D. Policy Statement

D1. General

D2. Reasonableness

D3. Allocability

D4. Allowability Determinations and Supporting Documentation

D5. Examples of Unallowable Costs (per FAR 31.205 and DEAR 970.3102-05)

POLICY

A. Purpose

This policy provides general guidelines for Lawrence Berkeley National Laboratory (Berkeley Lab) for determining allowable costs, in compliance with U.S. Department of Energy (DOE) Contract No. DE-AC02-05CH11231 (Contract 31), the Federal Acquisition Regulation (FAR), and the Department of Energy Acquisition Regulation (DEAR). This policy is not intended to amend or replace any federal, state, or regulatory requirements. For more specific details, refer to Contract 31, FAR, and DEAR.

B. Persons Affected

All Laboratory employees

C. Exceptions

None

D. Policy Statement

D.1  General

The University of California (UC) manages and operates Berkeley Lab on behalf of the Department of Energy (DOE) under a single cost-reimbursable prime contract with the DOE, referred to as Contract 31.

Berkeley Lab may only charge Contract 31 for costs actually incurred in the performance of authorized contract work, whether funded by DOE, Strategic Partnership Project (SPP) sponsors or another authorized Contract 31 agreement.

In addition, the costs must be determined to be allowable in accordance with all of the following requirements:

• Reasonableness;
• Allocability;
• Applicable Cost Accounting Standards (CAS); otherwise, generally accepted accounting principles (GAAP) and practices appropriate to the circumstances;
• The terms and conditions of Contract 31;
• Any rules or limitations described in FAR subpart 31.201-2 as supplemented by DEAR subpart 970.31 and/or specific clauses in Contract 31.

Individuals with authority to incur specific Berkeley Lab costs are responsible to ensure the costs are allowable under Contract 31 and Berkeley Lab policies, and that supporting documentation to demonstrate allowability is adequate.

Principal investigators and project managers and others with signature authority have a responsibility to ensure, in consultation with the division's or area's Office of the Chief Financial Officer (OCFO) resource management staff, that costs charged to their projects are allowable.

Division and area leaders as well as managers have a responsibility to provide reasonable assurance that the costs incurred in their division/area comply with the contract provisions under their purview, as well as allowability considerations contained in this policy.

D.2  Reasonableness

A cost is considered reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person while conducting normal Berkeley Lab business. The determination of reasonableness depends upon a variety of considerations and circumstances, including the following:

1. The type of cost is generally recognized as ordinary and necessary to conduct Laboratory business or contract performance;
2. The cost is in compliance with generally accepted sound business practices, arm's-length bargaining, and federal and state laws and regulations;
3. The cost supports the Laboratory's responsibilities to the government, other sponsors, the University of California (UC), employees, and the public at large;
4. The cost does not significantly deviate from established practices.

D.3  Allocability

A cost is allocable if it is assigned or charged to one or more cost objectives (projects) on the basis of benefits received (or other equitable relationship). The cost must be  charged or allocated consistently and in compliance with applicable CAS and Berkeley Lab's approved CAS Disclosure Statement. Therefore, a cost is allocable if it:

1. Is incurred specifically for the project;
2. Benefits both the project and other work, and can be distributed in reasonable proportion to the benefits received; or
3. Is necessary to the overall operation of Laboratory business.

D.4  Allowability Determinations and Supporting Documentation

1. Determining Allowability
   1. If it is unclear whether a cost is allowable, the individual should coordinate with the Financial Policy and Assurance Office in the Office of the Chief Financial Officer (OCFO), which will provide determinations based upon the appropriate directive or regulation, and/or in consultation with the appropriate authority.
   2. When costs are identified as questionable but considered necessary, one option available to the Laboratory is to request the OCFO to coordinate with the UC Office of National Laboratories (UCNL) to seek DOE Contracting Officer approval of the specific item or category of costs. Such requests should be made in advance of any commitments being made to utilize Contract 31 funds. Supporting Documentation
2. Supporting Documentation: Each division and area is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, to demonstrate that costs claimed have been incurred per Contract 31 requirements. DOE may disallow all or part of a claimed cost that is inadequately supported.

D.5  Examples of Unallowable Costs (per FAR 31.205 and DEAR 970.3102-05)

The following are examples of unallowable costs that often arise at Berkeley Lab. The list below does not include all potential unallowable costs. If the reader's particular cost issue is not in the sample listing below, the reader should consult with the Financial Policy and Assurance Office and/or review the specific FAR and DEAR references.

