Business Development

I did not discern a question in the original posting...

Marketing is often G&A, which aligns with the "S,G&A" nature of commercial entities. Where companies sell to both government and non-government entities, they may form separate OH pools and allocate the marketing cost only to benefiting cost objectives.

Is there no definitive answer to the above?  "Here_2_help" has a great history of helping with questions, but this time can anyone derive an answer from the above?

Maybe the problem is me, in assuming that there would be a widely-held view that prefers one over the other.  I am currently involved in a feud between a party who believes this stuff should be G&A, and another who believes this should be Overhead.

Maybe, as Here_2_help says, there is no conclusive answer.

Have you reviewed illustrations (c) and (d) under CAS 410?

Corduroy Frog said:

Is there no definitive answer to the above?  "Here_2_help" has a great history of helping with questions, but this time can anyone derive an answer from the above?

"Business Development"?

G&A.

That definitive enough for you? Hope that helps.

BTW, did you know that the term "business development" does not appear anywhere in the FAR System as a cost allowability issue, or in the DCAAM? The only mention of the term in the FAR System is in connection with SBA's 8(a) program. Karen Manos does not mention the term in Government Contract Costs & Pricing.

Anything else?

You know, you can always pay for help.

On 8/7/2018 at 9:11 AM, here_2_help said:

Marketing is often G&A, which aligns with the "S,G&A" nature of commercial entities. Where companies sell to both government and non-government entities, they may form separate OH pools and allocate the marketing cost only to benefiting cost objectives.

Corduroy Frog said:

Is there no definitive answer to the above?  "Here_2_help" has a great history of helping with questions, but this time can anyone derive an answer from the above?

Maybe the problem is me, in assuming that there would be a widely-held view that prefers one over the other.  I am currently involved in a feud between a party who believes this stuff should be G&A, and another who believes this should be Overhead.

Maybe, as Here_2_help says, there is no conclusive answer.

here_2_help said:

Have you reviewed illustrations (c) and (d) under CAS 410?

I would “derive an answer from above” , (thanks H2H) that Business Development costs should be allocated to the benefiting cost objectives. G&A costs are those costs which benefit the business as a whole.

This may apparently be be done by adjusting the G&A base for those non-general business costs and  include them in overhead for the benefitting cost objectives rather than in G&A.*

There may be other necessary adjustments beyond elements of business development cost, too for government contracts.*

I didn’t assume that a proposed G&A rate was necessarily “correct”.  I seldom assumed that a DCAA audit rate was correct, either. DCAA auditors often weren’t familiar with special aspects of treatment of costs under FAR for  construction contracts. Plus their techniques for sampling costs were at too high a level for me. 

*I don’t doubt that our treatment of certain costs caused those construction contractors some complications in cost accounting consistency. The company would, in essence, have one G&A rate for our work and another for other work.

I think that Biggies who do business with the government generally seemed to establish their accounting practices consistent with the FAR 31 principles and CAS rules.

However, we would sometimes detect inconsistent treatment of their costs and bring those up, too. It was more prevalent where companies have FFP and Cost Reimbursement or Fixed price incentive contracts with the government.

CR, what activities are you considering to be business development?

The FAR does not require contractors to have any specified indirect cost structure.  Further, it does not generally mandate how costs are to be treated.  An exception to this is B&P/IR&D costs which are to be allocated to contracts using the same base that is used to allocate G&A costs.  B&P/IR&D may be considered business development costs.  They can be stand alone costs or included in G&A.  Either way, they are allocated to contracts over the G&A base.

If a contractor has an overhead pool and a G&A pool, the determination as to the composition of each pool should be based on an analysis of each cost using the guidance in 31.201-4 and 31.203.  If the contract is CAS covered, look at CAS 410, 418 and 420.

joel hoffman said:

I would “derive an answer from above” ...

Yes, that was my intent. The answer is there, for those who seek it out.

Retreadfed said:

CR, what activities are you considering to be business development?

