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    Is this an allowable cost? If it is I think it should be allocated to an indirect rate like G&A or overhead, not direct billed to materials.


    Answer

    I do not know any law, regulation, or policy that would make these costs "unallowable." Telecommunications is a necessary part of doing business these days. But as you have so noted, necessary costs of doing business are typically an indirect expense allocated in accounts such as General and Administrative expense. Nevertheless, you might want to also check your requirements package, or statement of work/objectives, to see if there is a unique requirement your customer is writing into the contract. It may be that your contractor is responding to such a requirement by bidding these as a direct cost. It could be, for example, that perhaps your requirements contemplate dedicated communication lines that cannot be shared or used for any other purpose but your requirement. Even in the absence of such a specific requirement in your contract, it might also be the contractor's business and/or accounting practice to charge these cost direct.
     
    You have raised a good question and I recommend you inquire of your contractor why you are seeing such general utility costs, if you will, being charged direct to your contract. Your contractor should then be able to respond whether; 1) they are responding to a unique requirement in your requirements package, 2) it is their business and/or accounting practice, or 3) it is a matter of oversight or mistake on their part. If a matter of unique requirement, follow up with your customer regarding the validity of the need. If claimed to be a matter of business and/or accounting practice, then follow up with your ACO to confirm or deny. Once you have established the proper allocation of these costs, you next turn to whether the cost is reasonable. For example, even if you find dedicated communications is indeed a legitimate requirement in your effort - does the contractor really need blackberries to meet that need, or will a lower cost alternative still satisfy the requirement?

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