Navigating the complexities of federal contracts often involves understanding intricate regulations, and travel expenses are no exception. For contractors working with the U.S. government, adhering to Federal Travel Regulations is crucial for ensuring that costs are allowable and compliant. This guide breaks down the key aspects of these regulations, providing a clear understanding of what contractors need to know about transportation, lodging, meals, and incidental expenses.
Allowable Travel Costs for Contractors: A Detailed Overview
Federal Acquisition Regulation (FAR) Subpart 31.2, specifically 31.205-46, outlines the principles and procedures for determining the allowability of travel costs for contractors. These regulations aim to ensure that costs charged to government contracts are reasonable, allocable, and in compliance with established guidelines. Understanding these regulations is not just about compliance; it’s about efficient financial management and maintaining a transparent relationship with the contracting agency.
Transportation Costs: Getting There Reasonably
When it comes to transportation, contractors have options, but all must lead to a “reasonable charge.” This means costs should be justifiable and not excessive. Acceptable methods for calculating transportation costs include:
- Mileage Rates: Utilizing standard mileage rates for personal vehicle use.
- Actual Costs Incurred: Direct costs like fuel, tolls, and parking.
- Combination: Mixing mileage rates and actual costs, provided the outcome is reasonable.
The core principle is reasonableness. Contractors should select the most economical and practical transportation method appropriate for the business need.
Lodging, Meals, and Incidental Expenses: Per Diem vs. Actual Costs
Regulations provide two primary methods for handling costs related to lodging, meals, and incidental expenses (M&IE): per diem and actual expenses. A combination is also permissible, again, with the focus on a reasonable charge.
Per Diem Rates: A Fixed Allowance
The per diem method offers a fixed daily rate to cover lodging, meals, and incidental expenses. These rates are predetermined and vary based on location. Contractors should refer to the following resources to determine the applicable per diem rates:
- Federal Travel Regulations (FTR): For travel within the contiguous United States. These rates are set by the General Services Administration (GSA).
- Joint Travel Regulation (JTR), Volume 2, DoD Civilian Personnel, Appendix A: For travel in Alaska, Hawaii, and U.S. outlying areas. These are prescribed by the Department of Defense.
- Standardized Regulations (Government Civilians, Foreign Areas), Section 925: For international travel in areas not covered by FTR or JTR. These rates are set by the Department of State.
These regulations are available by subscription from the U.S. Government Publishing Office.
Actual Expenses: When Per Diem Isn’t Enough
While per diem rates offer simplicity, the regulations acknowledge that they may not always be sufficient. In “special or unusual situations,” contractors can claim actual expenses exceeding per diem rates. However, this option comes with strict conditions:
- Justification Based on Regulatory Conditions: The situation must meet one of the specific conditions outlined in the FTR, JTR, or Standardized Regulations that warrant using actual expenses. These conditions typically involve circumstances making per diem rates inadequate, such as conferences in high-cost cities or limited lodging availability.
- Written Justification and Approval: A written justification detailing why actual expenses are necessary must be approved by a responsible officer within the contractor’s organization. This ensures proper oversight and prevents misuse.
- Advance Approval for Repetitive Use: If actual expenses above per diem are needed repeatedly in a particular location, the contractor must obtain advance approval from the contracting officer. This is to manage costs and ensure appropriate use of the actual expense method.
- Detailed Documentation: Regardless of whether per diem or actual expenses are used, thorough documentation is essential. For actual expenses, receipts are mandatory for expenditures of $75.00 or more. The approved justification for exceeding per diem (and advance approval if applicable) must also be retained. Contractor’s established practices for expense documentation must be followed, subject to specific regulatory requirements.
It’s important to note that even when using per diem, adjustments may be necessary. For instance, on days where no lodging costs are incurred or on partial travel days (departure and return days), downward adjustments from the full per diem rate are usually required to ensure a reasonable charge.
Airfare Costs: Lowest Price Available
When it comes to air travel, the regulations prioritize cost-effectiveness. Airfare costs exceeding the lowest priced airfare available during normal business hours are generally unallowable. However, exceptions exist for situations where the lowest fare is impractical or detrimental to the trip’s purpose. These exceptions include:
- Circuitous Routing: If the lowest fare requires excessively indirect routes.
- Unreasonable Hours: Flights at inconvenient or unreasonable times.
- Excessive Travel Prolongation: If the lowest fare significantly extends travel time.
- Increased Overall Cost: If savings on airfare are offset by increased costs in other areas (e.g., overnight stay due to inconvenient flight times).
- Traveler’s Needs: If the lowest fare is not reasonably adequate for the traveler’s physical or medical needs.
- Mission Requirements: When the lowest fare does not reasonably meet the demands of the mission.
To claim airfare costs exceeding the lowest available fare, contractors must document and justify the applicable exception. This documentation should clearly explain why the lowest fare was not feasible or appropriate.
Contractor-Owned, Leased, or Chartered Aircraft and Automobiles
Specific rules also apply to travel using contractor-owned, leased, or chartered aircraft and automobiles.
Aircraft: Justification and Documentation
Using contractor-owned aircraft is generally limited to the cost of the lowest allowable airfare to the destination. Higher costs may be justified if:
- The contract specifically requires such aircraft.
- A higher amount is approved by the contracting officer due to circumstances mirroring the airfare exceptions (circuitous routing, unreasonable hours, etc.).
- An advance agreement is in place.
Crucially, all use of contractor-owned aircraft for business charged to government contracts must be thoroughly documented. Flight manifests/logs are mandatory and must include:
- Date, time, and departure points.
- Destination, date, and arrival time.
- Passenger names and their relationship to the contractor.
- Trip authorization.
- Trip purpose.
Advance agreements regarding aircraft use can be beneficial, especially when considering factors like the availability and convenience of commercial airlines versus the flexibility and time savings offered by contractor-owned aircraft.
Automobiles: Reasonable Use and No Personal Commuting
Costs for contractor-owned or leased automobiles are allowable to the extent they are used for company business and are deemed reasonable. However, costs related to personal use, including commuting to and from work, are considered “compensation for personal services” and are unallowable. This distinction is vital for accurate cost allocation.
Essential Documentation for All Travel Expenses
Regardless of the mode of transport or expense type, proper documentation is paramount. To ensure travel costs are allowable, contractors must document the following for every trip:
- Date and Location of Expenses: Specify the city, town, or similar designation where expenses were incurred.
- Purpose of the Trip: Clearly state the business reason for the travel.
- Traveler Information: Record the name of the person on the trip and their title or relationship to the contractor.
Conclusion: Ensuring Compliance and Reasonableness
Federal travel regulations are designed to ensure accountability and prevent excessive costs in government contracting. By understanding these regulations, particularly concerning federal travel regulation compliance, contractors can confidently manage travel expenses, maintain compliance, and foster a transparent and efficient working relationship with the government. Meticulous documentation, adherence to per diem or justified actual expense methods, and a focus on reasonableness are the cornerstones of compliant and allowable travel cost practices.
