I disagree with Michael and agree with those who say you must have the sponsor’s approval. Whereas a commercial organization might have recourse to the courts should a precontract cost be disallowed by a contracting officer, the regs clearly say that educational institutions must have approval from the sponsor.  The examples quoted by Mike are both for commercial organizations and one of them references 31.205-32.

 

31.2 are the cost principles for contracts with commercial organizations and they are listed in total there; 31.3 are the principles for educational institutions and they reference A-21. Compare the two respective clauses on precontract costs:

 

FAR 31.205-32 Precontract costs: “Precontract costs means costs incurred before the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract award when such incurrence is necessary to comply with the proposed contract delivery schedule. These costs are allowable to the extent that they would have been allowable if incurred after the date of the contract (see 31.109).”(“31.109: an advance agreement is not an absolute requirement and the absence of an advance agreement on any cost will not, in itself, affect the reasonableness, allocability or the allowability under the specific cost principles at Subparts 31.2, 31.3, 31.6, and 31.7 of that cost.”)

FAR 31.303 a): Contracts that refer to this Subpart 31.3 for determining allowable costs under contracts with educational institutions shall be deemed to refer to, and shall have the allowability of costs determined by the contracting officer in accordance with, the revision of OMB Circular A-21 in effect on the date of the contract. A-21 J.36. Preagreement costs: “Costs incurred prior to the effective date of the sponsored agreement, whether or not they would have been allowable thereunder if incurred after such date, are unallowable unless approved by the sponsoring agency.”

Carolyn Elliott-Farino, MA, CRA

Director, Contracting and Grants Administration

Office of the Vice President for Research and Graduate Dean

Kennesaw State University, 1000 Chastain Road, MD 0111

Kennesaw Hall, Room 3419 (deliveries), Kennesaw, Georgia 30144-5591

Direct: 770.423.6381;Main line: 770.423.6738

xxxxxx@kennesaw.edu; www.kennesaw.edu/ogc

 

This email, and any attachments, is intended only for use by the addressee(s) named herein and may contain privileged and/or confidential information.  If you are not the intended recipient of this email, you are hereby notified that any dissemination, distribution or copying of this email, and any attachments thereto, is strictly prohibited.

 

From: Research Administration List [mailto:xxxxxx@lists.healthresearch.org] On Behalf Of J. Michael Slocum
Sent: Monday, October 17, 2011 11:30 AM
To: xxxxxx@lists.healthresearch.org
Subject: Re: [RESADM-L] Pre-award costs on Federal Contracts

 

The question presented was allowability when no advance agreement is in place.  In those cases, a claim will need to be submitted and if rejected taken forward under the Contract Disputes Act.  Under the Act and the cases cited, the costs can be recovered if within the rule stated by the BCA and Court.
Of course, if possible, an advance agreement is the right way to go if possible, but even if the CO refuses, recovery can be had.

J. Michael Slocum
Slocum & Boddie, PC
6225 Brandon Ave.
Suite 310
Springfield, VA 22150
703-451-9001
703-451-8557 (fax)
xxxxxx@slocumboddie.com

 

On Mon, Oct 17, 2011 at 11:23 AM, Downey, Kaaren <xxxxxx@mail.wtamu.edu> wrote:

As a practical matter prior approval of preaward costs on contracts are necessary.  The contracting officer has always approved my request but has put a cap on the dollars available and in some instances have even stated what activities were allowable.  Normally my request for preaward spending came during the contract negotiation phase and was included in the contract as an advance understanding. 

 

Typically the preaward expenses were for set up costs, the purchase of a piece of equipment or travel expenses to attend a contract start up meeting.  When requesting the preaward spending be sure the costs / activities can be supported as logical preaward expenses, and I wouldn’t count on the 90 days that you get with grants.

 

Kaaren

 

______________________________________________________________________________

Kaaren J. Downey  |  Executive Director    -

West Texas A&M University  |  Office of Sponsored Research Services
WTAMU Box 60217 | Kilgore Center | Room 103

Canyon, TX 79016-0001

Phone:  806.651-3554  |  Fax: 806.651-3555  |  xxxxxx@wtamu.edu

wtamu.edu/srs

See the latest news from Sponsored Research Services by clicking here!

Latest article on our website: “4 Steps to Build Both Tenure and a Research Career”

 

 

From: Research Administration List [mailto:xxxxxx@lists.healthresearch.org] On Behalf Of J. Michael Slocum
Sent: Monday, October 17, 2011 9:16 AM
To: xxxxxx@lists.healthresearch.org
Subject: Re: [RESADM-L] Pre-award costs on Federal Contracts

 

One should always check the case law before opining about the application of regulations.
As I noted before, the FAR provides for allowance of pre-award costs under contracts.  The regulations appear to require an advance agreement, but the case law provides for a significant "gloss" on the apparent limit.    It is considered an abuse of the CO's discretion to disallow pre-contract costs in the appropriate circumstances.  See for instance:
Appeal of Radant Techs., Inc., 91-3 B.C.A. (CCH) P24,106, 120 (A.S.B.C.A. June 13, 1991)

Our decision in this appeal rests upon interpretation of FAR 31.205-32, precontract Costs, and the case law stemming therefrom. FAR 31.205-32 and the case law set forth a four-part  [**17]  test to determine whether a contractor is entitled to be paid precontract costs:
 
(1) the costs must be incurred prior to the effective date of the contract; and
 
(2) the costs must be incurred directly pursuant to the negotiations and in anticipation of the contract award; and
 
(3) incurrence of the costs must be necessary to comply with the proposed delivery schedule; and
 
(4) the costs must have been allowable if they were incurred after contract award. n6
 
AT&T Technologies, Inc., DOT BCA No. 2007, 89-3 BCA para. 22,104, aff'd, 90-1 BCA para. 22,380; Jana, Inc., ASBCA No. 32447, 88-2 BCA para. 20,651; Penberthy Electromelt Intern. v. United States, 11 Cl. Ct. 307 (1986).

