Travel is surprisingly complicated - what regs apply to 'commercial travel'?

General.Zhukov said:

What, if any, other regulations or laws must apply to travel in this scenario.  As its commercial, I'm uncertain if 31.205-46 Travel costs applies "automatically."  How about the Joint Travel Regulation?

Using your limited facts does this FAR reference apply as the facts of the procurement are peeled away?  FAR 31.102.  Think price analysis.

General.Zhukov said:

Let's say the tech always travels business class - and has the receipts from previous non-governmental customers to prove it - is that okay, as that's the 'commercial market practice?'

I will take a swing.   If what I will call no exception of FAR 31.102 applies to the specific instance (no cost analysis) and noting that the "Payments" paragraph of 52.212-4 inclusive of the Alt 1 can not be tailored here is my view.    By a literal read the travel as a Other Direct Cost shall be paid to the contractor at "actual cost" paragraph (i)(1)(ii)(B) and paragraph and (i)(1)(ii)(D)(1).    I see nothing that says such cost shall be in accord with FAR part 31, the JTR's etc.   My view is limited to the FAR and does not consider what an agency might supplement the FAR with.

Conclusion - The applicatioin of FAR part 31 contract cost principles depends on the facts of a fixed price commercial service instant procurement.

I prepared a response yesterday but got sidetracked before sending.  I see Carl already answered your question but I’ll just add the practice of reimbursing travel for technicians at actual cost is fairly common for scientific and lab equipment work.  This is normally done without regard to FAR 31 principles.    

Quote

31.000 Scope of part.

This part contains cost principles and procedures for-

(a) The pricing of contracts, subcontracts, and modifications to contracts and subcontracts whenever cost analysis is performed (see  15.404-1(c)); and

(b) The determination, negotiation, or allowance of costs when required by a contract clause.

So unless your contract clause contains restrictive language, you are fine.

In other words, if the technician travels business class--and assuming the contractor's policies permit that--then that would be a reimbursable expense, since there is no applicable limitation.

Zhukov, you said you include 52.212-4 ALT I in the contract.  In regard to travel, ALT I says "The Government will reimburse the Contractor on the basis of actual cost for the following, provided such costs comply with the requirements in paragraph (i)(1)(ii)(B) of this clause."   That should answer your question as it states what requirements the travel cost must meet in order for it to be reimbursable.  In accordance with ALT I, travel costs are not governed by the cost principles or any of the travel regs.

This was very helpful and reassuring to me, as your responses agree with my understanding.

The flying business class case is real too - although what happened is the GVT refused, thinking (wrongly, IMO) that it was prohibited, and the OEM agreed that $$ over economy class wouldn't be reimbursed.  Apparently, highly-skilled technicians - especially those willing to travel to remote locations and be responsible for very expensive and delicate machines - can demand perks, and their employers are eager to pass those costs on to customers.

General.Zhukov said:

This was very helpful and reassuring to me, as your responses agree with my understanding.

The flying business class case is real too - although what happened is the GVT refused, thinking (wrongly, IMO) that it was prohibited, and the OEM agreed that $$ over economy class wouldn't be reimbursed.  Apparently, highly-skilled technicians - especially those willing to travel to remote locations and be responsible for very expensive and delicate machines - can demand perks, and their employers are eager to pass those costs on to customers.

So, is it reasonable for the taxpayers to pay extra costs for contractor employee “perks”?

I flew on several flights that AL Senator Shelby was also on, between Washington DC and Huntsville, AL. Richard Shelby is a very tall man. He flew in a coach, non-exit row, window seat each time.

joel hoffman said:

So, is it reasonable for the taxpayers to pay extra costs for contractor employee “perks”?

Joel, with respect, I think you miss the thrust of the conversation. When the government enters the commercial marketplace to acquire commercial goods and services, it should be prepared to accept costs that are customary in relation to what is being acquired. That is why I worded my response the way I did. If the contractor's policies permit business class travel and business class travel is provided to all employees in similar circumstances--regardless of customer and/or contract type--then it is, almost by definition, reasonable. 

Quote

31.201-3 Determining reasonableness.

(a) A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business. Reasonableness of specific costs must be examined with particular care in connection with firms or their separate divisions that may not be subject to effective competitive restraints. No presumption of reasonableness shall be attached to the incurrence of costs by a contractor. If an initial review of the facts results in a challenge of a specific cost by the contracting officer or the contracting officer’s representative, the burden of proof shall be upon the contractor to establish that such cost is reasonable.

