[Federal Register Volume 74, Number 236 (Thursday, December 10, 2009)]
[Rules and Regulations]
[Pages 65612-65614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-28935]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 2005-38; FAR Case 2006-024; Item VI; Docket 2009-0044, Sequence 1]
RIN 9000-AK86
Federal Acquisition Regulation; FAR Case 2006-024, Travel Costs
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are issuing a final rule
amending the Federal Acquisition Regulation (FAR) to change the travel
cost principle to ensure a consistent application of the limitation on
allowable contractor airfare costs.
DATES: Effective Date: January 11, 2010.
FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
Mr. Edward N. Chambers, Procurement Analyst, at (202) 501-3221. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-38, FAR
case 2006-024.
[[Page 65613]]
SUPPLEMENTARY INFORMATION:
A. Background
The travel cost principle at FAR 31.205-46(b) currently limits
allowable contractor airfare costs to ``the lowest customary standard,
coach, or equivalent airfare offered during normal business hours.''
The Councils are aware that this limitation is being interpreted
inconsistently, either as lowest coach fare available to the contractor
or lowest coach fare available to the general public, and these
inconsistent interpretations can lead to confusion regarding what costs
are allowable.
The Councils believe that the reasonable standard to apply in
determining the allowability of airfares is the lowest priced airfare
available to the contractor. It is not prudent to allow the costs of
the lowest priced airfares available to the general public when
contractors have obtained lower priced airfares as a result of direct
negotiation.
Furthermore, the Councils believe that the cost principle should be
clarified to omit the term ``standard'' from the description of the
classes of allowable airfares since that term does not describe actual
classes of airline service. The Councils further believe that the terms
``coach, or equivalent,'' given the great variety of airfares often
available, may result in cases where a ``coach, or equivalent'' fare is
not the lowest airfare available to contractors, and should thus be
omitted.
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 72 FR 72325, December 20, 2007.
B. Public Comments
The comment period closed on February 19, 2008. Ten comments were
received from nine respondents. All comments were reviewed and
analyzed.
General Comments.
Since most of the comments submitted were unique and brief, it was
decided to address all ten specific comments.
Specific Comments:
1. Comment: Does ``lowest priced coach class'' mean the cost of
``non-refundable'' tickets when they are available and their cost is
lower than refundable tickets?
Response: If the lowest available airfare is a non-refundable
ticket then it is the allowable cost unless one of the exceptions in
FAR 31.205-46(b) applies.
2. Comment: The requirement for supporting documentation and
justification for airfare costs in excess of the ``lowest coach airfare
available'' should include documentation justifying purchase of a
higher-cost refundable ticket in those instances when a non-refundable
ticket is available.
Response: Concur in principle.
3. Comment: The proposed change ``clarifies FAR 31.205-46 to the
benefit of all contractors'' and is consistent with requiring that all
income, rebates, allowances or other credit relating to any allowable
cost shall be credited to the Government.
Response: Concur in principle. This change is consistent with FAR
31.201-5, Credits.
4. Comment: How will the Government determine the lowest priced
coach class airfare available to the contractor versus the lowest
priced coach class airfare available to the general public if the
contractor does not have a negotiated airfare agreement with air travel
providers and, therefore, only has available to it the same airfare
that is available to the general public?
Response: In the situations described by this commenter, the lowest
priced coach class airfare available to the contractor and the lowest
priced coach class airfare available to the general public are the
same. In this regard, the revision promulgated in this FAR case has no
effect on the contractor. This amendment is intended to prohibit the
contractor's practice where it has negotiated airfare agreements with
travel providers and uses those agreements to purchase first class or
business class seats but does not use the lowest priced airfare
available under the agreements to determine the allowable cost baseline
for the first class or business class seats, but instead determines the
allowable cost based on the lowest airfare available to the general
public instead of the lowest airfare available to the contractor under
the agreements. This amendment will require the contractor to use the
lowest airfare available to the contractor.
5. Comment: Please address whether or not costs associated with
cancelling or changing restricted tickets will be allowable;
alternatively, insert the word ``unrestricted'' into the phrase, i.e.,
``lowest priced coach class unrestricted or equivalent airfare
available to the contractor.''
Response: The Councils believe that the revision does not impact
the allowability of costs associated with cancelling or changing
restricted tickets or a forfeiture of air travel tickets purchased in
good faith but later determined to be unsuitable to the mission
requirements. To answer the Commenter's questions, the costs before and
after the revised cost principle should be allowable.
6. Comment: The ``standard'' rate for contractors with negotiated
airfare agreements should be those same, negotiated airfares, rather
than airfares available to the general public. ``This is an issue of
common sense.''
Response: This cost principle amendment explicitly identifies the
lowest airfares available to the contractor, including its negotiated
airfare agreements and those available to the general public, should be
the baseline in determining allowable airfare. This amendment should
eliminate inconsistent allowable airfare baselines used by various
contractors; that is, some contractors do not consider the lowest
priced airfare available to them under their negotiated agreements in
determining the allowable airfare cost.
7. Comment: Does the phrase ``lowest priced coach class, or
equivalent, airfare'' imply that the airfare tickets are refundable, as
non-refundable tickets are typically lower than refundable tickets?
Response: Same response as response to comment number 1.
8. Comment: Airfare pricing is dynamic. Airlines provide for a
variety of fares on given flights based upon available seat inventory.
