Bid and Proposal (B&P) Costs — Period Expense Included in G&A Pool
Recording costs incurred to prepare proposals for government contracts — expensed as incurred (not capitalized) and included in the allowable G&A pool when within negotiated B&P limits.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Bid & Proposal Expense — G&A Pool (Labor + Fringe + Overhead on Proposal Effort) | Expense (+) | 8,500,000.00 | - |
| Salaries Payable / Cash (Proposal Team Labor and Materials) | Liability (+) / Asset (-) | - | 8,500,000.00 |
💡 Accountant's Note
Bid and Proposal (B&P) costs are the costs of preparing proposals for government contracts — labor of proposal writers, pricing analysts, engineers developing technical approaches, subcontractor solicitations, proposal printing and production, and facility costs for proposal teams. Under FAR 31.205-18: B&P costs are ALLOWABLE and ALLOCABLE to the G&A pool — the government effectively shares in the cost of the industry's proposal activity (recognizing that companies must bid to win work). B&P costs are NOT capitalized as contract acquisition costs (they fail ASC 340-40 capitalization because the revenue from winning the bid is not yet a contract). The annual B&P spending limit negotiated with the government (in the B&P/IR&D master agreement) caps the amount allocated to government contracts — excess B&P above the negotiated limit is unallowable. Major defense contractors (Lockheed Martin, Raytheon, Northrop Grumman) spend 2–4% of revenue on B&P annually — billions of dollars to compete for government contracts.
Practitioner & Systems Framework
💻 ERP Architecture
B&P cost tracking requires a dedicated project code structure: each major proposal opportunity gets a project code, and all employees working on the proposal charge their time to that code. The B&P pool is then allocated to contracts through the G&A rate. B&P tracking enables win/loss analysis — understanding the cost of pursuing opportunities that are not won is a key cost management metric. Some contractors track 'new business B&P' (external competitions) separately from 'follow-on B&P' (re-competes of existing work).
⚠️ Audit Flags
DCAA audits B&P costs for: (1) allocability — are employees charging B&P for actual proposal activity? Floor checks on B&P projects are common. (2) B&P vs. IR&D classification — sometimes R&D done under the cover of a proposal (to develop technology that advances IR&D goals) is misclassified as B&P. (3) B&P ceiling compliance — does the contractor's total B&P exceed the negotiated ceiling? Any excess is unallowable. (4) Exclusion of costs for independently funded research from B&P.
📄 Required Documentation
B&P project codes by opportunity, proposal labor charge records (timesheets), B&P/IR&D master agreement with government (negotiated ceiling), annual B&P expenditure vs. ceiling, win/loss analysis by major proposal, B&P vs. IR&D classification policy, and DCAA audit results on B&P.
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