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Eager2Learn

Travel Costs-M&IE Per Diem vs Actuals

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Our prime contract states that travel costs may be reimbursed at actual cost in accordance with the limitations set forth in FAR 31.205-46.  FAR 31.205-46 states that costs incurred for lodging, meals and incidentals shall be considered reasonable and allowable only to the extent that they do not exceed on a daily basis the maximum per diem rates.  Our company policy reimburses our employees at the maximum daily per diem rate for M&IE.  Are we complying with the prime contract if we bill the maximum daily per diem rate for M&IE rather than actuals?

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Eager - It would helpful if you provided the exact wording of the prime contract so that folks could consider in responding to your question.   In the end I will say it will actually be left to you and the CO, concluding that you are the prime so to speak, in coming to a final decision as to what compliance really is.

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Thanks C.  I apologize for the delay in responding.  Below is the exact language.  I guess I'm wondering if actual cost in Section B is the same as per diem in Section H in this instance.  However, maybe this is a question for the CO as you suggested.  Thanks again for your assistance.

Section B:  Travel CLIN:  Authorized travel under this item shall be reimbursed at actual cost as limited by FAR 31.205-46(a).

 

Section H: Allowable Travel Costs

a.        Reasonable and allowable contractor costs for travel requirements will be reimbursed. Reimbursement for travel expenses shall be limited to those expenses specifically authorized at FAR 31.205-46. Billable travel costs are transportation, lodging, and per diem expenses, and receipts are required for lodging and transportation at a minimum.

b.       Pursuant to Public Law 99-234, reasonable and allowable contractor costs for transportation associated with the performance of this contract may be reimbursed based upon mileage, rates, actual costs, or a combination thereof. Lodging, meals, and incidental expenses may be based upon per diem, actual expenses, or a combination thereof, provided the method used results in a reasonable charge.

c.       The contractor shall be reimbursed for travel and per diem expenses in accordance with the regulations cited above, not to exceed amounts allowable under the Joint Travel Regulation (JTR), excluding overhead, profit or fee.

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On 12/16/2016 at 0:17 PM, Eager2Learn said:

Our company policy reimburses our employees at the maximum daily per diem rate for M&IE.  Are we complying with the prime contract if we bill the maximum daily per diem rate for M&IE rather than actuals?

 

Yes, except for partial travel days and those days when somebody else other than the traveler pays for one or more meals. In those circumstances the max locality M&IE rate must be reduced.

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Eager – Food for thought as the expressed position of H2H may not be spot on.   Your question definitely needs discussion with the CO to resolve. 

For what it is worth my view suggests that your contract has a conflict, and the conflict, unless otherwise mitigated, requires you to bill for actual charges, and that the actual amounts billed for M&IE cannot exceed (“reasonable and allowable”) a sum that is in excess of per diem rates.

My position is based on the following that may not be the true facts of the contract but my explanation as follows may help you be in a position to have a good discussion with the CO to sort the matter out.

My reasoning –

If the Solicitation/contract is result of following process and procedures of FAR Part 15 as such the prime contract would then follow the uniform contract format (UCF) (FAR 15.204).  Additionally the contract would therefore contain FAR clause 52.215-8.

The CLIN is most likely contained in “The Schedule”  as part of B – Supplies or Services andprices/costs as defined by the UCF.   The clause noted as being in Section H is in “The Schedule” as well, Special contract requirements. The CLIN states actual costs and H confused the statement in the CLIN and brings in the possibility of rates.

FAR 52.215-8 does not solve the conflict so the need for a CO to determine.

Further FAR part 31.205-46 does not solve the matter.  First off 31.205-46 simply is the FAR statement as to what is allowable and allocable with regard to the costs of any contract.   While referenced in the H clause my read is that the FAR reference is being used to indicate what travel charges (amounts) can be billed for at cost (“limited to those”) not that the rates can be used.  Your contract by my read specifically states that the costs allowable for travel under your contract are those that are actually incurred and are limited by 31.205-46.   Just because the employees are paid at per diem does not equate to what the actual costs were for the M&IE experienced under the contract.  Contract employees might be spending way less or way more in actual costs than the per diem rate for their travel.

Because there is a big difference between simply billing under the contract for M&IE at a rate versus that of actual costs for M&IE I would darn sure clarify with the CO before I billed.

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3 hours ago, C Culham said:

First off 31.205-46 simply is the FAR statement as to what is allowable and allocable with regard to the costs of any contract.

Well, not really. What the cost principle does say (in part) includes the following--

(a) Costs for transportation, lodging, meals, and incidental expenses.

(1) Costs incurred by contractor personnel on official company business are allowable, subject to the limitations contained in this subsection. Costs for transportation may be based on mileage rates, actual costs incurred, or on a combination thereof, provided the method used results in a reasonable charge. Costs for lodging, meals, and incidental expenses may be based on per diem, actual expenses, or a combination thereof, provided the method used results in a reasonable charge.