1. Public Relations and Advertising Costs (FAR 31.205-1): Examples of unallowable public relations and advertising costs include the following:
   1. Costs of sponsoring meetings, conventions, symposia, seminars, and other special events when the principal purpose of the event is other than dissemination of technical information or stimulation of production.
   2. Costs of ceremonies, such as celebrations, including ribbon cuttings, and new product announcements.
   3. Costs of promotional material, motion pictures, videotapes, brochures, handouts, magazines, and other media designed to call favorable attention to the Berkeley Lab and its activities.
   4. Costs of souvenirs, models, imprinted clothing, buttons, and other mementos provided to customers or the public.
   5. Costs of memberships in civic and community organizations.
   6. Costs of memorabilia (e.g., models, gifts, and souvenirs).
   7. Costs of alcoholic beverages, entertainment, and physical facilities that are primarily used for entertainment.
2. Bad Debts (FAR 31.205-3): Bad debts, including actual or estimated losses arising from uncollectible accounts receivable due from customers and other claims, and any directly associated costs (such as collection and legal costs) are unallowable.
3. Contributions or Donations (FAR 31.205-8): Contributions or donations, including cash, property, and services, regardless of the recipient, are unallowable, with the exception of the costs of participation in community service activities (e.g., blood bank drives, charity drives, savings bond drives, disaster assistance, etc.), as provided in FAR 31-205-1(e)(3).
4. Employee Morale (FAR 31.205-13) and Contract 31, Section J, Appendix A, Section IX:
   1. Costs of gifts are unallowable. (Gifts do not include awards for performance made in accordance with FAR 31.205-6[f], or awards made in recognition of employee achievements in accordance with an established Berkeley Lab plan or policy.)
   2. Costs of recreation are unallowable, except for the costs of employees' participation in Laboratory-sponsored sports teams or employee organizations designed to improve loyalty, teamwork, or physical fitness. However, Contract 31 does place an annual monetary limit on all employee morale-enhancing activities. Such expenditures must be pre-approved by the Employee Activities Association Coordinator.
5. Entertainment Costs (FAR 31.205-14):
   1. Costs of amusement, diversions, social activities, and any directly associated costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable.
   2. Costs of membership in social, dining, or country clubs or other organizations having the same purposes are also unallowable, regardless of whether the cost is reported as taxable income to the employees.
6. Fines, Penalties, and Mischarging Costs (FAR 31.205-15):
   1. Costs of fines and penalties resulting from violations of, or failure of the Berkeley Lab to comply with, federal, state, local, or foreign laws and regulations, are unallowable, except when incurred as a result of compliance with specific terms and conditions of the contract or written instructions from the contracting officer (U.S. Department of Energy [DOE]).
   2. Costs incurred in connection with, or related to, the mischarging of costs are unallowable when the costs are caused by, or result from, alteration or destruction of records, or other false or improper charging or recording of costs. Such costs include those incurred to measure (or otherwise determine) the magnitude of the improper charging, and costs incurred to remedy or correct the mischarging, such as costs to rescreen and reconstruct records.
7. Independent Research and Development and Bid and Proposal Costs (FAR 31.205-18 and DEAR 970.3102-05-18): Independent research and development and bid and proposal costs are unallowable. However, DOE-approved Laboratory Directed Research and Development costs and those costs incurred in support of DOE's various reimbursable (strategic partnership project) programs are allowable.
8. Insurance (FAR 31.205-19 and DEAR 970.5228-1): Insurance costs are restricted by the terms of Contract 31. Employees should consult with the OCFO and Lab Counsel before incurring insurance related expenses.
9. Lobbying and Political Activity Costs (FAR 31.205-22 and DEAR 970.3102-05-22): Costs associated with the following activities are unallowable:
   1. Attempts to influence the outcomes of any federal, state, or local election, referendum, initiative, or similar procedure through in-kind or cash contributions, endorsements, publicity, or similar activities.
   2. Establishing, administering, contributing to, or paying the expenses of a political party, campaign, political action committee, or other organization established for the purpose of influencing the outcomes of elections.
   3. Any attempt to influence:
      1. The introduction of federal, state, or local legislation, or
      2. The enactment or modification of any pending federal, state, or local legislation through communication with any member or employee of Congress or the state Legislature (including efforts to influence state or local officials to engage in similar lobbying activity), or with any government official or employee in connection with a decision to sign or veto enrolled legislation.
10. Plant Reconversion Costs (FAR 31.205-31): Reconversion costs are unallowable except for the cost of removing government property and the restoration or rehabilitation costs caused by such removal. However, in special circumstances where equity so dictates, additional costs may be allowed to the extent agreed upon before costs are incurred.
11. Professional and Consultant Service Costs (FAR 31.205-33): Costs of professional and consultant services performed under any of the following circumstances are unallowable:
    1. Services to improperly obtain, distribute, or use information or data protected by law or regulation.
    2. Services that are intended to improperly influence the contents of solicitations, the evaluation of proposals or quotations, or the selection of sources for contract award, whether the award is by the government or by a prime contractor or subcontractor.
    3. Any other services obtained, performed, or otherwise resulting in violation of any statute or regulation prohibiting improper business practices or conflicts of interest.
    4. Services performed that are not consistent with the purpose and scope of the services contracted for or otherwise agreed to.
       