Thanks to all who have responded.  Vern Edwards, despite his legendary acerbity, really cut through all this with a single one-word answer.

Activities include such things as daily filtering and examination of the FBO, knocking-on-doors with customers, consulting with contracting officers in an attempt to expand scope of work.  Travel to customers, meals and meetings to schmooze relations with customers, meeting with team members, etc.  Not nearly big enough for CAS to apply.

Does NOT include site surveys after an RFP has been released, or any proposal costs.

Corduroy Frog said:

Activities include such things as daily filtering and examination of the FBO, knocking-on-doors with customers, consulting with contracting officers in an attempt to expand scope of work.  Travel to customers, meals and meetings to schmooze relations with customers, meeting with team members, etc.  Not nearly big enough for CAS to apply.

In other words, a lot of unallowable selling activity

here_2_help said:

In other words, a lot of unallowable selling activity

“The question, if not otherwise clearly stated, is "which pool are business development costs normally charged to - G&A or Overhead?"

NEITHER. 

Hows that for a one word answer?

@here_2_help and @joel hoffman

You guys are just jealous because, despite my legendary (please take note) acerbity, I gave him what he asked for.

Vern Edwards said:

@here_2_help and @joel hoffman

You guys are just jealous because, despite my legendary (please take note) acerbity, I gave him what he asked for.

Absolutely true!

Even though I am forced to point out that just because he agreed with your answer doesn't make it correct. As you know.

I wasn't trying to be correct, whatever that might mean in this case. I was trying to give him what he asked for.

Vern, you did give me what I asked for.  If I can get straight up answers I can put up with the acerbity.  Thanks.

Corduroy, since you are a “beginner”, you may not have noticed that unallowable costs are not normally to be “charged” to a federal contract as overhead,  G&A or direct costs, when costs are being identified claimed and/or negotiated.  When the cost principles are applicable to a pricing action. 

You can account for them as costs to the company but cannot properly charge them to the government.  

And H2H’s answer is correct concerning how to account for allowable business development or other costs. 

See, for instance, FAR 31.201 and subparagraphs.

On 8/7/2018 at 6:53 AM, Corduroy Frog said:

This is a general question with general answers expected.  Some large contractors may form elaborate service centers which encompass some or part of the above, but I'm hoping for general answers.

The question, if not otherwise clearly stated, is "which pool are business development costs normally charged to - G&A or Overhead?"

Interesting (to me) that "general answers" were expected but the best answer was a single word. Ah, well.

As H. L. Mencken said, "For every complex problem there is an answer that is clear, simple, and wrong."

joel hoffman said:

Corduroy, since you are a “beginner”, you may not have noticed that unallowable costs are not normally to be “charged” to a federal contract as overhead,  G&A or direct costs, when costs are being identified claimed and/or negotiated.  When the cost principles are applicable to a pricing action. 

You can account for them as costs to the company but cannot properly charge them to the government.  

And H2H’s answer is correct concerning how to account for allowable business development or other costs. 

See, for instance, FAR 31.201 and subparagraphs.

Thanks for your post Joel.  I mentioned examples of activities which all companies engage, and the general consensus is that all of these activities are not even allowable at all.  Unallowable means neither G&A nor Overhead.

I have not extended the FAR definition of "advertising and promotion" to include business development activities such as examining the FBO, schmoozing the customer, knocking on doors, consulting with existing contracting officers to acquire additional scope, etc.  All companies do this kind of stuff.  Am I to believe these kinds of activities are unallowable under the mindset of advertising and promotion?

Corduroy Frog said:

Thanks for your post Joel.  I mentioned examples of activities which all companies engage, and the general consensus is that all of these activities are not even allowable at all.  Unallowable means neither G&A nor Overhead.

 I have not extended the FAR definition of "advertising and promotion" to include business development activities such as examining the FBO, schmoozing the customer, knocking on doors, consulting with existing contracting officers to acquire additional scope, etc.  All companies do this kind of stuff.  Am I to believe these kinds of activities are unallowable under the mindset of advertising and promotion?

