[Federal Register Volume 67, Number 168 (Thursday, August 29, 2002)]
[Proposed Rules]
[Pages 55682-55683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21619]



[[Page 55681]]

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Part IX





Department of Defense

General Services Administration

National Aeronautics and Space Administration





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48 Part 31



Federal Acquisition Regulation; Selling Cost Principle; Proposed Rule

  Federal Register / Vol. 67, No. 168 / Thursday, August 29, 2002 / 
Proposed Rules  

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 31

[FAR Case 2001-024]
RIN 9000-AJ42


Federal Acquisition Regulation; Selling Cost Principle

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) to revise the ``selling costs'' 
cost principle to increase clarity and to remove excessive wording and 
details.

DATES: Interested parties should submit comments in writing on or 
before October 28, 2002 to be considered in the formulation of a final 
rule.

ADDRESSES: Submit written comments to--General Services Administration, 
FAR Secretariat (MVA), 1800 F Street, NW., Room 4035, ATTN: Laurie 
Duarte, Washington, DC 20405.
    Submit electronic comments via the Internet to: [email protected]. Please submit comments only and cite FAR case 2001-024 in 
all correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC, 20405, at (202) 501-4755 for information 
pertaining to status or publication schedules. For clarification of 
content, contact Mr. Jeremy Olson, at (202) 501-3221. Please cite FAR 
case 2001-024.

SUPPLEMENTARY INFORMATION:

A. Background

    The proposed rule revises FAR 31.205-38, Selling costs, to increase 
clarity and to remove excessive wording and details. Among the changes 
are the following:
    1. In a revised FAR 31.205-38(b), combining the list of selling 
activities from existing FAR 31.205-38(a) with the more detailed 
guidance about the allowability of these costs in existing FAR 31.205-
38(b) and (c)(1).
    2. Eliminating references to reasonableness currently found in FAR 
31.205-38(b) and (c)(1) because this general allowability standard is 
already addressed at FAR 31.201-2, Determining allowability, and FAR 
31.201-3, Determining reasonableness.
    3. Removing as unnecessary existing FAR 31.205-38(c)(2) and the 
cross-reference in existing FAR 31.205-38(b) to FAR 31.205-14, 
Entertainment costs. The Councils believe there is no longer a reason 
to distinguish between the allowability of foreign and domestic selling 
costs involving direct selling and other market planning efforts. This 
would eliminate the current requirement that in order to be allowable, 
these export sales costs must be related to products normally sold to 
the U.S. Government. However, the public policy reasons for 
distinguishing between foreign and domestic broadly targeted sales 
efforts are still valid. The allowability of these costs is adequately 
covered at FAR 31.205-1 and does not need to be restated in FAR 31.205-
38.
    4. Removing existing FAR 31.205-38(e) as it is duplicative of the 
guidance at FAR 31.201-6, Accounting for unallowable costs, and 
paragraph (c) of FAR 31.204, Application of principles and procedures.
    5. Making related editorial changes.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Councils do not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because most contracts awarded to small entities use simplified 
acquisition procedures or are awarded on a competitive, fixed-price 
basis and do not require application of the cost principles discussed 
in this rule. An Initial Regulatory Flexibility Analysis has, 
therefore, not been performed. We invite comments from small businesses 
and other interested parties. The Councils will consider comments from 
small entities concerning the affected FAR Part 31 in accordance with 5 
U.S.C. 610. Interested parties must submit such comments separately and 
should cite 5 U.S.C. 601, et seq. (FAR case 2001-024), in 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: August 20, 2002.
Al Matera,
Director, Acquisition Policy Division.
    Therefore, DoD, GSA, and NASA propose amending 48 CFR part 31 as 
set forth below:

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

    1. The authority citation for 48 CFR part 31 continues to read as 
follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

    2. Amend section 31.205-1 in paragraph (f)(1) by removing from the 
parenthetical ``31.205-38(c)'' and adding ``31.205-38(b)(5)'' in its 
place.


31.205-12  [Amended]

    3. Amend section 31.205-12 in paragraph (a) by removing the word 
``generalized'' and adding ``general'' in its place.
    4. Amend section 31.205-33 by revising the first sentence of the 
introductory text of paragraph (f); and removing the parenthetical 
sentence. The revised text reads as follows:


31.205-33  Professional and consultant service costs.

* * * * *
    (f) Fees for services rendered are allowable only when supported by 
evidence of the nature and scope of the service furnished (see also 
31.205-38(c)). * * *
    5. Revise section 31.205-38 to read as follows:


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. The costs of any selling 
efforts other than those addressed in this cost principle are 
unallowable. Costs of activities that are correctly classified and 
disallowed under cost principles referenced in paragraph (b) are not to 
be reconsidered for reimbursement under any other provision of this 
subsection.
    (b) Selling includes the following broad categories:
    (1) Advertising. Advertising is defined at 31.205-1(b), and 
advertising costs are subject to the allowability provisions of 31.205-
1(d) and (f).
    (2) Corporate image enhancements. Corporate image enhancements

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including broadly targeted sales efforts, other than advertising, are 
included within the definition of public relations at 31.205-1(a), and 
the costs of such efforts are subject to the allowability provisions at 
31.205-1(e) and (f).
    (3) Bid and proposal costs. Bid and proposal costs are defined at 
31.205-18 and are subject to the allowability provisions of that 
subsection.
    (4) Market planning. Market planning involves market research and 
analysis and general management planning concerned with development of 
the contractor's business. Long-range market planning costs are subject 
to the allowability provisions of 31.205-12. Other market planning 
costs are allowable.
    (5) Direct selling. 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 efforts 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 efforts, individual demonstrations, and any 
other efforts 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.
    (c) 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.

[FR Doc. 02-21619 Filed 8-28-02; 8:45 am]
BILLING CODE 6820-EP-P