What are they and can you recover them?
Question: Are the costs incurred before the effective date of the contract allowable and therefore chargeable to the contract? You keep me sharp with your practical and insightful questions
The answer appears simple enough. Lets start by defining what the types of costs you asked about are. They are called Precontract Costs.
FAR 31.205-32 defines precontract costs as costs incurred before the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract award. But the key point is what is identified next: When such incurrence of the cost is necessary to comply with the proposed contract delivery schedule.
These cost Are Allowable to the extent that they would have been allowable if incurred after the date of the contract. In other words as if the contract had been dated earlier than the incurrence of the costs.
So if you look at precontract costs incurred as if the contract started earlier than the effective date identified on the contract document, and they are legitimate costs that would be generally allowable, then you can claim these costs as Precontract Costs related to the contract. This should include both Direct and Indirect costs.
Personally, I would get this approval in writing (or email confirmation) from either my prime contactor or government contracting officer. And I would also make sure you include and identify these precontract costs in any bid or proposal. Especially Fixed Price type contracts because once you agree upon the price it is going to be difficult to go back and try to get an adjustment because you forgot to include precontract costs. As for Cost Reimbursement type contracts I would still include them in the proposal or bid to give the contracting officer an opportunity to consider the costs when he/she is determining funding requirements.
Now remember, we are not talking about Bid and Proposal costs (B&P). We are talking about a contract you have been selected for and are in Negotiations on a final price while at the same time you may be performing on the contract per government request to meet delivery schedules. For example, setup, hiring costs, staff salaries that start working, tooling, travel, etc.
And this happens often. Situation: You have been the selected contractor but the final contract is not signed. You are still trying to negotiate price and work out some statement of work issues. The contracting officer agrees you need to begin work ASAP to meet the desired schedules.
It would be wise to get an agreement on this. That brings me to one of my Pet Peeves, Advance Agreements (FAR 31.109). You do not want to be caught in the position where the government decides they cant agree with you on the final price or statement of work and decide to go to another contractor.
If they do, with an advance agreement, you will have a legal agreement that should bind the government to pay all of your precontract costs. Not to mention other remedies you may have if the governments decision was not appropriate.
See the article on Advance Agreements to find out more on the topic.