For the assignment below, you are going to have to determine whether each of the costs included in an offeror’s proposal are allowable or unallowable. In order to determine allowability of the specific costs, you’re going to need to do some research. You can use your textbook (9:8-52). But, you also need to check the specific cost principle in FAR (FAR Part 31.205) in order to determine there hasn’t been a change to the FAR since your textbook was printed.
For each cost you determine is “unallowable”, you need to explain “why” it’s not allowable. If appropriate, you should reference your textbook as well as the appropriate cost principle in FAR.
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1. Included as Other Direct Costs is $55,000 of travel-related costs. The $55,000 includes $12,000 business class tickets. The contractor always purchases non-refundable tickets which would cost $4,800 instead of $12,000
2. $55,000 for shareholder meetings
3. $1,500,000 for direct materials. The technical review team has determined the direct materials are appropriate and necessary for the performance of this contract .
4. $1,500 in estimated parking tickets. Your review of the history of the prior contract has shown that the company regularly has parking tickets in the above amount.
5. $25,000 in state income taxes
6. $250,000 for the Sky Suite at stadium where the Baltimore Orioles play
7. $1,250,000 for engineering labor. Once again, the technical review team has determined that the house and labor categories bid by the contract are appropriate and necessary for the performance of this contract. Your cost/price analyst also verified the hourly rates used to calculate the direct labor are representative of the hourly rates in the area where the contractor is going to perform the work