[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR31.205-13]



[Page 615-616]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 31_CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents

 

          Subpart 31.2_Contracts With Commercial Organizations

 

Sec. 31.205-13  Employee morale, health, welfare, food service, and dormitory costs and credits.



    (a) Aggregate costs incurred on activities designed to improve 

working conditions, employer-employee relations, employee morale, and 

employee performance (less income generated by these activities) are 

allowable, subject to the limitations contained in this subsection. Some 

examples of allowable activities are--

    (1) House publications;

    (2) Health clinics;

    (3) Wellness/fitness centers;



[[Page 616]]



    (4) Employee counseling services; and

    (5) Food and dormitory services for the contractor's employees at or 

near the contractor's facilities. These services include--

    (i) Operating or furnishing facilities for cafeterias, dining rooms, 

canteens, lunch wagons, vending machines, living accommodations; and

    (ii) Similar types of services.

    (b) Costs of gifts are unallowable. (Gifts do not include awards for 

performance made pursuant to 31.205-6(f) or awards made in recognition 

of employee achievements pursuant to an established contractor plan or 

policy.)

    (c) Costs of recreation are unallowable, except for the costs of 

employees' participation in company sponsored sports teams or employee 

organizations designed to improve company loyalty, team work, or 

physical fitness.

    (d)(1) The allowability of food and dormitory losses are determined 

by the following factors:

    (i) Losses from operating food and dormitory services are allowable 

only if the contractor's objective is to operate such services on a 

break-even basis.

    (ii) Losses sustained because food services or lodging 

accommodations are furnished without charge or at prices or rates which 

obviously would not be conducive to the accomplishment of the objective 

in paragraph (d)(1)(i) of this subsection are not allowable, except as 

described in paragraph (d)(1)(iii) of this subsection.

    (iii) A loss may be allowed to the extent that the contractor can 

demonstrate that unusual circumstances exist such that even with 

efficient management, operating the services on a break-even basis would 

require charging inordinately high prices, or prices or rates higher 

than those charged by commercial establishments offering the same 

services in the same geographical areas. The following are examples of 

unusual circumstances:

    (A) The contractor must provide food or dormitory services at remote 

locations where adequate commercial facilities are not reasonably 

available.

    (B) The contractor's charged (but unproductive) labor costs would be 

excessive if the services were not available.

    (C) If cessation or reduction of food or dormitory operations will 

not otherwise yield net cost savings.

    (2) Costs of food and dormitory services shall include an allocable 

share of indirect expenses pertaining to these activities.

    (e) When the contractor has an arrangement authorizing an employee 

association to provide or operate a service, such as vending machines in 

the contractor's plant, and retain the profits, such profits shall be 

treated in the same manner as if the contractor were providing the 

service (but see paragraph (f) of this subsection).

    (f) Contributions by the contractor to an employee organization, 

including funds from vending machine receipts or similar sources, are 

allowable only to the extent that the contractor demonstrates that an 

equivalent amount of the costs incurred by the employee organization 

would be allowable if directly incurred by the contractor.



[60 FR 42662, Aug. 16, 1995, as amended at 68 FR 56688, Oct. 1, 2003]