Travel costs are one area where DCAA frequently finds a “gotcha” when auditing contractors. That is because the travel cost principle can be confusing in regard to its coverage, not only for contractors but also for contracting officers. It is not unusual to see contracting officers require the allowability of travel costs to be determined by the wrong regulations. Also, contractors sometimes forget to apply the travel cost principle fully to travel that is charged as an indirect cost to contracts. This seminar will explain the travel cost principle in depth and discuss DCAA’s audit guidance regarding the cost principle. In addition, it will cover travel performed in regard to a contract for commercial services when the cost principle does not apply.

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On December 10, 2009, FAC 2005-38 was published in the Federal Register. One of the changes made by this FAC is a revision to the travel cost principle, FAR 31.205-46, which becomes effective for contracts awarded on or after January 11, 2010. This change eliminated the words “the lowest customary standard, coach, or equivalent airfare” and substituted “the lowest priced airfare available to the contractor.” The reason for this change was to add clarity to the cost principle.

While the change may seem simple on its face, it is sure to generate controversy and disputes as to what is the lowest priced airfare available. The revised cost principle does not provide any guidance on how availability is to be determined. For example, a contractor in Washington, D.C. is informed on Feb. 1 that the government wishes to meet with the contractor in San Diego on Feb. 22. The contractor books a flight on Feb. 15. The cost principle does not tell us which, if any, of these dates should be used to determine what the lowest available airfare.

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The Departments of Transportation at both the state and federal level are slated to receive a significant share of the just passed “stimulus package” and state and federal government oversight will be intense. It’s in the best interest of all companies, whether utilizing Federal funds through FHWA contracts or not, to establish internal controls and utilize knowledgeable personnel to ensure the elimination of unallowable costs from any billing, claim or proposal applicable to such federal-aid as required by the Federal Acquisition Regulation (FAR).

Specific areas of unallowable cost identified in a recent DoT OIG audit report on application of the FAR 31 cost principles to state highway design contracts included:

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The General Services Administration issued two final rulings in its Report Letter No. 1993 dated January 28, 2009 amending the Federal Travel Regulation.

The first one pertains to use of United States flag air carriers under the Fly America Act (49 USC 40118). Under the Act, passengers whose air travel is funded by the U.S. government are generally required to use U.S. flag air carrier service. The new rule revises FTR 301-10.135 to provide an Internet-based source (http://www.gsa.gov/openskies) for exceptions to this requirement, which are made under bilateral or multilateral air transportation agreements.

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