[Comments on Proposed FAR Amendment]
Highlights
GAO commented on a proposed amendment to the Federal Acquisition Regulation to: (1) include as allowable the costs of promoting American aerospace exports at domestic and international exhibits; and (2) exclude the costs of entertainment, hospitality suites, and other unnecessary expenses. GAO had no objection to the revision, since it properly implemented the relevant statute.
B-229902, Feb 11, 1988
DIGEST: General Accounting Office has no objection to a proposal to revise the Federal Acquisition Regulation (FAR) by adding FAR Sec. 31.205-1(g) to provide that reasonable costs incurred to promote American aerospace exports at domestic and international exhibits are allowable.
Ms. Margaret A. Willis:
This responds to your letter of December 17, 1987, requesting our comments on a proposal to revise Federal Acquisition Regulation (FAR) section 31.205-1 with respect to the allowability of the costs of promoting American aerospace exports at domestic and international exhibits. This is FAR case No. 87-45.
The Supplemental Appropriations Act, 1987, Pub. L. No. 100-71, provided that the Secretary of Defense may pay government contractors' reasonable costs of promoting American aerospace exports at domestic and international exhibits. Similarly, the continuing resolution for fiscal year (FY) 1988, H.J. Res. No. 395, Pub. L. No. 100-202, provides that such costs are to be paid by the Secretary. The FAR revision would implement these statutes by adding subsection (g) to FAR Sec. 31.205-1, the public relations and advertising cost principle, to provide that reasonable costs of domestic and international exhibits-- such as air shows, trade shows, and conventions-- incurred to promote American aerospace exports are allowable. Proposed subsection (g) also would provide that allowable costs shall not include the costs of entertainment, hospitality suites, or other costs not necessary for such an exhibit.
The proposed revision properly implements the statutes, and we therefore have no objection to the change. We note, however, that the conference report on the FY 1988 continuing resolution states that for purposes of encouraging industry to explore overseas markets the conferees believe that, generally, it would be more effective for the Department of Defense (DOD) to adjust its profit policy calculations, rather than simply to make foreign selling costs allowable. H.R. Rep. No. 498, 100th Cong. 1st Sess. 672-73 (1987). The conferees have requested DOD to report to Congress by May 1, 1988, concerning proposed changes in its profit regulations. Depending on the nature and scope of any changes in DOD's profit policy, it may be that further revisions to the cost principles will be needed.