Isn't it true that legal costs related to protests (both a losing contractor's protest and the winning contractor's intervention) are unallowable? See FAR 31.205-47(f)(8). There is an exception there, but that circumstance hasn't been cited by the original questioner. As a general rule, legal costs related to protests are unallowable, right?
The following response is based solely on the question and background information provided. As we do not have all the facts particular to your situation, we highly recommend you consult, as applicable, your contracting officer and/or Legal Office for further guidance.
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We believe some groundwork must be laid to properly answer the question posed. "Are Legal Costs for Protest Unallowable?" Must be given a reference point. Given your citation, FAR 31.205-47(f)(8), the reference point is a contract. FAR part 31 provides guidance for determining if costs are allowable reasonable, and allocable. If the cost in question meets these criteria, they are considered to be allowable and allocable to the contract. FAR 31.205-47(f)(8) says, "Protests of Federal Government solicitations or contract awards, or the defense against protests of such solicitations or contract awards..." in general are unallowable.
The Financial Management Regulation (FMR) 7000.14-R Volume 10 Chapter 12 and 31 U.S.C. 3551 address the payment of bid protest costs. These are not opposite positions. The FAR addresses costa allowable to a contract whereas the FMR and 31 U.S.C. address Federal payment to a company, not a contract.