Are company provided pizzas during a working lunch devoted to a specific contract an allowable direct expense for that contract? If not direct, is it allowable as part of an indirect cost pool?
There is not enough specific information available for the AAP to provide an answer to this question and an attempt to provide a third opinion with limited information would not be prudent. However, it appears that DCMA and DCAA have rendered differing recommendations on the costs in question. You should review the audit report provided by DCAA for the specific reasons the DCAA auditor determined those costs unallowable. If the official audit report does not provide the explanation, the ACO should request that information from the DCAA auditor. Once those facts are gathered, it is the responsibility of the ACO to make the decision based on the recommendations and facts provided.
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We suggest you take this issue to your legal counsel for a judgement.