H2H indicated that they weren’t. Why not ask him?

In reading:  31.205-1   “Public relations and advertising costs”, much of what you described appear to be unallowable self promoting marketing type costs. They don’t appear to benefit performance of the required contract scope. I’m not sure what “schmoozing the customer” means.  

Some of the activities that you described may be allowable type costs under 31.205-38  as “Selling costs”.

EDIT: Add

I think that one might have to examine the allocabity of such costs. (31.201-4   Determining allocability).

However, they might not all be G&A costs, as H2H and I previously explained.  

In attempting respond to your question about deriving an answer to [your initial question and H2H’s initial response], I said:

“I would “derive an answer from above” , (thanks H2H) that Business Development costs should be allocated to the benefiting cost objectives. G&A costs are those costs which benefit the business as a whole.

This may apparently be be done by adjusting the G&A base for those non-general business costs and  include them in overhead for the benefitting cost objectives rather than in G&A.”

That’s why I believe that the one word answer “G&A” isn’t necessarily appropriate, especially in response under a “Beginners Only” category.

Perhaps a better one word response is “Depends”, although you didn’t ask for a one word answer. 

Finally, even though a cost is legitimate and all companies engage in it, it might not be allowable as a reimbursable cost under a federal government contract, when subject to the FAR 31 cost principles. I think that your last post agrees with that point.

Here's the original question:

On 8/7/2018 at 6:53 AM, Corduroy Frog said:

Expenditures for business development, including labor, travel, etc. is most commonly charged as:

1. G&A Expense
2. Overhead Expense



This is a general question with general answers expected.

Yes, the question mark is missing, but it is obviously a question:

Into which of these two indirect cost pools is business development most commonly allocated: G&A or some overhead pool?

That could be answered by one word or another: G&A or overhead.

The OP was obviously clueless that the question called for speculation, since it's unlikely that anybody anywhere knows the truth, whatever it might be, about what contractors most commonly do. At least, no one has come forward claiming to know.

My search for relevant references to "business development" in regulations, manuals, board decisions, and other published government contract reference sources found none. I presume it is a kind of marketing expense, but I don't know. That's why I didn't respond in the first place. Why respond if you don't know?

Sure enough, the first answer was nonresponsive, which frustrated the OP:

On 8/7/2018 at 7:11 AM, here_2_help said:

Marketing is often G&A, which aligns with the "S,G&A" nature of commercial entities. Where companies sell to both government and non-government entities, they may form separate OH pools and allocate the marketing cost only to benefiting cost objectives.

On 8/8/2018 at 2:54 PM, Corduroy Frog said:

Is there no definitive answer to the above?  "Here_2_help" has a great history of helping with questions, but this time can anyone derive an answer from the above?

Annoyed by the OP's lack of apparent sense of entitlement and his/her lack of perceptiveness and thoughtfulness (I just want a quick answer!), I responded with "G&A." Short, to the point, and I think very likely correct, depending on what "business development" is. In any case, it satisfied the OP and we could have seen him off on his merry way, satisfied, but no wiser. But no.

And now we get:

here_2_help said:

Interesting (to me) that "general answers" were expected but the best answer was a single word. Ah, well.

As H. L. Mencken said, "For every complex problem there is an answer that is clear, simple, and wrong."

Isn't that a nice how do you do?

Wrong how? Does H2H know the correct answer to the question that was asked? No. And he has no idea whether my answer to the question asked was wrong. He has got not one bit of data. And why isn't one word a "general answer"? But unable to answer himself, he wants to take pot shots. And that after posting nothing but unsolicited cryptic tutorials.

In the way that you broadly described “business development costs”, my answer to your question “Is there no definitive answer to the above? ” would be “No, it depends upon the nature of the specific costs under “Business Development”.

as Vern stated, there is no FAR definition of Business Development Costs.”  You generally mentioned some types of activities. They are covered under various cost principles.

