Contract Management Expense

At last night’s IACCM Board Meeting, there was an interesting discussion on the accounting treatment for contract management expense. Although this was largely a sell-side debate, it revealed various differences in current approach.

For some, all contract management costs are apportioned to SG&A. Others make a distinction between pre-award (cost of sales) and post-award (cost of delivery). In some cases, contract management expense is identified up-front as part of the delivery cost and therefore assumed in pricing; in others, it is ‘sold’ to the business unit post-contract signature.

Several of those involved in the discussion have their contract management staff complete time sheets so that costs can be allocated to the appropriate deal, or split between pre and post-award activity.

Further thoughts and experiences on this topic will be welcome. What approaches do you take, or have you encountered? And what about the buy-side – where does contract management expense get identified and allocated in this case?