A Whitepaper from Redstone Government Consulting

Updated for the January 2023 Court of Appeals Raytheon Decision

All businesses plan for future changes in the marketplace and implement plans to deal with these changes. However, if your business involves Government contracts, many auditors and administrative contracting officers (ACOs) see these planning activities as a high-risk area for unallowable activities/costs. It is clear FAR 31.205-27(a) makes the activities related to a merger or acquisition unallowable and states such unallowable costs include “but are not limited to incorporation fees and costs of attorneys, accountants, brokers, promoters and organizers, management consultants and investment counselors, whether or not employees of the contractor.” The FAR also makes it clear that planning activities, both long-term and near-term, are allowable. So, where is the line in the sand that determines allowable planning cost versus unallowable merger or acquisition cost?

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