splitting travel costs between option years or between contract awards

Linda Y said:

the contract I support is in it's last option year and we were recently notified that we won the recompete.  We have travel that was scheduled at the end of the current POP and will overlap into the new contract.  Are there any rules in the FAR or CAS that stipulate that those travel costs must be split between the 2 contracts or even between different option period in a contract?

Contract type? Ending contract?  New contract?

Linda Y said:

Are there any rules in the FAR or CAS that stipulate that those travel costs must be split between the 2 contracts or even between different option period in a contract?

No.

Now what?

Linda Y said:

the contract I support is in it's last option year and we were recently notified that we won the recompete.  We have travel that was scheduled at the end of the current POP and will overlap into the new contract.  Are there any rules in the FAR or CAS that stipulate that those travel costs must be split between the 2 contracts or even between different option period in a contract?

If you are asking about accounting for the (direct) travel costs and especially concerning billing the costs under the respective contracts, I believe that the costs generally must  be allocated (i.e., “split”) to the respective contracts under which and for which they are incurred.

See FAR Part 31 general discussion concerning allowability and Allocable Costs

“31.201-2 Determining allowability.

(a) A cost is allowable only when the cost complies with all of the following requirements:

(1) Reasonableness.

(2) Allocability…”

“31.201-3 Determining reasonableness.

…(b) What is reasonable depends upon a variety of considerations and circumstances, including-

(1) Whether it is the type of cost generally recognized as ordinary and **necessary for the conduct [**of the contractor’s business or] the contract performance;

31.201-4 Determining allocability.

A cost is allocable if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship. Subject to the foregoing, a cost is allocable to a Government contract if it-

(a) Is incurred specifically for the contract;

See also FAR discussion concerning consistency in accounting practices.

You didn’t say whether these are fixed price or cost reimbursement contracts.

However, it would seem that your accounting practices concerning where you account for these costs should be consistent and you should properly allocate the costs to the contracts under which and for which they are incurred.

EDIT: From FAR 2.101 Definitions:

“Direct cost means any cost that is identified specifically with a particular final cost objective. Direct costs are not limited to items that are incorporated in the end productas material or labor. Costs identified specifically with a contract are direct costs of that contract. All costs identified specifically with other final cost objectives of the contractor are direct costs of those cost objectives.”

Regarding CAS rules, I’m not up on those. However, I believe CAS is generally consistent with the above and probably even more specific than the general rules…

Just speculation:

The travel began under the predecessor contract, which was scheduled to end on, say, 30 September. The predecessor contractor won the recompete, so the travel continued for some time after 30 September by express or tacit agreement. Now, either (1) somebody wants to charge the travel costs incurred after 30 September to the new contract, or, (2) alternatively, want to charge it to the old contract. And some people are asking questions and raising issues. So Linda Y signed up to Wifcon and hopped in here to fish for opinions.

If my speculation is accurate, then the issue is allocability. See FAR 31.201-4. In theory, the travel costs are allocable to the predecessor contract, because they were incurred for that purpose. The CO should have taken action to ensure that happened. But, as a practical matter, the CO could document the file and pay for the post-September 30 travel under the successor contract. I don't think that would violate any laws or regulations. A memo to file should be enough.

I'd be interested in finding out if my speculation is grounded in reality.

Vern Edwards said:

If my speculation is accurate, then the issue is allocability. See FAR 31.201-4. In theory, the travel costs are allocable to the predecessor contract, because they were incurred for that purpose.

Also speculating,  that the initial travel costs and some of the daily travel costs were incurred for the predecessor contract and speculate that the “overlapping” travel costs  “into the new contract” are being incurred for the purpose of “the new contract”.

If so, I believe that they are allocable to the respective contracts for the purposes which they are incurred under each contract.

The thread is under “For Beginners Only”, so I posted some of the general principles regarding allocating direct costs to the contracts based upon the purposes that they were and now are being incurred.

I think that these direct costs need to be accounted for consistently with the purpose for which they are being expended.

Linda Y said:

We have travel that was scheduled at the end of the current POP and will overlap into the new contract.

This is not clear as to the purpose of the travel. What travel was scheduled at the end of the current POP and for what purpose was it incurred?

