Selling Costs

Allowable or Unallowable: Unallowable, Allowable

Source: FAR

Selling costs

Both allowable and unallowable, depending on the type of selling costs, and circumstances in which the cost was incurred.

FAR Summary

(a) “Selling” is a generic term encompassing all efforts to market the contractor’s products or services, some of which are covered specifically in other subsections of 31.205. The costs of any selling efforts other than those addressed in this cost principle are unallowable.

(b) Selling activity includes the following broad categories:

(1) Advertising

Advertising is defined at 31.205-1(b), and advertising costs are subject to the allowability provisions of 31.205-1(d) and (f). Please see - Public relations and advertising.

(2) Corporate Image Enhancement

Corporate image enhancement activities, including broadly targeted sales efforts, other than advertising, are included within the definition of public relations at 31.205-1(a), and the costs of such efforts are subject to the allowability provisions at 31.205-1(e) and (f).

(3) Bid and Proposal Costs

Bid and proposal costs are defined at 31.205-18 and are subject to the allowability provisions of that subsection.

Independent Research & Development (IR&D) and Bid & Proposal (B&P) Costs

(4) Market Planning

Market planning involves market research and analysis and general management planning concerned with development of the contractor’s business. Long-range market planning costs are subject to the allowability provisions of 31.205-12 (Economic Planning Costs). Other market planning costs are allowable.

(5)Direct selling

Direct selling efforts are those acts or actions to induce particular customers to purchase particular products or services of the contractor.

Direct selling is characterized by person-to-person contact and includes such efforts as familiarizing a potential customer with the contractor’s products or services, conditions of sale, service capabilities, etc. It also includes negotiation, liaison between customer and contractor personnel, technical and consulting efforts, individual demonstrations, and any other efforts having as their purpose the application or adaptation of the contractor’s products or services for a particular customer’s use.

The cost of direct selling efforts is allowable.

Notwithstanding any other provision of this subsection, sellers’ or agents’ compensation, fees, commissions, percentages, retainer or brokerage fees, whether or not contingent upon the award of contracts, are allowable only when paid to bona fide employees or established commercial or selling agencies maintained by the contractor for the purpose of securing business. SEE FAR 52.203-5 - Covenant Against Contingent Fees and Contingent Fee Arrangements.