AIA Cost Principles Committee

Expressly Unallowable Costs: Raytheon Co. v. Sec. Def., 940 F.3d 1310 (Fed. Cir., 2019)

Expressly Unallowable Costs – Raytheon

Unallowable v. Expressly Unallowable Costs:

  • Some costs are "unallowable", others are "expressly unallowable"
  • An "expressly unallowable" costs is a: "particular item or type of cost which, under the express provisions of an applicable law, regulation, or contract, is specifically named and stated to be unallowable."
  • Expressly unallowable costs are subject to penalty

FAR 31.205-22:

  • designates as unallowable costs "associated with" various types of lobbying any political activities.

Prior ASBCA precedent:

  • compensation and bonus and incentive compensation costs "associated with" lobbying activities are not expressly unallowable
  • compensation and BAIC are not "specifically named and stated" as unallowable under FAR 31.205-22
  • Raytheon Co., ASBCA No. 57576 et al., 15-1 BCA ¶ 36,043

Federal Circuit holds:

  • salary costs associated with lobbying are expressly unallowable under FAR 31.205-22 under the "associated with" language.
  • even though salary is not "specifically named and stated" in FAR 31.205-22, the Circuit reasoned: "Costs unambiguously falling within a generic definition of a 'type' of unallowable cost are also 'expressly unallowable.' Here, salaries of in-house lobbyists are a prototypical lobbying expense."

Elements influencing Court's opinion:

  • Inability to reconcile any other type of cost that the cost principle would be addressing (i.e., Salary)
  • Examination of administrative history. The court looked at the prior DAR language, which had specifically included salary within the prohibition, but was removed upon the promulgation of the FAR

Misunderstanding regarding Raytheon's position about the removal of the word "salary" from the cost principle

  • Raytheon's position is that removal of the word salary shifted the status of the cost from expressly unallowable to merely unallowable.


  • What other costs are "associated with" lobbying and political activity?
  • How might this impact other Cost Principles and CAS provisions that use "associated with" and similar language?

    • What other costs "unambiguously" fall within a generic definition of a type of unallowable costs, or are prototypical expenses of an unallowable costs?
  • Expect heightened audit scrutiny
  • Potential CAS 405 considerations

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