What is the purpose of the continuing travel and associated travel costs? 

Where it is accounted for and/or charged depends upon the circumstances. Thus, a reason for my speculation.

joel hoffman said:

This is not clear as to the purpose of the travel. What travel was scheduled at the end of the current POP and for what purpose was it incurred?

If they were going to charge all of the travel to the predecessor contract, they might have had to mod that contract to extend the period of performance, which might have been an issue. I think they could charge the cost incurred after "September 30" to the new contract without much of an issue.

I have much to say, most of which I will keep to myself--because this is the Beginner's Forum and no place for a technical discussion of allocability. I will offer the observation that nobody has yet asked the most obvious question -- under which contract were the travel costs proposed and priced?

Another related question: Assume there was no follow-on contract. Would the travel costs have been the same? If not, why not? What is changing based on the introduction of a new contract (final cost objective)? What event(s) drive the change?

Direct cost allocation determinations are surprisingly hard.

here_2_help said:

Direct cost allocation determinations are surprisingly hard.

They can be. But I don't think this one is.

Unfortunately, as Carl has pointed out, the OP did not provide essential context, and we may not hear from her again.

One thing that has not been discussed is what appropriations will be used to pay for the travel and the impact the bona fide needs rule has on the use of those funds.  Also, does the travel fall under the severable or non-severable services rule?  Without more facts than we have been provided, any discussion of these issues would be based on pure speculation and conjecture.

OP here.. to clarify some questions.

the specific purpose of the travel is unknown to me, only that is supports the work of the contract, lets just call it "travel for maintenance of gov systems".  my position has always been, if it was obligated under an existing contract, all the cost of the travel should go to that contract.  someone made the point of "if we were not awarded the follow on contract, what would happen?".. I'm not sure tbh, because the employee on that trip would still have to charge his labor incurred so if the successful bidder did not pick this person up, then I guess the original contract would have to extend to complete the trip, or the trip would be cut short.  Since the follow-on contract is doing the same work, the trip for "travel for maintenance of gov systems" would also be supporting the PWS of the new contract.  I think it an allocation issue as well but I have just not had this issue come up for me before to determine if this is the right way to do and should we do it every time there is a trip overlapping POP's?  

I appreciate the discussion on this.

vr

Linda Y -- would you say the days of travel or the activities involved are severable between the two different contract PWS's? Can the contractor feasibly "split" time and expenses between the two contracts? If so, what would the basis be?

EDITED:

Related question. Other than travel, are their any contractor activities that might generate costs past the end of the first contract's PoP? For example, are there any subcontractors whose costs, incurred for activities within the PoP, will be recorded by the prime contractor after the end of the PoP? (This is entirely normal, by the way.) If so, how will those costs be handled?

If this is a cost-type contract and the contractor settles its final billing rates related to the years of contract performance, and wishes to submit an additional invoice for its "final" billing rates (IAW 52.216-7) -- how will those costs be treated?

pretty sure there will not be any costs for subs that are incurred past the last day of the contract, even though we might receive invoices after the end of the contract, they will still be posted to the last period of the contract performance.

Linda Y said:

Since the follow-on contract is doing the same work, the trip for "travel for maintenance of gov systems" would also be supporting the PWS of the new contract.

Then that portion of the travel costs would be charged to the government on the new contract. Otherwise using government funds from the prior contract for the new contract work would be augmenting the funding for work on the new contract.

That generally is unauthorized, is an allocability issue and is a potential Antideficiency Act violation for the government.

What is the contract pricing arrangement?

Is it cost-reimbursement, time-and-materials, or firm fixed price?

Linda Y said:

if the successful bidder did not pick this person up, then I guess the original contract would have to extend to complete the trip, or the trip would be cut short.

In addition to Vern’s questions, why would the government “extend” the contract to complete the trip?  I’m assuming that you mean return the employee somewhere at the end of the first contract.

Certainly, the employee(s) wouldn’t still be working on the new contract for you, if the new contractor doesn’t hire them.