(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;

(2) Generally accepted sound business practices, arm’s-length bargaining, and Federal and State laws and regulations;

(3) The contractor’s responsibilities to the Government, other customers, the owners of the business, employees, and the public at large; and

(4) Any significant deviations from the contractor’s established practices.

@joel hoffman  @here_2_help 

I had this additional thought.  It probably has no nexus to travel, and I do not want to open another can of worms, so I will offer my thought as quickly and concisely as possible.

Application of Service Contract Act.  Again no conncection to travel but it is interesting to me that those that calibrate equipment can be exempted from SCA.  FAR 52.222-51.  Same basis of thought as expressed by here-2-help or just some labor thing that has made its way into the USDOL regulation, I did not research so who knows.  Yet extending the line of thinking to travel if business travel is a market or catalog thing could not the ideal of 52.222-51 help justify as to why, if I was still a CO, a contractor's travel policies, especially if a stipulated catalog price or a confirmed market price , help support the business travel.   

Dumb comparison or not it would not stop me from putting this conclusion in a fair and reasonable price determination and then leave it to higher up legal or court of opinion to decide it it was dumb or not.

If the purpose of the trip is business, then one should fly business class. Anything else would not make logical sense.

This should apply to Government, too.

Don Mansfield said:

This should apply to Government, too.

No thanks!  I hope you were kidding.

Don Mansfield said:

This should apply to Government, too.

Do you mean government travelers too, performing official business?  Fat chance.

Or government contractors performing business for the government?

If it’s a commercial services contract, especially a quote, it should be negotiable.

But I forget…that’s too much effort and one might actually have to speak to the vendor.

Voyager said:

No thanks!  I hope you were kidding.

Why?

Well as the thread has departed from the original post I might as well respond to @Don Mansfield lastest comment on business class travel. 

I find it interesting that the lead sentence of the regualtion (Title 41 CFR 301-10.103) regarding other than coach applies  a "prudent person" standard yet the following paragraphs to the sentence do not support such a standard.   Afterall I as a prudent person in doing personal business do consider comfort on any flight I take.  Comfort is not allowed in bureaucratic terms it seems.   

"301-10.103 When may I use other than coach class accommodations?

You are required to exercise the same care in incurring expenses that a prudent person would exercise if traveling on personal business when making official travel arrangements. ..."

Jamaal Valentine said:

Why?

Because I and the majority of people that travel view the 3x pricing of business class to be imprudent as a general rule, and Don is speaking in generalities.  The “majority” is evident by the fact that a majority of tickets sold are coach.

Now, what is really imprudent, though, was something I witnessed the last time I traveled on a 3-hour flight.  A man in front of me, not in uniform and who I did not know, opened his laptop and revealed it said “UNCLASSIFIED” at the top on a green header.  He started working on a scope document in MS Word.  It was logged in and thus gave his full name and office routing symbol in the header of Word.  I knew from my experience at that base that he was contracting.  They are trained in information security there, and this was a breach.  So under the current prudence standard, should he have been granted an exception to go business class to work?  Or could he have printed his document as a prudent way to avoid burdening the taxpayers with 3x airfare?

Change the law from a prudence standard to a conducting-business-on-the-flight standard, and I would agree with Don.  Without that clarity though, we would have a lot of loafers sleeping and drinking on Uncle Sam’s dime.

@General.Zhukov,  Did I miss where you asked how travel costs were treated on the contractor’s other government (DoD?) commercial and non-commercial contracts?  Did your market analysis of government contracts show that reimbursable business class travel for similar services was predominant ? 

If there are examples of the same or similar type of government travel that didn’t allow the additional cost of business class fares, then it would appear that, even if they didn’t like it, they still performed their jobs.

Since travel costs and travel policies affecting the eventual contract cost are significant enough for you to inquire about here, I would think that a prudent KO or acquisition professional would evaluate the proposed basis for employee travel especially If it varies from the otherwise predominant government travel policies

C Culham said:

"301-10.103 When may I use other than coach class accommodations?

Carl, what is the relevance of this to travel under a contract for commercial services?

On 2/22/2024 at 1:37 PM, General.Zhukov said:

The flying business class case is real too - although what happened is the GVT refused, thinking (wrongly, IMO) that it was prohibited, and the OEM agreed that $$ over economy class wouldn't be reimbursed.

So, as it turned out the government didn’t agree that business class fare was reasonable. And the job still got accomplished, I assume. 

Im guessing that the proposal or quote described the basis of travel. Thus - you or somebody else analyzed that COST aspect of the proposal.

Was this agreement made during the contract negotiations? Edit - added:  Or was it after a contract award? Was this a competitive or was it non-competitive acquisition?

