and grounds (exclusive of fixing-up expenses), utilities, taxes, property insurance, etc., after settlement date or lease date of new permanent residence; and

(8) Continuing mortgage principal and interest payments on residence being sold.

(b) Subject to paragraphs (c) and (f) of this § 1-15.205-25, relocation costs of the type covered in paragraph (a) (1), (2), (3), (4), and (7) of this § 1-15.205-25 are allowable, provided:

(1) The move is for the benefit of the employer;

(2) Reimbursement is in accordance with an established policy or practice consistently followed by the employer, and such policy or practice is designed to motivate employees to relocate promptly and economically;

(3) The costs are not otherwise unallowable under the provisions of § 115.205-33 or any other provision of this Subpart 1-15.2 (see § 1-15.107 as related to large scale contractor relocation); and

(4) Amounts to be reimbursed shall not exceed the employee's actual (or reasonably estimated) expenses.

(c) Costs otherwise allowable under paragraph (b) of this § 1-15.205-25 are subject to the following additional provisions:

(1) The transition period for incurrence of costs of the type covered in paragraph (a) (2) of this § 1-15.205-25 shall be kept to the minimum number of days necessary under the circumstances, but shall not, in any event, exceed a cumulative total of 30 days including advance trip time;

(2) Allowance for the combined total of costs of the type covered in paragraph (a) (3) and (7) of this § 1-15.20525 shall not exceed 8 percent of the sales price of the property sold;

(3) Cost of canceling an unexpired lease under paragraph (a) (4) of this § 1-15.205-25 shall not exceed three times the monthly rental; and

(4) Costs of the type covered in paragraph (a) (3), (4), and (7) of this § 1-15.205-25 are allowable only in connection with the relocation of existing employees, and are not allowable for newly recruited employees.

(d) Costs of the type covered in paragraph (a) (5), (6), and (8) of this § 1-15.205-25 are not allowable.

(e) Payments for employee income taxes incident to reimbursed relocation costs are not allowable.

(f) Where relocation costs incurred incident to recruitment of a new employee have been allowed either as an allocable direct or indirect cost and the newly hired employee resigns for reasons within his control within 12 months after hire, the contractor shall be required to refund or credit such relocation costs to the Government. [34 F.R. 18165, Nov. 13, 1969]

§ 1-15.205-26 Patent costs.

(a) Costs of (1) preparing disclosures, reports, and other documents required by the contract and of searching the art to the extent necessary to make such invention disclosures, (2) preparing documents and any other patent costs, in connection with the filing and prosecution of a United States patent application where title or royalty free license is required by the Government contract to be conveyed to the Government, and (3) general counseling services relating to patent matters, such as advice on patent laws, regulations, clauses, and employee agreements, are allowable (see § 1-15.205-31).

(b) Costs of preparing disclosures, reports and other documents and of searching the art to the extent necessary to make invention disclosures, if not required by the contract, are unallowable. Costs in connection with (1) filing and prosecuting any foreign patent application, or (2) any United States patent application with respect to which the contract does not require conveying title or a royalty free license to the Government, are unallowable. (Also see § 115.205-36.)

[34 FR 18165, Nov. 13, 1969, as amended at 40 FR 14915, Apr. 3, 1975]

§ 1-15.205-27 Pension plans.

(See § 1-15.205-6.)

§ 1-15.205-28 Plant protection costs.

Costs of items such as (a) wages, uniforms, and equipment of personnel engaged in plant protection, (b) depreciation on plant protection capital assets, and (c) necessary expenses to comply with security requirements, are allowable. § 1-15.205-29 Plant reconversion costs.

Plant reconversion costs are those incurred in the restoration or rehabilitation of the contractor's facilities to approximately the same condition existing immediately prior to the commencement of the contract work, fair wear and tear

excepted. Reconversion costs are unallowable except for the cost of removing Government property and the restoration or rehabilitation costs caused by such removal. However, in special circumstances where equity so dictates, additional costs may be allowed to the extent agreed upon before the costs are incurred. Whenever such costs are given consideration, care should be exercised to avoid duplication through allowance as contingencies, as additional profit or fee, or in other contracts.

§ 1-15.205-30 Precontract costs.

Precontract costs are those incurred prior to the effective date of the contract directly pursuant to the negotiation and in anticipation of the award of the contract where such incurrence is necessary to comply with the proposed contract delivery schedule. Such costs are allowable to the extent that they would have been allowable if incurred after the date of the contract (but see § 1-15.107). § 1-15.205-31 Professional and consultant service costs--legal, accounting, engineering, and other.