Quote

I am currently involved in a feud between a party who believes this stuff should be G&A, and another who believes this should be Overhead.

Corduroy:

Could you explain how a_nother_ supports his/her belief that business development should be overhead?

When I was employed as a civil engineer  designer and project engineer in a consulting firm almost forty years ago, I had to charge my daily time in fifteen minute increments to specific customer projects/jobs or to other activities. The non-project cateories included such activities as training, personal time, “business development”, etc. 

As I recall,  I charged general client relations such as face to face visiting and phone discussions, marketing time with existing clients and some public non-project presentations during business hours to business development.  I wasn’t willing to charge my clients directly for those hours. 

i assume that my boss, the company principle,  accounted for business development as overhead in establishing hourly rates for our professional services. We did not perform any wrk for the federal government. Our clients were generally private individuals, developers, municipal public works departments, public and private utilities, etc.

I don’t know what type or amount of non-billable hours were written off or included in the overhead cost pool.

Some people want to shift this thread from the original question, which was in which of two pools BD is most commonly included, G&A or overhead. Now people want to discuss into which pool it should be included.

I don't know if the OP is interested in that discussion. If he/she is interested, then you cannot discuss the issue intelligently until you know:

1. the specific type of activity for which the cost was incurred or is to be incurred,
2. the purpose for which the activity was or is to be undertaken, and
3. the choices of pools available.

And general descriptions will not be especially helpful. You need specifics.

I suspect that by "business development" the OP meant selling costs. See FAR 31.205-38 and

http://www.dcaa.mil/Content/Documents/sac/Chapter65.pdf

Corduroy Frog said:

Unallowable means neither G&A nor Overhead.

Corduroy - h2h could do this more justice than I but I offer that you and who ever you are feuding with are looking at your dilemma  from a single view, that of the FAR.  Pursuant to the FAR unallowable means any cost that is determined unallowable no matter where it might be captured in the contractors accounting system.  To this point I suggest a close read of FAR 31.201-6 as you consider all of the responses you have received in this thread.

Consider this as well.   I as a individual capture all my costs in my accounting system (checkbook, bank statement(s) or something more sophisticated).  All of the costs are used to represent my financial health (checkbook/bank statement balance) or something more sophisticated such as a profit/loss statement and balance sheet.  All are costs (expenses) to me.  Now I have to file my taxes.  When I prepare my taxes I have to determine  which of those costs are deductible in computing my taxes.  Some are some are not.

Now think of this with regard to a contractor that does Federal government business.   I have costs.   If I am really, really small I may just capture them in a checkbook or I may categorized them in many different places in more sophisticated account systems (say I use QuickBooks) yet no matter where I might categorized them for the sake of my business accounting system the Federal government may determine some are unallowable and be "excluded from any billing, claim, or proposal applicable to a Government contract."

As to where a contractor might normally capture a cost such as "business development"?   It depends and I would offer that there is no normal place its up to the individual contractor where they might capture such costs.   For many contractors, but not all, they will depend on "Generally Accepted Accounting Principles" (GAAP) to make the determination of where the following costs that you identified would be accounted for.   GAAP in fact might suggest some go in "other expenses" and others in "prepaid sales" and so on. 

Corduroy Frog said:

Activities include such things as daily filtering and examination of the FBO, knocking-on-doors with customers, consulting with contracting officers in an attempt to expand scope of work.  Travel to customers, meals and meetings to schmooze relations with customers, meeting with team members, etc.

But again a contractor can and will put the above costs anywhere and the Government in determining what costs to have to excluded because they are not allowable has comb through data provided in proposal submission, billings and/or claims inclusive of certified cost or pricing data if it is required to be submitted.  

Bottom line I would offer that there is no "common" place a business will put business development costs as the business can place them anywhere they want.

Vern Edwards said:

Some people want to shift this thread from the original question, which was into which pool BD is most commonly included, G&A or overhead. Now people want to suggest into which pool it should be included. I don't know if the OP is interested in that discussion. If he/she is interested, then you cannot discuss the issue intelligently until you know:

1. the specific type of activity for which the cost was incurred or is to be incurred,
2. the purpose for which the activity was undertaken, and
3. the choices of pools available.

