New Year’s Resolution #10: I will correctly account for my protest costs
January 18, 2023
At a glance
- Costs incurred to file a bid protest are unallowable according to the FAR, but that doesn’t mean they won’t be reimbursed.
- In some circumstances, the GAO will recommend that the Agency reimburse the protestor’s costs.
- The allowability of legal costs in situations other than protests are often unclear and may depend on a variety of factors.
The full story:
In our 9th New Year’s Resolution, we addressed what the Federal Acquisition Regulation (FAR) has to say about ‘fun’ expenses and determined that they are unallowable.
Here, we’re considering another kind of cost – those incurred to file a bid protest.
Are bid protests unallowable according to the FAR?
Costs incurred to file a bid protest are unallowable, but that does not mean they will not be reimbursed.
We are frequently asked whether bid protest costs are allowable. The answer is always “no.”
Per FAR 31.205-47 “Costs related to legal and other proceedings,” the costs involved in protesting an RFP or contract award are expressly unallowable. The only exception would be if the Contracting Officer asked the contractor to help the Agency defend against another contractor’s protest. But that doesn’t mean protest costs won’t be reimbursed.
When will protest costs be reimbursed?
In some circumstances, the Government Accountability Office (GAO) will recommend that the Agency reimburse the protestor’s costs.
However, the award of protest costs does not mean the costs are now allowable on government contracts. The original unallowable protest costs resulted in a reduction of the contractor’s profit. If the Agency reimburses the protest costs, the contractor should record the payment in an “other income” account, which restores the profit.
What about legal costs?
The allowability of legal costs in situations other than protests are often unclear and may depend on a variety of factors.
The bottom line
For guidance about the allowability of any cost, contact Aprio’s Government Contract Consulting Services team.