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  • Question

    Is Bid and Prep allowed to be a direct cost to a new contract?


    Answer

    Proposal preparation costs that are not required by a contract are, by definition, to be charged indirectly to the contractor's bid and proposal (B&P) indirect cost pool. See DPAP Memorandum dtd. 10 Nov 2011, Subject: Direct and Indirect Charging of Contractor Proposal Preparation and Negotiation Support Costs. Proposal preparation costs should only be charged directly to a contract when there is a specific contractual requirement for the contractor to submit a proposal (see FAR 31.205-18(a) and CAS 9904.402-61(c)). According to the Cost Accounting Standards (CAS) and the Federal Acquisition Regulation (FAR), if B&P costs (i.e., those costs without a specific contractual requirement) are incurred without a contractual requirement, those costs can never be re-characterized as direct costs of any contract since they were independent B&P costs at the time they were incurred.

    Follow-on work does not automatically qualify to be charged directly to a contract merely because there is an assumption that the contractor will submit a proposal as part of a continuing program. For the costs to be charged directly to a contract, there must be a specific requirement in an existing contract to submit that particular proposal, not just an implied requirement. 

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