Federal Acquisition Regulation; FAR Case 2006-024, Travel Costs, 65612-65614 [E9-28935]
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Federal Register / Vol. 74, No. 236 / Thursday, December 10, 2009 / Rules and Regulations
D. 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., because most
small entities do not accrue PRB costs
for Government contract costing
purposes.
E. 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.
Therefore, DoD, GSA, and NASA
amend 48 CFR part 31 as set forth
below:
■
PART 31—CONTRACT COST
PRINCIPLES AND PROCEDURES
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).
2. Amend section 31.001 by adding, in
alphabetical order, the definition
‘‘welfare benefit fund’’ to read as
follows:
■
31.001
Definitions.
*
*
*
*
*
Welfare benefit fund means a trust or
organization which receives and
accumulates assets to be used either for
the payment of postretirement benefits,
or for the purchase of such benefits,
provided such accumulated assets form
a part of a postretirement benefit plan.
■ 3. Amend section 31.205–6 by
revising paragraph (o)(2)(iii) to read as
follows:
31.205–6 Compensation for personal
services.
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*
*
*
*
*
(o) * * *
(2) * * *
(iii) Accrual basis. PRB costs are
accrued during the working lives of
employees. Accrued PRB costs shall
comply with the following:
(A) Be measured and assigned in
accordance with one of the following
two methods:
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17:21 Dec 09, 2009
Jkt 220001
(1) Generally accepted accounting
principles, provided the portion of PRB
costs attributable to the transition
obligation assigned to the current year
that is in excess of the amount
assignable under the delayed
recognition methodology described in
paragraphs 112 and 113 of Financial
Accounting Standards Board Statement
106 is unallowable. The transition
obligation is defined in Statement 106,
paragraph 110; or
(2) Contributions to a welfare benefit
fund determined in accordance with
applicable Internal Revenue Code.
Allowable PRB costs based on such
contributions shall—
(i) Be measured using reasonable
actuarial assumptions, which shall
include a healthcare inflation
assumption unless prohibited by the
Internal Revenue Code provisions
governing welfare benefit funds;
(ii) Be assigned to accounting periods
on the basis of the average working lives
of active employees covered by the PRB
plan or a 15 year period, whichever
period is longer. However, if the plan is
comprised of inactive participants only,
the cost shall be spread over the average
future life expectancy of the
participants; and
(iii) Exclude Federal income taxes,
whether incurred by the fund or the
contractor (including any increase in
PRB costs associated with such taxes),
unless the fund holding the plan assets
is tax-exempt under the provisions of 26
USC § 501(c).
(B) Be paid to an insurer or trustee to
establish and maintain a fund or reserve
for the sole purpose of providing PRB to
retirees. The assets shall be segregated
in the trust, or otherwise effectively
restricted, so that they cannot be used
by the employer for other purposes.
(C) Be calculated in accordance with
generally accepted actuarial principles
and practices as promulgated by the
Actuarial Standards Board.
(D) Eliminate from costs of current
and future periods the accumulated
value of any prior period costs that were
unallowable in accordance with
paragraph (o)(3) of this section, adjusted
for interest under paragraph (o)(4) of
this section.
(E) Calculate the unfunded actuarial
liability (unfunded accumulated
postretirement benefit obligation) using
the market (fair) value of assets that
have been accumulated by funding costs
assigned to prior periods for contract
accounting purposes.
(F) Recognize as a prepayment credit
the market (fair) value of assets that
were accumulated by deposits or
contributions that were not used to fund
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costs assigned to previous periods for
contract accounting purposes.
(G) Comply with the following when
changing from one accrual accounting
method to another: the contractor
shall—
(1) Treat the change in the unfunded
actuarial liability (unfunded
accumulated postretirement benefit
obligation) as a gain or loss; and
(2) Present an analysis demonstrating
that all costs assigned to prior periods
have been accounted for in accordance
with paragraphs (o)(2)(iii)(D), (E), and
(F) of this section to ensure that no
duplicate recovery of costs exists. Any
duplicate recovery of costs due to the
change from one method to another is
unallowable. The analysis and new
accrual accounting method may be a
subject appropriate for an advance
agreement in accordance with 31.109.
*
*
*
*
*
[FR Doc. E9–28934 Filed 12–9–09; 8:45 am]
BILLING CODE 6820–EP–S
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.
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.
E:\FR\FM\10DER2.SGM
10DER2
Federal Register / Vol. 74, No. 236 / Thursday, December 10, 2009 / Rules and Regulations
SUPPLEMENTARY INFORMATION:
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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 ‘‘nonrefundable’’ 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
VerDate Nov<24>2008
17:21 Dec 09, 2009
Jkt 220001
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.
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Fmt 4701
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65613
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
E:\FR\FM\10DER2.SGM
10DER2
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65614
Federal Register / Vol. 74, No. 236 / Thursday, December 10, 2009 / Rules and Regulations
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
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17:21 Dec 09, 2009
Jkt 220001
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.
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.
Therefore, DoD, GSA, and NASA
amend 48 CFR part 31 as set forth
below:
PO 00000
Frm 00018
Fmt 4701
Sfmt 4700
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).
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
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 6, 8, 15, and 52
[FAC 2005–38; Item VII; Docket 2009–0003;
Sequence 6]
C. Paperwork Reduction Act
■
PART 31—CONTRACT COST
PRINCIPLES AND PROCEDURES
Federal Acquisition Regulation;
Technical Amendments
AGENCIES: Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
SUMMARY: This document makes
amendments to the Federal Acquisition
Regulation in order to make editorial
changes.
DATES:
Effective Date: December 10,
2009.
FOR FURTHER INFORMATION CONTACT: The
Regulatory Secretariat, 1800 F Street,
E:\FR\FM\10DER2.SGM
10DER2
]]>Agencies
[Federal Register Volume 74, Number 236 (Thursday, December 10, 2009)]
[Rules and Regulations]
[Pages 65612-65614]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-28935]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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
