When a product or service is partially eligible for support but contains ineligible components, a cost allocation is usually required so that funding can be provided only for the eligible portion. However, in some cases, ineligible features are an insubstantial and inseparable part of a product or service.
If a product or service contains ineligible features on an ancillary (i.e., subordinate, auxiliary, or supplemental) basis, and no separate pricing is available for those features, then costs need not be allocated to the ineligible functionality.
Ineligible functionality is considered “ancillary” if:
- A price for the ineligible component cannot be determined, and
- The product or service is the most cost-effective means of obtaining the eligible functionality without regard to the value of the ineligible functionality.
Applicants and service providers must be sure that they do not “hide” the attempted procurement of separable ineligible features in funding requests through the use of a single line item charge that is not cost allocated. If the ineligible costs can be separated from the overall charges, the applicant must exclude the ineligible amount from their funding request and pay for the ineligible features with their own funds.