Penalties Permitted On Costs Directly Associated With Expressly Unallowable Costs

In Raytheon Co., ASBCA No. 57743, 17-1 BCA ¶ 36724, the Armed Services Board of Contract Appeals (ASBCA) held that certain Raytheon claimed salary expenses were associated with lobbyists and, therefore, such costs were expressly unallowable and subject to penalties (this first decision is further discussed here). Raytheon moved the ASBCA for reconsideration. Recently, on reconsideration, the ASBCA upheld its decision that, notwithstanding the fact that the lobbying cost principle (FAR 31.205-22) does not name or state that salary or compensation costs are unallowable, Raytheon's claimed salary expenses to compensate lobbyists are expressly unallowable lobbying costs.

Raytheon sought reconsideration of the earlier decision, asserting that while salary expenses are "directly associated costs" of lobbying costs, salary cannot constitute expressly unallowable costs because the salary is not rendered unallowable as a "specific selected cost[]." FAR 42.709-1