(a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill and who are not officers or employees of the contractor are allowable, subject to paragraphs (b), (c), and (d) of this § 1-15.205–31, when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Government (see § 1-15.205–23 and 1-15.20526).

(b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors among others may be relevant:

(1) The nature and scope of the service rendered in relation to the service required;

(2) The necessity of contracting for the service, considering the contractor's capability in the particular area;

(3) The past pattern of such costs, particularly in the years prior to the award of Government contracts;

(4) The impact of Government contracts on the contractor's business (ie., what new problems have arisen);

(5) Whether the proportion of Government work to the contractor's total business is such as to influence the con

tractor in favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work under Government contracts;

(6) Whether the service can be performed more economically by employment rather than contracting;

(7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-Government contracts; and

(8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions).

(c) In addition to the factors in paragraph (b) of this § 1-15.205-31, retainer fees to be allowable must be supported by evidence of bona fide services available or rendered.

(d) Cost of legal, accounting, and consulting services, and related costs, incurred in connection with organization and reorganization, defense of antitrust suits, and the prosecution of claims against the Government, are unallowable. Costs of legal, accounting and consulting services, and related costs, incurred in connection with patent infringement litigation, are unallowable unless otherwise provided for in the contract (see § 1-15.205-23). [34 F.R. 18166, Nov. 13, 1969]

§ 1-15.205-32 Profits and losses on disposition of plant, equipment, or other capital assets.

Profits or losses of any nature arising from the sale or exchange of plant, equipment, or other capital assets, including sale or exchange of either short or long term investments. shall be excluded in computing contract costs (but see § 1-15.205-9(b) as to basis for depreciation).

§ 1-15.205-33 Recruitment costs.

(a) Subject to paragraphs (b), (e), and (d) of this § 1-15.205-33, and provided that the size of the staff recruited and maintained is in keeping with workload requirements, costs of help-wanted advertising, operating costs of an employment office necessary to secure and maintain an adequate labor force, costs of operating an aptitude and educational testing program, travel costs of employees while engaged in recruiting personnel, travel costs of applicants for in

terviews for prospective employment, and relocation costs incurred incident to recruitment of new employees are allowable to the extent that such costs are incurred pursuant to a well managed recruitment program. Where the contractor uses employment agencies, costs not in excess of standard commercial rates for such services are allowable.

(b) Costs of help-wanted advertising are unallowable if the advertising:

(1) Is for other than for personnel required for the performance of obligations under a Government contract, except as provided in § 1-15.205-1(b);

(2) Does not describe specific positions or classes of positions;

(3) Is excessive in relation to the number and importance of the positions, or in relation to the practices of industry;

(4) Includes material that is not relevant for recruitment purposes, such as extensive illustrations or descriptions of the company's products

capabilities;

or

(5) Is designed to "pirate" personnel from another Government contractor; or (6) Includes color (in publications). (c) Costs of excessive salaries, fringe benefits and special emoluments that have been offered to prospective employees, designed to "pirate" personnel from another Government contractor, or in excess of the standard practices in the industry, are unallowable.

(d) Relocation costs incurred incident to recruitment of new employees are subject to § 1-15.205-25. When such costs have been allowed either as an allocable direct or indirect cost and the newly hired employee resigns for reasons within his control within 12 months after hire, the contractor shall be required to refund or credit such relocation costs to the Government. However, costs of travel to an overseas location shall be considered travel costs in accordance with § 115.205-46 and not relocation costs for the purpose of this subparagraph, if (1) dependents are not permitted at that location for any reason, and (2) such costs do not include costs of transporting household goods.

[35 FR 13579, Aug. 26, 1970, as amended at 40 FR 14915, Apr. 3, 1975]

data processing equipment (ADPE)— see 1-15.205-50.

(b) As used in this section, the words and phrases defined in this paragraph (b) shall have the meanings set forth below.

(1) "Short-term leasing" means leasing where the cumulative term of the use or occupancy (initial term plus additional terms whether or not pursuant to a renewal option) is 2 years or less for personal property and 5 years or less for real property.

