A common practice for a company is to identify its products using logos and emblems. Some contracting officers are concerned over the costs being incurred for contractors' logos and emblems being placed on Government systems. These contracting officers are treating the direct and indirect costs for logos and emblems produced by means of a special mold or casting (not simple stick-on adhesive decals) as unallowable advertising costs under FAR 31.205-1.
The contracting officers' position reflects an internal negotiating/contracting policy. This policy is enforceable to the extent that contracting officers obtain contractor concurrence and include a specific clause in contracts making such costs expressly unallowable or issue a notice of intent to disallow. Unless contracts contain such a clause, contractors need only comply with FAR 31.205-1 and FAR 31.201-3, Reasonableness.
The use of the terminology “logos and emblems” may be misleading. Logo is an abbreviation for the word logotype, which actually means the standard ways in which to letter or set in type the company trade name, while emblem represents the mark of a nonprofit organization.
However, "contractor logos and emblems" as used in Government contracting represent the actual design and typesetting of all company marks. Company marks can be trademarks (companies who manufacture products) or service marks (companies who provide services to their customers).
Regardless of the type of mark, the key factor is the purpose for which the marks are designed. Marks are initially designed to meet three main purposes,
(1) To indicate the origin of the product or service provided,
(2) To guarantee quality consistency (the mark tells the buyer that the product or service is the same as that provided previously), and
(3) To serve as an advertisement (simple enough to catch attention, complete enough to tell a story, and persuasive enough to move the viewer to action).
When a company initially designs a mark, each of these three purposes is relevant. Therefore, disallowance of these costs under FAR 31.205-1 is generally not practicable. However, the initial design of logos and emblems may be challenged as unreasonable if costs are determined to be excessive.
While the initial design of a company mark cannot generally be questioned under FAR 31.205-1, the redesign can be. When a company redesigns its mark, the public is usually already familiar enough with the original mark to know the origin of the product; thus, this purpose is usually not relevant to a redesign.
In addition, redesigning the mark does not serve to guarantee quality consistency, since the original mark already told the prospective buyer that the product or service is the same as that previously provided.
However, redesigning the mark does serve as an advertisement, since it is intended to catch the attention of those who were previously unaware of the company, tell a story (a new one or the rephrasing of an old one), and be persuasive enough to move a viewer to take a form of action that the old mark could not.
Thus, the major purpose of redesigning a company mark will usually be advertising; if this is the case, then these costs are unallowable under FAR 31.205-1.
A company mark may be redesigned for other reasons, such as a corporate merger, reorganization, etc. The auditor, and therefore you as the contractor, must carefully consider the purpose of redesigning the company mark in determining the allowability of such costs.
For example, if the redesign results from reorganization, then FAR 31.205-27, Organization Costs, should be considered in evaluating the allowability of these costs. Furthermore, as was the case with the initial design, the redesign of logos and emblems may also be challenged as unreasonable if costs are to be excessive.
Summary:
As you can see, Logos and Emblems can be allowable. So don’t automatically assume these costs are unallowable. Make sure you review this article again and ensure your appropriate employees and policies reflect activities so that they are more likely to be considered allowable.