[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]

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