(2) "Long-term leasing" means leasing where the cumulative term of the use or occupancy (initial term plus additional terms whether or not pursuant to a renewal option) is more than 2 years for personal property and more than 5 years for real property. Leasing with initial terms of more than 2 years for personal property and more than 5 years for real property is long-term leasing as of the effective date. Leasing with initial terms of 2 years or less for personal property, and 5 years or less for real property, becomes long-term leasing as of the effective date of the document which extends the cumulative term to more than 2 or 5 years, and will be treated as short-term leasing prior to such date and long-term leasing on such date.

(3) "Anticipated useful life" of property may represent the application life (utility in a given function), technological life (utility before becoming obsolete in whole or in part), or physical life (utility before physically wearing out), depending upon the facts and circumstances and the particular property involved. In estimating anticipated useful life under long-term leasing, the starting date shall be the date that the lease qualifies as long-term leasing. The contractor may use application life if he can clearly demonstrate that the property has utility only in a given function and the duration of the function can be determined. Technological life may be used by the contractor if he can demonstrate that existing property must be replaced because of:

(1) Specific program objectives or con. tract requirements which cannot be accomplished with the existing facilities;

(ii) Cost reductions which will produce identifiable savings in production or overhead costs;

(iii) Increase in workload volume which cannot be accomplished efficiently

and maintenance (excluding interest or other unallowable costs pursuant to this Part 1-15): Provided, That no part of such costs shall duplicate any other allowed costs. However, rental cost of personal property, which is leased from any division, subsidiary, or affiliate of the contractor under common control, which has an established practice of leasing the same or similar property to unaffiliated lessees shall be allowed in accordance with paragraphs (b), (c), and (d) of this 1-15.205-34. In addition, where the lessor is also the manufacturer of the personal property, the purchase price for the purposes of paragraph (d) (1) of this 1-15.205-34, and the cost of ownership for the purposes of paragraph (d) (2) of this 1-15.205-34, shall be determined in accordance with § 1-15.205-22(e).

(h) Rental costs under long-term leasing entered into prior to the effective date of this § 1-15.205-34 are allowable for the remaining term of the lease (excluding unexercised options) to the extent they would have been allowable under this § 1-15.205-34 in effect January 1, 1969.

(1) The allowability of rental costs under unexpired leases in connection with terminations is subject to § 1-15.205-42(e).

(j) Allowable rental costs shall not be adjusted by the amount of any investment credit accruing to the contractor by reason of an election, made by a lessor of new "section 38" property, to treat the contractor as the purchaser of such property pursuant to section 48(d) of the Revenue Act of 1962, as amended. [35 FR 13579, Aug. 26, 1970]

(a) Basic research, for the purpose of this Subpart 1-15.2, is that type of research which is directed toward increase of knowledge in science. In such research, the primary aim of the investigator is a fuller knowledge or understanding of the subject under study, rather than any practical application thereof. Applied research, for the purpose of this Subpart 1-15.2, consists of that type of effort which (1) normally follows basic research, but may not be severable from the related basic research, (2) attempts to determine and expand the potentialities of new scientific discoveries or improvements in technology, materials, processes, meth

ods, devices, and techniques, and (3) attempts to "advance the state of the art." Applied research does not include any such efforts when their principal aim is the design, development, or test of specific articles or services to be offered for sale, which are within the definition of the term development as hereinafter provided.

(b) "Development" is the systematic use of scientific knowledge which is directed toward the production of, or improvements in, useful products to meet specific performance requirements, but exclusive of manufacturing and production engineering.

(c) A contractor's independent research and development is that research and development which is not sponsored by a contract, grant, or other arrangement.

(d) A contractor's costs of independent research as defined in (a) and (c) above shall be allowable as indirect costs (subject to (h) below), provided they are allocated to all work of the contractor (e) Costs of contractor's independent development, as defined in (b) and (c) above (subject to (h) below), are allowable to the extent that such development is related to the product line for which the Government has contracts, provided the costs are reasonable in amount and are allocated as indirect costs to all work of the contractor on such product lines In cases where a contractor's normal course of business does not involve production work, the cost of independent development is allowable to the extent that such development is related and allocated as an indirect cost to the field of effort of Government research and development contracts.

(f) Independent research and development costs shall include an amount for the absorption of their appropriate share of indirect and administrative costs, unless the contractor, in accordance with his accounting practices con sistently applied, treats such costs otherwise.

(g) Research and development costs (including amounts capitalized), regardless of their nature, which were incurred in accounting periods prior to the award of a particular contract, are unallowable except where allowable as precontract costs (see § 1-15.205-30).

(h) The reasonableness of expenditures for independent research and development should be determined in light