“Cost analysis” can extend to evaluating the basis of reimbursable travel costs…

Edit: Whether competitive or non-competitive its a negotiable aspect.  If the government doesn’t want to pay for upgraded travel it has the right to negotiate it.

On 2/22/2024 at 2:37 PM, General.Zhukov said:

The flying business class case is real too - although what happened is the GVT refused, thinking (wrongly, IMO) that it was prohibited, and the OEM agreed that $$ over economy class wouldn't be reimbursed.

Was this under a contract for commercial services?

Retreadfed said:

Carl, what is the relevance of this to travel under a contract for commercial services?

None.  Reread it it please.  It was a offhand remark to Don's post that Government folks should be allowed to fly business class.

joel hoffman said:

Edit: Whether competitive or non-competitive its a negotiable aspect.  If the government doesn’t want to pay for upgraded travel it has the right to negotiate it.

This is the crux of the issue.  Under the situation in the original post, the contracting officer can include upgraded travel.  But is it wise to do so?  As Joel said, it’s negotiable.  There may be valid reasons for or it could be just a perk the contractor is providing their employees at government expense.  It’s gets down to the contractor and the contracting officer reaching agreement.

formerfed said:

This is the crux of the issue.  Under the situation in the original post, the contracting officer can include upgraded travel.  But is it wise to do so?  As Joel said, it’s negotiable.  There may be valid reasons for or it could be just a perk the contractor is providing their employees at government expense.  It’s gets down to the contractor and the contracting officer reaching agreement.

And one should realize that non-government customers might not have any or have fewer policy restrictions on travel. The government has an established policy for travel for its employees and for many government contract personnel. The government doesn’t have to simply accept paying for upgraded travel status for contractor employees.

This may sound like a broken record.  The government can define conditions for travel reimbursement and/or can negotiate terms if a vendor includes upgraded travel as the basis for other direct costs or otherwise for travel.

Could an intrepid CO write into the contract a conducting-business-on-the-flight requirement for business class to be allowable?  I am asking if that would confuse potential bidders to see that in the travel CLIN description on a commercial contract.

As a practitioner myself, I feel this potential confusion over what is a standard commercial T&C scares COs out of the commercial market.

That’s overly complicating things.  I wouldn’t even bring that issue up in a solicitation.  If travel is involved, request estimated travel costs and a brief explanation of the company’s travel policy.  Should an offeror propose business class, discuss the subject with them.  But I’m sure just about every company says coach for employees.

formerfed said:

That’s overly complicating things.  I wouldn’t even bring that issue up in a solicitation.  If travel is involved, request estimated travel costs and a brief explanation of the company’s travel policy.  Should an offeror propose business class, discuss the subject with them.  But I’m sure just about every company says coach for employees.

“LIKE”👍

formerfed said:

That’s overly complicating things.  I wouldn’t even bring that issue up in a solicitation.  If travel is involved, request estimated travel costs and a brief explanation of the company’s travel policy.  Should an offeror propose business class, discuss the subject with them.

Yes!

formerfed said:

But I’m sure just about every company says coach for employees.

I hope no one uses this statement as market research as I would suggest it really depends on the company, and even for a individual company it might depend on the employee and purpose of travel.

On 2/25/2024 at 7:35 AM, C Culham said:

Yes!

I hope no one uses this statement as market research as I would suggest it really depends on the company, and even for a individual company it might depend on the employee and purpose of travel.

it also depends upon who the customer is. A commercial customer may have other priorities than quibbling about the cost of travel and/or may not have strict travel protocols/policies.

Many commercial customers place priorities on getting their products and services to the market with less emphasis on the initial cost of associated services or development costs. There may or may not be competition involved in providing services to non-government, commercial customers.

The government generally does have policies and is mindful of travel costs. Has been at least since 1980, when I joined the Civil Service. Travel costs comprise a major Federal cost.

The federal government isn’t necessarily bound to adopt every commercial practice, as some here have suggested.

It is important to consider some principles regarding reasonableness of costs or prices, including commercial products and services. Such as the definition of commercial services in 2.101 and whether they were priced competitively,  31.201-3 Determining reasonableness and 15.4 regarding commercial services.

In addition, many companies have direct,  overhead or G&A rates that may include costs that are not necessarily illegal, but unallowable on Government contracts.

Final comment.  I don't know the details of the fly business class but charge economy class case.  I do, however, know that Business Class jumped of the screen when the CO looked at the proposal's travel cost estimates, and was never going to get into the contract.  At least in my office, it's the only case I know of where an offeror was like "yeah, we are proposing to fly business class and you are going to pay for it."  In fairness, the PhDs in the labs want/need this exact model of instrument made by this one company (whose sales reps maybe or probably have been chatting about it to the PhDs for months before contracting got involved), and everyone knows this and negotiates accordingly.

