I am taking a survey to get an idea as to how other people in industry handle identification and segregation of the cost of unallowable activities for pricing, billing and accumulating actual costs incurred. If you would be willing to share what you do, or your perspective on this task, I'd appreciate it.

Do you:

1) Survey people on % of time spent on unallowable activities during the year (prospectively and/or retrospectively) and then make a disallowance in calculating expenses/rates for pricing, billing and accumulating actual costs incurred.

2) Require assignment of time to an "Unallowable" cost objective at the time incurred/known unallowable

3) Some combination of the above

4) Some other method?

Thanks in advance for your help.

Hi govtacct02,

I'm in industry, working at a multi-billion dollar sector of a major defense contractor. DOD is our biggest customer, accounting for more than 90% of sales. We have a mixture of cost-plus and other contract types.

We require people to charge time to unallowable cost objectives (charge codes) at the time the activity takes place. Discrete charge numbes are opened, either based on budgeted/forecasted activity (known events) or as needed (unplanned events). Our discipline for opening new charge codes before the activity takes place is good.

For certain sensitive areas (e.g., lobbying) we follow-up annually with an additional survey (for those who charged time to sensitive activities as well as those who may have incurred time but not charged it, based on position/title/function/etc.), and make adjustments to unallowable labor (and expense) accounts based on the survey results. For issues such as lobbying, we are aware of differing definitions and reporting requirements based on differing statutes, and work hard to get our reporting right in those areas. (It's quite a time-consuming -- and expensive -- proposition.)

Hope this helps.