       See the Consultants to Berkeley Lab Policy for additional guidance.
12. Recruitment Costs (FAR 31.205-34 and Contract 31, Section J, Appendix A, Section X): Help-wanted advertising costs are unallowable if the advertising:
    1. Does not describe specific positions or classes of positions.
    2. Includes material that is not relevant for recruitment purposes, such as extensive illustrations or descriptions of the Berkeley Lab's products or capabilities.
    3. The Laboratory may incur costs for the recruitment of personnel, as follows:
       1. Costs of advertising and agency and consultant fees shall not exceed $1 million annually without prior Contracting Officer (DOE) approval.
       2. Travel and subsistence for interviewee, interviewer, and recruiting contact paid in accordance with Contract 31, Section J, Appendix A. As approved by the Laboratory Director, expenses for round-trip travel and subsistence for the interviewee's spouse may be reimbursed. Meal expense for interviewer's spouse may be reimbursed.
       3. New or prospective employees who have been offered and have accepted a position, and who are required to take a preplacement physical examination, shall be reimbursed for costs of the physical examination.
       4. Costs associated with pre-employment screening shall be allowable.
13. Relocation Costs (FAR 31.205-35): The following types of costs are unallowable:
    1. Loss on the sale of a home.
    2. Costs incident to acquiring a home in the new location as follows:
       1. Real estate brokers' fees and commissions.
       2. Costs of litigation.
       3. Real and personal property insurance against damage or loss of property.
       4. Mortgage life insurance.
          1. Owner's title policy insurance when such insurance was not previously carried by the employee on the old residence. However, the cost of a mortgage title policy is allowable.
          2. Property taxes and operating or maintenance costs.
    3. Continuing mortgage principal payments on a residence being sold.
    4. Costs incident to furnishing equity or nonequity loans to employees or making arrangements with lenders for employees to obtain lower-than-market rate mortgage loans.
       1. If relocation costs for an employee have been allowed and the employee resigns within 12 months for reasons within the employee's control, the Berkeley Lab will refund or credit the relocation costs to the government.See the Relocation Assistance Policy in the Requirements and Policies Manual (RPM) for more information on relocation costs.
14. Taxes (FAR 31.205-41): The following types of costs are unallowable:
    1. Federal income taxes.
    2. Taxes in connection with financing, refinancing, refunding operations, or reorganizations.
    3. Taxes from which exemptions are available directly, or available based on an exemption afforded the government, except when the contracting officer determines that the administrative burden incident to obtaining the exemption outweighs the corresponding benefits accruing to the government.
    4. When partial exemption from a tax is attributable, taxes charged in excess of that amount resulting from application of the preferential treatment are unallowable.
    5. Special assessments on land that represent capital improvements.
    6. Taxes (including excises) on real or personal property, or on the value, use, possession, or sale thereof, which is not used in connection with government work.
    7. Any excise tax in Subtitle D, Chapter 43 of the Internal Revenue Code of 1986, as amended (which includes excise taxes imposed in connection with qualified pension plans, welfare plans, deferred compensation plans, or other similar types of plans).
15. Trade, Business, Technical, and Professional Activity Costs (FAR 31.205-43): The following types of costs are allowable:
    1. Memberships in trade, business, technical, and professional organizations.
    2. Subscriptions to trade, business, professional, or other technical periodicals.
    3. When the principal purpose of a meeting, convention, conference, symposium, or seminar is the dissemination of trade, business, technical, or professional information or the stimulation of production or improved productivity:
       1. Costs of organizing, setting up, and sponsoring the meetings, conventions, symposia, etc., including rental of meeting facilities, transportation, subsistence, and incidental costs.
       2. Costs of attendance by contractor employees, including travel costs (see FAR 31.205-46).
    4. Costs of attendance by individuals who are not employees of the contractor, provided:
       1. Such costs are not also reimbursed to the individual by the employing company or organization, and
          1. The individual's attendance is essential to achieve the purpose of the conference, meeting, convention, symposium, etc.
16. Research and Development Costs (FAR 31.205-48): When research and development costs are incurred in excess of either the amount sponsored by the grant for research and development effort or the ceiling required in the performance of a contract, the excess is unallowable under any other government contract or grant.
17. Costs of Alcoholic Beverages (FAR 31.205-51): Costs of alcoholic beverages are unallowable.

E. Roles and Responsibilities

F. Definitions/Acronyms

G. Recordkeeping Requirements

None

H. Implementing Documents

I. Contact Information

Financial Policy and Assurance Manager, OCFO

J. Revision History

DOCUMENT INFORMATION

Source Requirements Documents

• DOE Contract No. DE-AC02-05CH11231, Clause I-127A - DEAR 970.5216-7, Allowable Cost and Payment (OCT 2021) (PF 2022-23 DEVIATION)
• Federal Acquisition Regulation, Part 31, Contract Cost Principles and Procedures, Subpart 31.2, Contracts with Commercial Organizations, FAR 31.201-2, Determining Allowability
• Federal Acquisition Regulation, Part 31, Contract Cost Principles and Procedures, Subpart 31.2, Contracts with Commercial Organizations, FAR 31.205, Selected Costs
• Department of Energy Acquisition Regulation, Part 970, DOE Management and Operating Contacts, Subpart DEAR 970.31, Contract Cost Principles and Procedures
• U.S. Department of Energy (DOE) Contract No. DE-AC02-05CH11231, Section J, Appendix A, Section IX, Employee Programs
• U.S. Department of Energy (DOE) Contract No. DE-AC02-05CH11231, Section J, Appendix A, Section X, Costs of Recruiting Personnel

Implementing Documents