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Eager2Learn

Travel Costs & Approved Acct Systems

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I’m negotiating IDIQ subks (Task orders will be FFP, FFP LOE, CR Travel). If 52.216-7, Allowable Cost & Payment is in the Prime contract and flowed down to the Subs, does that mean that a Sub with an approved accounting system MUST apply their applicable indirect burdens to actual travel costs and does not need to submit travel receipts with their invoices? I was hoping to keep the invoice and close-out process consistent among all the Subs, whether they have an approved accounting system or not, but I'm not sure that's possible. Thanks for any assistance.

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Eager2Learn,

What? No.

Let's break it down:

1. Travel will be reimbursable and 52.216-7 will be in the subcontract. (These decisions will haunt you later, but we'll get to that.)

2. Subcontractor has approved accounting system.

3. Subcontractor's standard accounting practice is to apply indirect burdens to travel costs. (I assume that's G&A but it need not be limited to only G&A.)

4. Therefore, subcontractor MUST apply its applicable indirect burdens to travel costs.

5. However, whether or not subcontractor can BILL the indirect burdens applied to travel costs is controlled by contract terms, not the accounting system description. It is perfectly cromulent for the subcontractor to apply those burdens but not be able to bill them, though of course that will eat into its profit margin.

6. Whether or not the subcontractor must submit travel receipts with its invoices to the prime is controlled by contract terms, not the accounting system description. If you want receipts you should get them. However, be advised that you should also be prepared to pay for any additional costs incurred by the subcontractor in complying with your request.

7. Now here's the kicker. You have chosen to include 52.216-7 in the subcontract. That means the subcontractor must submit a proposal to establish final billing rates and that proposal must be reviewed and the final billing rates must be negotiated and then a final voucher must be prepared and submitted. That takes time (think years). So your goal of wanting to keep the close-out process consistent among all the subcontractors was DOA the moment you decided to include 52.216-7 in the subcontract. It is irrelevant whether the subcontractor can BILL its indirect rates; it must still comply with clause requirements.

8. You could avoid all this mess by making the travel SLIN FFP and removing 52.216-7 from the subcontract.

Hope this helps.

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Eager, when you ask about travel costs are you concerned with airfare, per diem or both? In regard to airfare, the subs will have to demonstrate that they utilized the lowest airfare available to them if you want to be reimbursed for those costs as the prime unless an exception applies. The big issue here is not receipts, but showing what the lowest available airfare was. If you are concerned with per diem and really want to simplify travel claims, why not put a clause in the subcontract saying that the subs will be reimbursed for travel at the maximum per diem rate for the travel destination specified in the applicable travel regulation plus applicable indirect costs. That eliminates the need for receipts. Look at FAR 31.205-46 to get a better understanding of travel costs.

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I have often wondered why the government doesn't just specify the same travel rules on contractors as they do for federal employees if they want to control travel costs.

Government employees have been have long been treated like spendthrifts and crooks who must be reigned in and tightly limited. I remember priding myself as an Air Force Officer for being able to feed myself on the two dollar a day per diem rate on the early 70's. When I started with DoD as a civilian employee in 1980, I think the daily rate was about $3 per day. I remember being proud about pocketing about $0.10 to $0.50 per day on TDY, thinking how much money I was making for my family. Of course, I ate all my meals at Burger King and/oror stayed at LaQuinta Inn, which had a free breakfast.

Our voucher examiner once denied my voucher claim for $0.50 for my wife to park the car for an hour to sit with me in the departure lounge at the airport before my flight. He called me long distance to chew me out, which probably cost at least $0.50. After that, I just showed the $0.50 as a parking fee on the return leg, which passed his muster. 😜

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Thank you all for your assistance. Your responses are extremely helpful and I really appreciate your time.

1. With regard to 52.216-7, I read the Discussion topic “Who is responsible for review and determination of subcontractor final indirect cost rate proposals”, from 30 July 2012. So, if I keep this clause in our subcontracts, then the Subs would be required to pay us for any costs we paid them deemed unallowable by the Govt, which is good. However, on the other hand, the Subs need to submit proposals to establish billing rates and we as prime need to review, negotiate and accept their proposals which could take years to close-out. Correct? If so, by removing 52.216-7, we as prime just need to make sure that we are not paying the Subs for any costs that are unallowable, right?

2. Regarding travel costs, we want to keep travel as a Cost Reimbursable SLIN. So, what happens if we reimburse allowable, actual travel costs and allow a NTE fee on travel but no G&A? I’m thinking (probably in the wrong direction) that all the Subs, whether having an approved acct system or not, could apply the fee and we wouldn’t have to deal with indirect rates at close-out. How wrong am I in my logic? How will the Govt view our invoices and our subs' invoices if we allow the Subs to apply a small fee to travel costs?

Thanks again for all your help!

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Eager2Learn,

1. 52.216-7 goes with cost-reimbursement contract types (also T&M I think but that's not what you're asking about). If you have a FFP contract then you don't worry about reimbursement of unallowable costs, since you pay the firm, fixed, price regardless of costs incurred (allowable or unallowable).

2. You insist on having travel as a cost-reimburseable SLIN. That means you need to incorporate 52.216-7 in order to invoke the Part 31 Cost Principles (specifically 31.205-46). You skip the indirect rate calculation part but you still have an audit-determined final cost.

3. Because we are talking about prime and subcontractor, the prime could conceivably tailor a clause to invoke the Cost Principles without requiring submission of a final billing rate proposal. That would be a good step, I think. And you could also state that the travel cost audit will be performed by prime contractor personnel (and not government auditors), and that the findings of the prime's review would be used for purposes of determining final contract costs and for contract close-out. That would work.

4. Or you could fixed-price travel.

Hope this helps.

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help:

How about some words of seven characters or less. My wife is kicking my butt at Scrabble. Seriously. Need short words with Js, Ps, Qs, Vs, Ws, and Zs.

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Hi, Vern,

My wife destroys me at scrabble by using solfege syllables. She may be cheating by using the chromatic ones.

I'd provide a link but I can't get the comment system to insert one. No useful for those specific letters, though, sorry.

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My wife uses solfege syllables, too. But they're in the dictionary, so what can I do besides use them myself? I never thought of using chromatic ones.

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