1) Is the argument given in the scenario background valid?
2) When is it appropriate to consider a tradeshow's primary purpose the dissemination of technical information if their is also effort to promote company image, etc.?
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This response is based on the information provided. We suggest you discuss with your contracting and finance team, program manager and/or legal department as appropriate.
The contractor's assertion that " there is no such thing as an allowable or unallowable tradeshow/airshow" is not incorrect. What is allowable or unallowable are the costs of participating in a given airshow. We do not believe that FAR 31.205-43 really pertains to tradeshows/airshows. FAR 31.205-38 applies to the extent that it refers back to FAR 31.205-1. But tradeshows and direct selling are different. The nature of tradeshows is broad and not targeted to a specific potential customer. While direct selling may come from contacts made at a tradeshow, tradeshows on their face do not constitute direct selling. FAR 31.205-1 does allow costs of tradeshows, subject to specific limitations identified in FAR 31.205-1(d)(2), if the contractor can make a case that its participation in the tradeshow is driven toward the promotion of exporting its products/services from the United States.
The second question you pose is not a FAR/DFARS question. This is a judgment call. Although subjective, you should apply certain objective considerations. These considerations might be the overall nature of the event. Is the targeted audience primarily foreign nations/companies? IS the nature of the event heavily social or heavily technical? What personnel is the company sending; more technical or more business development/sales?