Therefore, employees of the same contractor, traveling on the same
flight, may have different fares. Documenting and supporting Government
inquiries as to why there is variation in the ``lowest fare'' among
individuals on the same flight would be unduly burdensome. Under the
existing regulation, travel agents provide a standard airfare that is
readily available and clearly understood; the proposed amendment will
increase costs by requiring additional administration to document the
allowable airfare to satisfy Government audit inquiries.
Response: The cost principle currently requires the justification
and documentation of airfare costs in excess of the lowest customary,
standard coach, or equivalent airfare. In view of the changes in the
airline industry, the terms ``customary, standard, coach or
equivalent'' increasingly do not describe an actual class of airline
service. This amendment clarifies that the reasonable standard to apply
in determining allowability of airfare cost is the lowest airfare
available to the contractor. This clarification in the cost principle
should not increase the documentation implicit in the existing cost
principle.
9. Comment: The proposed amendment is based upon the premise that
there is a standard airfare rate that contractors pay each time for a
negotiated fare. There are significant
[[Page 65614]]
differences in airfare based upon timing and load factors. Employees of
the same contractor on the same flight might incur different airfare
prices based on supply and demand. Determination of allowable airfare
based upon this proposed rule of the ``available air fare standard''
will be more difficult to determine than exists under the current cost
principle. We see no need for the proposed revision as it appears to be
based upon the premise that there is only one negotiated price a
contractor will pay for a flight.
Response: This amendment does not establish any ``available air
fare standard'' nor does the amendment presume that there is only one
negotiated price a contractor can pay for a particular flight. The
final rule eliminates the reference to ``coach or equivalent''.
10. Comment: There are two parts to this comment. (1) The proposed
amendment is perceived to require a comparison of coach class fares
available to determine the lowest available for allowability purposes;
as such, the comparison would be impossible to apply systematically for
a number of reasons, most notably the disparity in the nature of price
reductions. A specific flight with a negotiated airfare may appear to
be the lowest cost when purchasing the ticket, but in fact a flight
with a different airline providing a volume rebate later has a lower
net cost. Throughout the cost principles is the underlying concept that
only reasonable costs will be reimbursed. The measure of what is
reasonable has never been interpreted to represent only the absolutely
lowest cost available. (2) Also, elimination of the word ``standard''
from paragraph (b) of the cost principle creates a conflict with
paragraph (c)(2) of the cost principle which requires comparison to
``standard airfare'' for travel costs by contractor-owed, -leased, or
chartered aircraft.
Response: With respect to the first comment, the Councils do not
believe the revision will be impossible to apply systematically. The
amendment is not intended to guide contractors through the decision-
making process of selecting the most economical airfare with the lowest
net cost when multiple corporate airfare agreements are in place, as
this is properly addressed in the contractor's policies and procedures
that should be applied appropriately and reasonably in the
circumstances of each travel mission and its associated scheduling
requirements. In relying on the contractor's procedures to select the
most economical airfare appropriate in the circumstances, this
amendment only seeks to clarify for the contractor that it should use
the lowest airfare available to the contractor that meets the schedule
requirements of the trip rather than considering only airfare available
to the general public for the same flight. This amendment makes
explicit that the lowest of the two should be selected as the
appropriate baseline.
With respect to the second comment, the noted ``conflict'' created
among paragraphs (b) and (c)(2) by the elimination of the word
``standard'' from (b), the Councils appreciate the commenter's
observation and have replaced the word ``standard'' with ``allowable''
in paragraph (c)(2) where applicable.
This is a significant regulatory action and, therefore, was subject
to review under Section 6(b) of Executive Order 12866, Regulatory
Planning and Review, dated September 30, 1933. This rule is not a major
rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The Councils believe that few
small businesses have negotiated rate agreements with airlines. The
rule will primarily affect businesses with negotiated rate agreements
who otherwise might seek to charge negotiated rates for first class or
business travel which are lower than the coach rate available to the
general public. Finally, no comments were received from small
businesses on the Regulatory Flexibility Act statement in the proposed
rule.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
chapter 35, et seq.
List of Subjects in 48 CFR Part 31
Government procurement.
Dated: November 30, 2009.
Al Matera,
Director, Acquisition Policy Division.
0
Therefore, DoD, GSA, and NASA amend 48 CFR part 31 as set forth below:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
0
1. The authority citation for 48 CFR part 31 continues to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
0
2. Amend section 31.205-46 by revising paragraph (b); and by removing
from paragraph (c)(2) introductory text the word ``standard'' and
replacing it with the word ``allowable'' wherever it appears (twice).
The revised text reads as follows:
31.205-46 Travel costs.
* * * * *
(b) Airfare costs in excess of the lowest priced airfare available
to the contractor during normal business hours are unallowable except
when such accommodations require circuitous routing, require travel
during unreasonable hours, excessively prolong travel, result in
increased cost that would offset transportation savings, are not
reasonably adequate for the physical or medical needs of the traveler,
or are not reasonably available to meet mission requirements. However,
in order for airfare costs in excess of the above airfare to be
allowable, the applicable condition(s) set forth above must be
documented and justified.
* * * * *
[FR Doc. E9-28935 Filed 12-9-09; 8:45 am]
BILLING CODE 6820-EP-S