Emerging Trends in Government Contracts: Navigating Rules for Pro Bono Work
For many large private companies and firms that contract with the federal government, pro bono work is more than a feel-good activity; it is necessary for their business model to develop new business, attract and retain employees, and to provide valuable training opportunities for their employees. But when a large firm contracts with the federal government, it is often subject to the strict and complicated Cost Accounting Standards (CAS), which limit the types of activities in which an employee may engage. The CAS, originally adopted in the 1970s and occasionally updated since, are a set of standards used to determine and allocate costs on federal contracts. Designed to promote uniformity in government procurement, CAS compliance requires contractors to segregate direct and indirect costs and properly allocate indirect costs (such as overhead, general and administrative costs, etc.) to intermediate and final cost objectives. The CAS, however, does not appear to contemplate emerging trends of pro bono work such as Bain & Company's recent commitment to engage in $1 billion worth of pro-bono work over a 10 year period. Specifically, the standards do not directly address whether and to what extent employees under the purview of a government contract may participate in pro bono activities.
Federal Acquisition Regulation Section 31.205-8 provides that contributions or donations, including cash, property, and services, regardless of recipient are unallowable costs—limiting the ability of contracted employees to perform pro bono work as a contribution or donation of services. But the CAS does list a diverse array of activities that are allowed for contracted employees—most of which are essential for a company to carry on its normal course of business. For example, CAS allows contracted employees to engage in public relations work, including discrete charitable or community service activities (such as a canned-food drive or disaster assistance). Section 31.205-13 allows for costs associated with activities that are designed to improve working conditions, employer-employee relations, employee morale, and employee performance (gifts, however, are not allowed under this exception). Finally, the CAS allows for government contracted employees to spend their time on employee training and education. Training, employee morale, and good public relations are all key reasons firms engage in pro bono work. Yet it's possible that the government just didn't contemplate this when it wrote or updated the CAS.
Because the CAS appears to bar pro bono work despite conveying in spirit an attempt to allow contractors to engage in activities that are within the general scope of their business, contractors are left considering alternative policies to allow their employees and firms to engage in important pro bono work. Some contractors have creatively adopted internal rules allowing their employees that are subject to federal government contracts to engage in pro bono work outside normal hours. This type of policy does not appear to violate the CAS and still provides an avenue for a firm and its employees to benefit from engaging in pro bono activities. Creating specific pro bono projects or trainings could provide contractors with an alternative means of engaging in pro bono work without violating the CAS. Ultimately, an update to the CAS that contemplates the value of pro bono work to both contractors and to the contracting federal government agency would be of benefit to all.
Tristan Brown is a member of the firm's Energy division. He is located in the Washington, DC office. For more information, please contact Tristan or the Stinson Leonard Street contact with whom you regularly work.
Christy Milliken is a member of the firm's Business Litigation division. She is located in the Washington, DC office. For more information, please contact Christy or the Stinson Leonard Street contact with whom you regularly work.
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