Proposal costs are not an allowable direct cost charges on federal grants as noted in the text of OMB Circular A-21 (see excerpt below):
A-21, J.34.
"Proposal costs are the costs of preparing bids or proposals on potential federally and non-federally-sponsored agreements or projects, including the development of data necessary to support the institution's bids or proposals. Proposal costs of the current accounting period of both successful and unsuccessful bids and proposals normally should be treated as F&A costs and allocated currently to all activities of the institution, and no proposal costs of past accounting periods will be allocable to the current period."
The cost of preparing a progress report on a non-competing year of a multi-year grant or contract is not considered a proposal cost and is therefore an allowable direct cost.
