Public Relations Costs

GAO discussed the allowability of defense contractors' public relations costs. GAO stated that Federal Acquisition Regulations (FAR) are ambiguous regarding the allowability of such costs, which include costs for advertising, contributions and donations, entertainment, lobbying, and trade activities. For example, advertising costs are unallowable unless the advertising is for recruiting personnel, acquiring scarce items, or disposing of surplus materials. In addition, there is confusion as to whether public relations costs are allocable under FAR as allowable selling costs. GAO stated that contracting officers have taken various actions with respect to public relations expenses challenged by the Defense Contract Audit Agency. These actions ranged from totally disallowing challenged costs to totally allowing such costs. GAO believes that FAR could more directly address the allowability of public relations costs, but that it would be difficult to resolve all of the ambiguities under current FAR.