However, with respect to the original question, It seems obvious to me that, when an employee(s) works on a new contract, the employee’s labor costs and any associated “travel cost” incurred during that new period of effort* - regardless of the fact that it is continuation of a trip that began under a previous contract - should be allocated and charged to the new contract in the accounting system and for payment by the government.

*If you’ve already paid for and charged the other contract for a round trip ticket, that might be an exception,  depending upon the circumstances, the two contracts’ pricing arrangements, etc.

I’m talking about costs incurred during performance of the new contract during a continuation of the original trip. That is what I think you are asking about.

You posted this thread under the “newbie” discussion area.

But please respond to Vern’s questions…

On 4/26/2023 at 8:02 AM, Linda Y said:

Are there any rules in the FAR or CAS that stipulate that those travel costs must be split between the 2 contracts or even between different option period in a contract?

So how does your accounting system handle the travel costs?  Split between contracts or just put all contracts together?

Linda Y said:

"if we were not awarded the follow on contract, what would happen?".

It is still a cost to the old contract isn't it?

Linda Y said:

then I guess the original contract would have to extend to complete the trip,

Why?  The employee went on the trip under the original contract did he/she not?  Or are you saying the employee was actually sent on travel to perform work beyond the PoP designated in the contract?   If so why would you do that?   If so and if a FFP contract too bad so sad you eat it because you assumed the risk of performing beyond contract PoP.   If a cost type contract I believe it is the same issue.  Work beyond the PoP of the contract is most likely not authorized (allowable).   If a T&M contract same conclusion.  Work beyond the PoP would not be allowed/paid.  In the case of the latter two there might be consideration as to what would be allowed with regard to "ceilings" as well.

Linda Y said:

Since the follow-on contract is doing the same work, the trip for "travel for maintenance of gov systems" would also be supporting the PWS of the new contract.

How so?   After all it  sounds like the trip started under the old contract.   Would it not be specifically attributable to the old contract?

Linda Y said:

I think it an allocation issue as well but I have just not had this issue come up for me before to determine if this is the right way to do and should we do it every time there is a trip overlapping POP's?

Yes I think so too.  But from my view if it is a FFP contract who the heck cares.   If a cost or T&M then yes you should allocate by the contract under which the work was done based on its PoP.   

I will say my thoughts are based on a old/new contract.   For exercised options I am left wondering because in most cases a contractor knows the option is or is not going to be exercised.   And if they do not then that is crazy to me as it suggests poor communication between the contractor and Government.   Just as crazy as sending a employee on a trip for "maintenance of government systems" that extends (overlaps) beyond the PoP of contract.  On the other hand if you sent the employee on the trip and they were to return on or before the PoP of the old contract, you got the new contract and told the employee to stay, then it would seem you have a line in the sand to figure allocation of travel costs to which contract.

I think a question has got you too wrapped around the axle.   In the simplest of views direct costs experienced under a contract are attributable to that contract, not to some other contract real or imagined.

Vern Edwards said:

What is the contract pricing arrangement?

Is it cost-reimbursement, time-and-materials, or firm fixed price?

the contract is cost reimbursable

C Culham said:

Or are you saying the employee was actually sent on travel to perform work beyond the PoP designated in the contract?   If so why would you do that?

employees travel at the direction of the government customer

C Culham said:

After all it  sounds like the trip started under the old contract.   Would it not be specifically attributable to the old contract?

he PWS doesn't change between contracts.  We are still doing the same work in support of the government.

C Culham said:

So how does your accounting system handle the travel costs?  Split between contracts or just put all contracts together?

all travel is allocated to the ultimate cost objective.

Interesting that

Linda Y said:

employees travel at the direction of the government customer

Still a cost under the contract in which the direction was given, is it not?  Travel, come home, nope stay new contract.  Still a line in the sand isn't it?

Linda Y said:

he PWS doesn't change between contracts.  We are still doing the same work in support of the government.

But different contracts are they not?  I will express some surprise at 100% the same but that is a different matter such as same costs, just saying.

Linda Y said:

all travel is allocated to the ultimate cost objective.

Of a contract, correct?

Linda Y said:

"if we were not awarded the follow on contract, what would happen?

Anyone on travel would come home by September 30.

Considering Travel is always covered as a reimbursable, I'm curious why contract type is a factor at all.

