November 14, 2016
Government Contracts: Allowability & Allocation of M&A Costs
Acquisitions can have a significant impact on a company’s direct and indirect cost rates, and on the cost of performing its contractual obligations. This Shepard Mullin blog discusses the challenges that companies face when it comes to the allocation & allowability of M&A costs under government contracts. Here’s an excerpt:
The regulations applicable to the allowability and allocability of costs under government contracts include specific requirements regarding the treatment of costs that are likely to arise from mergers and acquisitions. The requirements are scattered throughout the Federal Acquisition Regulation (“FAR”) Cost Principles and the Cost Accounting Standards (“CAS”). Some are complex. Others are impenetrable. Government auditors are instructed and trained to scrutinize these costs with a critical eye.
Failure to appropriately navigate this regulatory thicket can result in consequences ranging from disallowance of costs to False Claims Act investigations.
– John Jenkins