And general descriptions will not be especially helpful. You need specifics.

I agree that specifics are necessary. 

What does the term “general descriptions” mean?  After all, Corduroy said in the initial post:  “This is a general question with general answers expected.” 

Simple answers to general questions lacking specifics can be dangerous and misleading, when there is little or no context. Especially for “beginners”, who need to understand more than a high altitude, carpet bomb, one size fits all answer. 

Executive level people like simple answers.  I don’t think that “Beginners” in federal acquisition/contracting benefit much from simple, non-contextual answers. I don’t think that one can effectively participate in a debate based upon a simple answer without understanding the context. 

“They don’t know what they don’t know.”

Just my opinion. I guess that I should review the Forum guidelines for responding under the “beginners” category. 

EDIT: Vern edited the above quoted post to add a reference to “selling costs” . Yes,  I also mentioned that in an eArlier post. 

But - as to where these various costs belong - in general and administrative or some type of lower level or specific  overhead,  “it depends” on the circumstances.

joel hoffman said:

What does the term “general descriptions” mean?

It means not specific. "Marketing" is general. "Researching the interest of the Air Force Space Command in funding our plan to experiment with new methods of controlling the timing jitter of mode-locked lasers" is specific.

joel hoffman said:

But - as to where these various costs belong - in general and administrative or some type of lower level or specific  overhead,  “it depends” on the circumstances.

Yes, a molehill of a routine accounting problem that some of you are turning into a mountain. If I were Corduroy I'd walk away.

Ok, thanks for your original point above, prior to edits.  

At any rate, I believe that’s why the answers to the questions should indicate that it depends upon the circumstances.

Just now, joel hoffman said:

I believe that’s why the answers to the questions should indicate that it depends upon the circumstances

That's been pointed out to the OP in various ways a bunch of times.

Vern Edwards said:

That's been pointed out to the OP in various ways a bunch of times.

Yep, but he/she doesn’t seem to want that answer. Appears to want a simple one size fits all answer, independent of context/circumstances - for a debate** yet!

Clarified:  ** involvement in a feud between two parties at opposite viewpoints. One says”  business development is G&A” and the other says it is  “overhead”.the OP wants to if there is a widely held viewpoint favoring one or the other position.

joel hoffman said:

Yep, but he/she doesn’t seem to want that answer. Appears to want a simple one size fits all answer, independent of context/circumstances - for a debate yet!

So what are you, a nanny? If that's what he/she wants that's what he/she wants. You can lead a horse to water... Nobody is debating with you.

joel hoffman said:

Ok, thanks for your original point above, prior to edits.

Why just prior to edits? 😂

Vern Edwards said:

So what are you, a nanny? If that's what he/she wants that's what he/she wants. You can lead a horse to water... Nobody is debating with you.

Sorry, I was referring to the apparent reason for the question, which was described as the OP’s involvement in a “feud” between two parties. I incorrectly used the term “debate”. 

Corduroy said: “Maybe the problem is me, in assuming that there would be a widely-held view that prefers one over the other.  I am currently involved in a feud between a party who believes this stuff should be G&A, and another who believes this should be Overhead.“.

Vern Edwards said:

Yes, a molehill of a routine accounting problem that some of you are turning into a mountain. If I were Corduroy I'd walk away.

Vern, this is exactly what I'm going to do.  This overblown bloviating of a discussion is exactly what I wanted to avoid when I preferred simple answers, and I was even criticized for that.  Of course, almost nothing has a simple answer, but in the evaluation of options available to you at the time, you appreciate clarity - not a cesspool of uncertainty in which to wade around.

You guys spend as much time feuding with yourselves as you do feuding with me.  I'm surprised for accomplished experts that you have so much time on your hands.  I would, however, extend appreciation for those posts that appeared to be a bona fide effort to help.