Thanks for the thoughtful responses.

General.Zhukov said:

when the CO looked at the proposal's travel cost estimates, and was never going to get into the contract.

Thanks for the clarifications, General Z. So, some costs were indeed analyzed (“cost analysis”) for the reimbursable aspects of the Time and Materials portion.

See 31.103 Contracts with commercial organizations.

“…(b) In addition, the contracting officer shall incorporate the cost principles and procedures in subpart  31.2 and agency supplements by reference in contracts with commercial organizations as the basis for-

(1) Determining reimbursable costs under-

…(ii) The cost-reimbursement portion of time-and-materials contracts except when material is priced on a basis other than at cost (see  16.601(c)(3));”

Edit: However, see also 12.301:

“…(d) Other required provisions and clauses. Notwithstanding prescriptions contained elsewhere in the FAR, when acquiring commercial products or commercial services, contracting officers shall be required to use only those provisions and clauses prescribed in this part. The provisions and clauses prescribed in this part shall be revised, as necessary, to reflect the applicability of statutes and executive orders to the acquisition of commercial products or commercial services.“

But also:

12.213 Other commercial practices.

“It is a common practice in the commercial marketplace for both the buyer and seller to propose terms and conditions written from their particular perspectives. The terms and conditions prescribed in this part seek to balance the interests of both the buyer and seller. These terms and conditions are generally appropriate for use in a wide range of acquisitions. However, market research may indicate other commercial practices that are appropriate for the acquisition of the particular item. These practices should be considered for incorporation into the solicitation and contract if the contracting officer determines them appropriate in concluding a business arrangement satisfactory to both parties and not otherwise precluded by law or Executive order.

On 2/27/2024 at 1:30 PM, joel hoffman said:

See 31.103 Contracts with commercial organizations.

Joel, Z said the contract was for commercial services.  If the contract is a T&M contract, it is governed by FAR 52.212-4 Alt I which does not incorporate the cost principles from FAR Part 31.

I think Joel is just sensing that a lack of government-unique terms and conditions does not mean the government, as an enormous buyer entering a commercial market, cannot leverage its purchasing power to get terms and conditions favorable to its shareholders (taxpayers).  That has always been the focus of DOD in the post-FY16 NDAA era.  One of the main precepts they train is "Be a Prudent Businessperson", along with "Understand the Competitive Market Conditions" and "Have Reasonable Knowledge of the Marketplace".

On 3/1/2024 at 12:38 PM, Retreadfed said:

Joel, Z said the contract was for commercial services.  If the contract is a T&M contract, it is governed by FAR 52.212-4 Alt I which does not incorporate the cost principles from FAR Part 31.

Retreadfed, I agree that 52.212-4 Alt I does not incorporate the cost principles from FAR Part 31.

Z said that “travel [is] a reimbursable ODC on a T&M Line Item” in a fixed price contract. And Z said “ Business Class jumped [off] the screen when the CO looked at the proposal's travel cost estimates”. In other words, the KO analyzed the basis for and/or amount of the proposed flying cost.

That constitutes cost analysis, which is addressed in subpart 15.404 and is applicable when requiring and/or evaluating data other than certified cost or pricing for commercial services in 15.403.

Per 31.103 (a),  The cost principles and procedures in  subpart  31.2 and agency supplements shall be used in pricing negotiated services contracts whenever cost analysis is performed as required by 15.404-1(c)” [“Cost analysis”].

As I mentioned above, 31.103 (b) (ii),  addresses using the cost principles and applicable procedures in Part 31 for cost reimbursable aspects of time and materials pricing.

On 3/1/2024 at 1:22 PM, Voyager said:

I think Joel is just sensing that a lack of government-unique terms and conditions does not mean the government, as an enormous buyer entering a commercial market, cannot leverage its purchasing power to get terms and conditions favorable to its shareholders (taxpayers).  That has always been the focus of DOD in the post-FY16 NDAA era.  One of the main precepts they train is "Be a Prudent Businessperson", along with "Understand the Competitive Market Conditions" and "Have Reasonable Knowledge of the Marketplace".

Yes- and the government and some commercial customers may have different quality, cost, budget and schedule goals and objectives than other commercial customers.

Many commercial clients will tradeoff higher initial cost (and probably not be overly concerned about travel costs) vs. shorter time to start or resume production, get their products to market, and/or quality and reliability, for instance. Return on investment.

Many commercial customers often have continuing relationships with their vendors, I.e., little or no competition involved. True best value…