a wider network.
• Active Commenting: Engage thoughtfully on the posts of other leaders, federal decision-makers, and industry partners. Leave comments that add value, rather than generic phrases like “Great post!”

4. Leverage Content for Trust and Business Growth

The numbers don’t lie. An active executive presence directly influences purchasing decisions and talent attraction. Your LinkedIn activity should be a continuous feedback loop that reinforces your credibility.

• Build Trust: An impressive 78% of business decision-makers are more likely to trust companies whose leadership has an authentic social media presence.
• Influence Buyers: 64% of buyers use thought leadership content from executives to assess a company’s capabilities.
• Attract and Retain Talent: 78% of job candidates will research a CEO’s online presence, and companies with socially engaged executives report 40% higher employee retention.

In a market defined by turnover, the power of an executive’s LinkedIn presence is undeniable. By consistently sharing strategic content and actively engaging with the community, GovCon leaders can build a professional brand that enhances their company’s reputation, attracts top talent, and drives business results. Don’t miss this critical opportunity to make your voice heard where it matters most.”

The new rules of GovCon leadership: Why your LinkedIn presence matters more than ever

ABOUT THE AUTHOR:

Mark Amtower advises government contractors on all facets of business-to-government (B2G) marketing and leveraging LinkedIn. Find Mark on LinkedIn at http://www.linkedin.com/in/markamtower.”

The New Republic | Trump Sons Land Massive Military Deal as Family Corruption Grows by Ellie Quinlan Houghtaling

AI generated summary, Read the full article for complete information.

Donald Jr. and Eric Trump have leveraged their family’s political influence to secure multimillion‑dollar federal contracts, first by joining the board of Powerus—a drone maker founded by former Army special‑operations veterans that recently landed an undisclosed U.S. Air Force purchase as the Iran war enters its second month, and second by using a shell vehicle backed by their investment firm American Venture to merge with a Kazakh tungsten mine that has received $1.6 billion in U.S. government support, culminating in a $20 million purchase of a 20 percent stake in Kaz Resources and a total “skyline” investment of roughly $24 million; while the brothers assert they are passive investors with no operational role, the deals illustrate how the Trump family is profiting directly from government spending tied to their father’s administration.

Read more: https://newrepublic.com/post/209840/donald-jr-eric-trump-military-deal-mining-company

#EricTrump #Trumpfamily #corruption #governmentcontracting #DonaldTrumpJr

What Small Business Should Know About FAR and CAS

“SMALLTOFEDS” BY Ken Larson

“Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS) – Rules of the Game and Developing Your Game Plan”

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“Small businesses consistently encounter FAR and CAS requirements upon entering or growing into federal government contracting.   The purpose of these standards is to supply uniform regulatory guidance to all companies doing business with the government and to the agencies that buy from them.

“This article will discuss a basic understanding of FAR and CAS as well as the methods to design approaches to meeting them.

OVERVIEW

The below table contains the principle FAR chapter titles and each of the 19 CAS clause titles (CAS 419 was never written).  Linked below the table are the web sites that can be utilized to explore these documents.

 (Please Click Image To Enlarge)  

Federal Acquisition Regulation

Determine the regulation basics that apply to any given job considered for bidding.  Examine a few solicitations in your area of expertise at the SAM web site:

SAM Contract Opportunities

Glance through the terms and conditions of a given solicitation and note the FAR and CAS requirements sited.  Use the links to the FAR and CAS web sites as source documents to read in detail the clauses you must understand to effectively bid the job .  

Cost Accounting Standards

Small businesses are generally required to meet modified CAS coverage.  The business system requirements for Modified Cost Accounting Standards (CAS) Coverage are defined by the government as follows: 

Standard 9904.401, Consistency in Estimating, Accumulating, and Reporting Costs

Standard 9904.402, Consistency in Allocating Costs Incurred for the Same Purpose

Standard 9904.405, Accounting for Unallowable Costs

Unallowable Cost Guidance

Standard 9904.406, Cost Accounting Standard―Cost Accounting Period

Modified, rather, than full, CAS coverage may be applied to a covered contract of less than $50 million awarded to a business unit that received less than $50 million in net CAS-covered awards in the immediately preceding cost accounting period.

The following article contains practical business system guidance regarding building a Modified CAS Coverage Small Business System for federal government contracting:

Managing Risk In Small Business Federal Government Contracting Business System Development

If you have confusion regarding interpreting a requirement, seek assistance in the table of contents to the free book at this site offering guidance under the topic in question

SUMMARY

While assessing the impact of FAR and CAS on your company educate yourself on that what directly affects your company first in making the transition to federal government contracting and growing into the field.

Carefully  maximize your existing business processes and systems first before making changes and do not jump to instant fixes with exotic software tools a supplier or consultant has told you will make you compliant or competitive overnight in government contracting. 

FAR and CAS are generally logical bodies of regulation that have come about due to the need to control and make consistent the government and industry approaches to meeting prudent and sound contracting objectives with the necessary  transparency to govern. 

FAR and CAS do not impose business systems.  They do require that you disclose the way you meet regulatory requirements in the way you operate with your processes and tools. Plan the approach and learn to convey it to auditors, contracting officers and industry partners.

Grow into the business by exploring the venue and having it grow into you.”  

What Small Business Should Know About FAR and CAS

Tips For Small Business In Teaming With Prime Contractors

“WASHINGTON TECHNOLOGY” – By Mike Lisagor

Adapted from the book: How to Win in the Government Market (co-authored with Mark Amtower)

“There are plenty of pitfalls and possible mistakes when you form partnerships.There is no such thing as a risk-free proposition as a subcontractor. But here are eleven guidelines that can increase your chances of picking the winning prime contractor.”

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And, above all, avoid teaming just because it’s someone you already know…team to win!

Tips On Teaming With Prime Contractors

ABOUT THE AUTHOR:

Mike Lisagor

A (usually) retired writer, gov’t contractor BD & PM expert, and blues musician, Mike Lisagor is the founder of Celerity Works and a co-founder of GovFlex.com. His books include the just released, How to Win in the Government Market (with Mark Amtower), The Essential Guide to Managing a Government Project, and How to Develop a Winning SBIR Proposal (with Eric Adolphe). He can be reached at LinkedIn.com/in/mikelisagor and [email protected]