rae.story Posted January 13, 2016 Report Share Posted January 13, 2016 I was hoping I could pick someone's brain, as I wanted to confirm as to whether or not there is some federal or accounting principle that would prevent the following or if there are any ramifications that I may not be aware of? Long story short, we are a Subcontractor to a contract in which the Prime is requesting to handle all travel for our employees. From making arrangements, to reimbursing and/or paying the employee. The CLIN associated with travel was awarded on a cost reimbursable basis not-to-exceed $350k. Not sure if it's such a big deal but logically it just doesn't make sense to me. My understanding is that should we ever be audited by DCAA, that the question would be raised of why the Prime elected to handle and issue a purchase order strictly for labor. Thank you in advance for your thoughts and expertise. Rae Quote Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted January 13, 2016 Report Share Posted January 13, 2016 The prime is requesting, or the subcontract requires? Quote Link to comment Share on other sites More sharing options...
rae.story Posted January 13, 2016 Author Report Share Posted January 13, 2016 Vern; The prime is requesting. I've received word from two others who have indicated that while it is unusual, some of the larger companies do this for buying power purposes with airlines, rental car companies, hotels, etc. and to save on paying the G&A on the subs travel costs. Essentially being viewed as a cost savings to the Government. Quote Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted January 13, 2016 Report Share Posted January 13, 2016 I don't see a problem. I know of no cost principle that would prohibit the practice per se. But wait for a response from here_2_help. Quote Link to comment Share on other sites More sharing options...
here_2_help Posted January 13, 2016 Report Share Posted January 13, 2016 My thoughts, in no particular coherent order: It's not terribly unusual for a prime to buy materials and other direct cost items (e.g., equipment) for a subcontractor, especially a subcontractor that does not have an approved purchasing system. It is a bit more unusual for a prime to have subcontractor employees submit travel expense reports and receive payment, as if the subcontractor employees were employees of the prime. It's a fact that the larger primes have negotiated sweet deals with airlines and hotels and car rental companies, often approaching what the Federal government negotiates. Primes often have sophisticated travel systems that facilitate compliance with the complex FTR/JTR rules. So I can see why the prime might want the subcontractor to use its systems. Is there a prohibition per se? I don't know of one. But to this non-attorney, it seems to cloud the independent contractor relationship between the two firms. From a practical compliance perspective, the prime is asking subcontractor employees to travel in accordance with its (the prime's) travel and reimbursement policies and procedures; I wonder how the subcontractor employees are supposed to become familar with those policies and procedures? Will they receive training? Will the time spent being trained be billable direct labor from the subcontractor to the prime? Other thoughts: what happens if the prime doesn't reimburse the subcontractor employees for their submitted expense reports? What recourse do they have? How long does the prime have to issue a travel reimbursement check? How does the prime even know where to mail that reimbursement check? Do the subcontractor employees have to disclose their home addresses, or perhaps their bank account numbers (for direct deposit)? That sounds ... risky. Those questions are just off the top of my head. There may well be others. The answers to those questions need to be written down as part of the subcontract, to avoid confusion and potential disputes. If the prime won't address them in the subcontract, I would be very reluctant to agree to the request. Hope this helps. Quote Link to comment Share on other sites More sharing options...
rae.story Posted January 13, 2016 Author Report Share Posted January 13, 2016 here_2_help, Greatly appreciate your insight and thoughts, as many of the concerns you expressed crossed my mind. Thank you again. Rae Quote Link to comment Share on other sites More sharing options...
Retreadfed Posted January 13, 2016 Report Share Posted January 13, 2016 While I agree that there is no prohibition against this practice, and there are some pitfalls that H2H has identified, there are some other considerations that come into play. Because the travel CLIN is cost reimbursement, travel costs are probably subject to FAR 31.205-46. That cost principle states in part that "Airfare costs in excess of the lowest priced airfare available to the contractor during normal business hours are unallowable." This raises the question of whether the prime has an arrangement with one or more airlines so that it can get fares lower than those available to the general public, and if so, are those same fares available to the subcontractor under the circumstances here. I can see DCAA taking the position that they are and questioning any airfare costs in excess of what the prime could have received. That would be the most reasonable position if DCAA believes the costs are not in accordance with the cost principle. I also can see DCAA taking the extreme position that since the prime offered to pick up the travel tab, any travel costs claimed by the sub are unreasonable and unallowable. Similarly, DCAA may question lodging and per diem, even if they are within the limits prescribed by the appropriate travel regulation, if the costs the prime could have obtained were lower than those incurred by the sub. Remember, under DCAA's revised charter, the "public interest" is DCAA's primary "customer." As such, DCAA is constantly trying to find innovative ways of squeezing contractors. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.