[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR31.205-13]

[Page 621-622]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
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;
    (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:

[[Page 622]]

    (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]