Quote

The PWS doesn't change between contracts.  We are still doing the same work in support of the government.

The PWS is definitely different. It's in a different contract.  In response to a different solicitation. With different terms. With a different PoP. With a different award date. With a different PIID. And a different price.

I have to laugh at this thread. What the OP has described is not a big problem. All it would take to sort this out would be a couple of memoranda to files. You could do it even if the successor were a different contractor. Just close out the trip on the last day of the predecessor contract and start a new trip on the first day of the new contract. There are no issues with cost principles and none with CAS.

This is what happens when a bunch of people are determined to turn a minor complication into a big problem.

This is why you need knowledgable and experienced people in a contracting office.

REA'n Maker said:

Considering Travel is always covered as a reimbursable,

What do you mean by this?  Doesn't contract type and the terms of the contract determine if this statement is true in all circumstances.  For example, look at FAR 52.212-4 Alt I.

Retreadfed said:

Doesn't contract type and the terms of the contract determine if this statement is true in all circumstances.  For example, look at FAR 52.212-4 Alt I.

Fair enough; there is no regulatory reason Travel must be a reimbursable; in practice it typically is.  (I'm not getting your point about 52.212-4 Alt I though)

But as a business practice I fail to see why it would be done any other way.  Price risk associated with Travel seems a bit obtuse.

@REA'n Maker

Just now, REA'n Maker said:

Fair enough; there is no regulatory reason Travel must be a reimbursable; in practice it typically is.

In the immortal words of Bob Dylan, your experience is "limited and underfed." You don't know what you're talking about. I negotiated plenty of fixed-price contracts in which we specified the purpose, number, and duration of trips for which the costs were included in the contract price.

Quote

You don't know what you're talking about.

No; I know exactly what I'm talking about which is why I rephrased my response. You are obviously referring to rather simple, predictable requirements, while I am referring to complex engineering and technical requirements where Travel is not the point of the contract.   If your experience is different that does not mean "I do not know what I am talking about".   

Based on my breadth of experience throughout all branches of government, I'll go with my assessment of what constitutes "typical", your approval notwithstanding. And next time you take someone to task for their "limited understanding" you might want to base your own assertions on something other than your limited personal experience at DoD a long time ago.  For example, my assertion is based on recent, first-hand, objective, down and dirty review of the active contracts of entire agencies over many years, not an overinflated ego which conflates personal opinion with fact. Self-awareness much?

If the contracts are both cost reimbursement types, then it isn’t complicated to track and invoice for the travel expenses associated with the appropriate contract that the employee is working on.

Id be surprised if the KO directed you to charge the travel costs during the time that the employee works on the new contract to the old contract.

Linda Y, What is the problem???

EDIT: Do you plan to invoice the old contract for your employee’s ongoing “TDY” travel expenses to work on the new contract after the period of performance of the prior contract? If the KO would allow that, it seems clear to me that the government would be augmenting the funding for performance of a new contract with funds from the earlier contract.

“As explained in the Government Accountability Office (GAO) Red Book, “the objective of the rule against augmentation is to prevent a government agency from undercutting the congressional power of the purse by circuitously exceeding the amount Congress has appropriated for that activity.” In addition, Title 31, US Code, Section 1301(a), states that “appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law.” End Quote.

See, for example:  https://www.dau.edu/acquipedia/pages/ArticleContent.aspx?itemid=8#:~:text=Another type of potential Anti,rather than a specific statute.

REA'n Maker said:

(I'm not getting your point about 52.212-4 Alt I though)

That was my mistake.

REA'n Maker said:

in practice it typically is

@REA'n MakerYou have no basis for saying, "typically..." Typical with regard to what?

You could say often, for contracts such as..." You could say typical for many long-term support service contracts...' But there are many, many contracts that entail travel for which there is no separate provision for travel cost reimbursement. And they are not all "simple" contracts.

And then you say something absurd, like "Anyone on travel would come home by September 30." Now, why would that be the case? What universal law of contracting would make that necessary?

Just what have your comments contributed to this thread?

I'm self-aware, which is why I, unlike you, am careful about my assertions. I know my limitations.