Essay Question #1:
You work with a Government agency managing several large defense contracts. On one of these contracts with a contractor named ATI, an issue has arisen concerning the allowability of certain ATI incurred and invoiced costs. ATI's contract is a cost plus award fee contract. The specific costs in question involve some $50,000 in costs running the ATI fitness center at the ATI main business campus. Additionally, ATI paid $500,000 to a political action committee (PAC) which supports legislative initiatives for defense contractors. Finally, ATI incurred and invoiced the Government $1.5 million for its legal fees associated with a proceeding brought against it by the local U.S. Attorney's Office for an alleged violation of the False Claims Act under 31 U.S.C. 3730. This False Claims act matter was ultimately resolved and settled through a consent decree between the parties. Before he visits the local DCAA auditor for guidance on what actions to take, your boss want you to prepare an essay advising him on whether any of these three sums are allowable under the FAR. I would advise my boss of the regulations set forth in the FAR that he may use to his discretion. 1st Sum- Far part 31.205-13 Employee morale, health, welfare, food service, and dormitory costs and credits states that “(a) Aggregate costs incurred on activities designed to improve working conditions, employer-employee relations, employee morale, and employee performance (less income generated by these activities) are allowable, subject to the limitations contained in this subsection. Some examples of allowable activities are— (1) House publications;
(2) Health clinics;
(3) Wellness/fitness centers;
(4) Employee counseling services; and
(5) Food and dormitory services for the contractor’s employees at or near the contractor’s facilities. The fact that they are running a fitness center is completely authorized under the FAR. 2nd Sum- FAR 31.205-47 Costs related to legal and other proceedings states that “(b) In accordance with 41 U.S.C. 4310 and 10 U.S.C. 2324(k), costs incurred in connection with any proceeding brought by a Federal, State, local, or foreign government, or by a contractor or subcontractor employee submitting a whistleblower complaint of reprisal in accordance with 41 U.S.C. 4712 or 10 U.S.C. 2409, for violation of, or a failure to comply with, law or regulation by the contractor (including its agents or employees), or costs incurred in connection with any proceeding brought by a third party in the name of the United States under the False Claims Act, 31 U.S.C. 3730, are unallowable if the result is— (1) In a criminal proceeding, a conviction;
(2) In a civil or administrative proceeding, either a finding of contractor liability where the proceeding involves an allegation of fraud or similar misconduct; or imposition of a monetary penalty, or an order issued by the agency head to the contractor or subcontractor to take corrective action under 41 U.S.C. 4712 or 10 U.S.C. 2409, where the proceeding does not involve an allegation of fraud or similar misconduct; In a typical consent decree, the defendant has already ceased or agrees to cease the conduct alleged by the plaintiff to be illegal and consents to a court injunction barring the conduct in the future.
These costs are not authorized under the FAR
3rd Sum- FAR 31.205-22 Lobbying and political activity costs states “(a) Costs associated with the following activities are unallowable: (2) Establishing, administering, contributing to, or paying the expenses of a political party, campaign, political action committee, or other organization established for the purpose of influencing the outcomes of elections; These costs are not authorized under the FAR.
Essay Question #2:
Vandy Inc.'s CEO was particularly proud of his firm's work supporting Special Agent Tom Know-it-All and the FBI in a recent sting operation. In fact, Vandy Inc. had provided numerous supplies...
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