And for those who want one newer:

To recover pre-contract costs a contractor must show that the costs were (1) incurred in order to meet the contract delivery schedule, (2) incurred directly pursuant to the negotiation and in anticipation of the award, and (3) would have been allowable if incurred during contract performance. Penberthy Electromelt Int'l, Inc. v. United States, 11 Cl. Ct. 307, 315 (1986).

OK's Cascade Co. v. United States, 97 Fed. Cl. 635, 647 (Fed. Cl. 2011)

On Fri, Oct 7, 2011 at 4:11 PM, Buennemeyer, Patricia - buennepd <xxxxxx@jmu.edu> wrote:

Mike,

 

I agree they are allowable under the FAR but wouldn’t they still require the sponsor’s approval.

From OMB-A21

J.36 Preagreement cost:  Costs incurred prior to the effective date of the sponsored agreement, whether or not they would have been allowable thereunder if incurred after such date, are unallowable unless approved by the sponsoring agency.

 

Now under the Research General Terms and Conditions (grant terms) that apply to universities, the agencies have waived prior approvals for 90 day pre-award costs.

2 CFR §215

Except for requirements listed in paragraphs (c)(1) and (c)(4) of this section,

Federal awarding agencies are authorized, at their option, to waive cost-related and

administrative prior written approvals required by 2 CFR parts 220 and 230 (OMB

Circulars A–21 and A–122). Such waivers may include authorizing recipients to do

any one or more of the following.

(1) Incur pre-award costs 90 calendar days prior to award or more than 90 calendar

days with the prior approval of the Federal awarding agency. All pre-award costs

are incurred at the recipient's risk (i.e., the Federal awarding agency is under no

obligation to reimburse such costs if for any reason the recipient does not receive an

award or if the award is less than anticipated and inadequate to cover such costs).

 

 

 

David Hollingsworth

Office of Sponsored Research Services

Phone:  979 847-7638

 

 

 

From: Research Administration List [mailto:xxxxxx@lists.healthresearch.org] On Behalf Of J. Michael Slocum
Sent: Friday, October 07, 2011 9:51 AM
To: xxxxxx@lists.healthresearch.org
Subject: Re: [RESADM-L] Pre-award costs on Federal Contracts

 

ALL THOSE WHO SAID THE PRE-AWARD COSTS AREN'T COVERED OR AREN'T ALLOWABLE:

LOOK AT THE REGULATIONS BEFORE OPINING

 

AND IT MAKES NO DIFFERENCE WHICH AGENCY, AS LONG AS THE FAR OR EQUIVALENT IS THE APPLICABLE REGULATION.

Subpart 31.3—Contracts with Educational Institutions

31.301  Purpose.

This subpart provides the principles for determining the cost of research and development, training, and other work performed by educational institutions under contracts with the Government.

31.302  General.

Office of Management and Budget (OMB) Circular No. A-21, Cost Principles for Educational Institutions, revised, provides principles for determining the costs applicable to research and development, training, and other work performed by educational institutions under contracts with the Government.

31.303  Requirements.

(a) Contracts that refer to this Subpart 31.3 for determining allowable costs under contracts with educational institutions shall be deemed to refer to, and shall have the allowability of costs determined by the contracting officer in accordance with, the revision of OMB Circular A-21 in effect on the date of the contract.

(b) Agencies are not expected to place additional restrictions on individual items of cost.

 

 

On Thu, Oct 6, 2011 at 4:59 PM, Maggie Griscavage <xxxxxx@alaska.edu> wrote:

Ty,

You're not going to find anything about preaward costs for contracts. They just flat aren't allowed. You'll need to ask your sponsor to move the start date forward.

See:  FAR 52.216-7 for allowable costs. Nowhere does it mention preaward costs, so they become unallowable.

maggie

G. Maggie Griscavage, CRA, GWCCM
Director, Office of Grants & Contracts Administration
Authorized University Representative
University of Alaska Fairbanks

On Thu, Oct 6, 2011 at 12:43 PM, Stephens, Tyrone D <xxxxxx@uams.edu> wrote:

Good afternoon all,

 

We were recently awarded a federal cost reimbursement contract (opposed to grant), which is kinda rare for us.  The P.I. is asking us to transfer personnel costs to the contract for effort expended prior to the award date.  I am not that well versed with the FAR, and can’t find anything that would allow pre-award costs.  Can someone point me to a citation that either allows or disallows pre-award costs on a federal contract?

 

Thanks.

 

Ty

 

Tyrone Stephens

Director of Cost Accounting

University of Arkansas for Medical Sciences

(501) 526-7452

 

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