[Code of Federal Regulations] [Title 48, Volume 1] [Revised as of October 1, 2002] From the U.S. Government Printing Office via GPO Access [CITE: 48CFR31.205-38] [Page 608] TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM CHAPTER 1--FEDERAL ACQUISITION REGULATION PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents Subpart 31.2--Contracts With Commercial Organizations Sec. 31.205-38 Selling costs. (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. Selling activity includes the following broad categories: (1) Advertising. (2) Corporate image enhancement including broadly-targeted sales efforts, other than advertising. (3) Bid and proposal costs. (4) Market planning. (5) Direct selling. (b) Advertising costs are defined at 31.205-1(b) and are subject to the allowability provisions of 31.205-1 (d) and (f). Corporate image enhancement activities are included within the definitions of public relations at 31.205-1(a) and entertainment at 31.205-14 and are subject to the allowability provisions at 31.205-1 (e) and (f) and 31.205-14, respectively. Bid and proposal costs are defined at 31.205-18 and have their allowability controlled by that subsection. Market planning involves market research and analysis and generalized management planning concerned with development of the contractor's business. The allowability of long-range market planning costs is controlled by the provisions of 31.205-12. Other market planning costs are allowable to the extent that they are reasonable and not in excess of the limitations of subparagraph (c)(2) of this subsection. Costs of activities which are correctly classified and disallowed under cost principles referenced in this paragraph (b) are not to be reconsidered for reimbursement under any other provision of this subsection. (c)(1) 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 activities 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 activities, individual demonstrations, and any other activities 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 if reasonable in amount. (2) The costs of broadly targeted and direct selling efforts and market planning other than long-range, that are incurred in connection with a significant effort to promote export sales of products normally sold to the U.S. Government, including the costs of exhibiting and demonstrating such products, are allowable on contracts with the U.S. Government provided the costs are allocable, reasonable, and otherwise allowable under this subpart 31.2. (d) The costs of any selling efforts other than those addressed in paragraphs (b) or (c) of this subsection are unallowable. (e) Costs of the type identified in paragraphs (b), (c), and (d) of this subsection are often commingled on the contractor's books in the selling expense account because these activities are performed by the sales departments. However, identification and segregation of unallowable costs is required under the provisions of 31.201-6 and 48 CFR 9904.405, and such costs are not allowable merely because they are incurred in connection with allowable selling activities. (f) 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. [51 FR 12301, Apr. 9, 1986, as amended at 52 FR 19805, May 27, 1987; 55 FR 38517, Sept. 18, 1990; 56 FR 15153, Apr. 15, 1991; 57 FR 39591, Aug. 31, 1992; 59 FR 11387, Mar. 10, 1994; 61 FR 39189, July 26, 1996; 62 FR 12704, Mar. 17, 1997] [[Page 609]]