(2) Except as provided in paragraph (a)(3) of this subsection, costs incurred for lodging, meals, and incidental expenses (as defined in the regulations cited in (a)(2)(i) through (iii) of this paragraph) shall be considered to be reasonable and allowable only to the extent that they do not exceed on a daily basis the maximum per diem rates in effect at the time of travel as set forth in the [FTR or JTR, as applicable].

[Emphasis added.]

 

Thus the use of 31.205-46 as "authorization" gives the contractor permission to choose one of the three permissible methods expressly called out in the cost principle.

H2H

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14 hours ago, here_2_help said:

Well, not really. What the cost principle does say (in part) includes the following--

(a) Costs for transportation, lodging, meals, and incidental expenses.

(1) Costs incurred by contractor personnel on official company business are allowable, subject to the limitations contained in this subsection. Costs for transportation may be based on mileage rates, actual costs incurred, or on a combination thereof, provided the method used results in a reasonable charge. Costs for lodging, meals, and incidental expenses may be based on per diem, actual expenses, or a combination thereof, provided the method used results in a reasonable charge.

(2) Except as provided in paragraph (a)(3) of this subsection, costs incurred for lodging, meals, and incidental expenses (as defined in the regulations cited in (a)(2)(i) through (iii) of this paragraph) shall be considered to be reasonable and allowable only to the extent that they do not exceed on a daily basis the maximum per diem rates in effect at the time of travel as set forth in the [FTR or JTR, as applicable].

[Emphasis added.]

 

Thus the use of 31.205-46 as "authorization" gives the contractor permission to choose one of the three permissible methods expressly called out in the cost principle.

H2H

 H2H - Agreed as related to this instant thread since the reference of the FAR language at 31-205-46 is in the H clause.  It thought I covered same with this language “While referenced in the H clause my read is that the FAR reference is being used to indicate what travel charges (amounts) can be billed for at cost (“limited to those”) not that the rates can be used.” Sorry I was not clear.   I do still say that the contract language is confusing as in one place it clearly says “actual cost” (at the CLIN) which is different than a rate and in another (at clause H) is not explicit as to what is really is the way that M&IE is to be billed. 

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It is always good advice to discuss patent ambiguities in contract language with the contracting officer, unless it's not. It's not a good idea when you might not like the answer you receive. Instead, one might consider interpreting the ambiguity in a reasonable manner and subsequently establish a course of dealing that reinforces your interpretation. If nothing else, then contra proferentem.

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On 12/16/2016 at 0:17 PM, Eager2Learn said:

Our prime contract states that travel costs may be reimbursed at actual cost in accordance with the limitations set forth in FAR 31.205-46.  FAR 31.205-46 states that costs incurred for lodging, meals and incidentals shall be considered reasonable and allowable only to the extent that they do not exceed on a daily basis the maximum per diem rates.  Our company policy reimburses our employees at the maximum daily per diem rate for M&IE.  Are we complying with the prime contract if we bill the maximum daily per diem rate for M&IE rather than actuals?

I'm no expert on travel costs, but I wonder: Is routine unquestioned reimbursement at the maximum routinely and unquestionably reasonable? If not, then is routine unquestioned reimbursement at the maximum complaint with the contract?

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Eager, I generally agree with H2H that the contract language you have quoted does not limit you to actual costs, but the contract does permit you to be reimbursed for M&IE at the maximum amount for those costs for the locale where the travel is being performed. 

It is a fundamental rule of contract interpretation that all portions of a contract are to be read together in a way that gives meaning to all sections.  This means that you try to interpret a contract so as to avoid a conflict between provisions in the contract.  That can be done here. 

On its fact, the CLIN language appears to limit the choices afforded the contractor by 31.205-46.  However, in my opinion that would constitute a deviation from the FAR.  See, FAR 1.401(a).  For this deviation to be proper, it would have to be approved by the agency head or designee in accordance with FAR 31.101.  In the absence of a deviation, the language of the cost principle would be controlling.

The section H language is largely consistent with the cost principle, but is inconsistent is some respects such as requiring receipts for lodging.  This would seem to indicate that the clause is not permitting contractors to claim lodging expenses at the maximum amount permitted for the location by the travel regulations, but is requiring contractors to use the actual expense method for lodging.  However, this does not appear to be an issue for you as you only asked about M&IE,

Reading the two provisions together, the Section B language can be interpreted as stating that the contractor will be reimbursed for the costs of travel in accordance with 31.205-46, but that the contractor will not be allowed to claim any fee or profit on such costs.  Section H largely restates what is in the cost principle and permits you to bill using the maximum amount for the locale.  Reading the two together, you would be permitted to bill in accordance with your company policy, which is consistent with the FAR cost principle, but would not be permitted to claim any fee profit or overhead on the cost.  This latter prohibition might be troublesome if you are CAS covered and travel costs are a part of your G&A base.

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23 hours ago, here_2_help said:

those days when somebody else other than the traveler pays for one or more meals. In those circumstances the max locality M&IE rate must be reduced.

here_2_help: This makes sense, on a common sense basis. Does your advice turn solely on reasonableness, and the words "provided the method used results in a reasonable charge," found in FAR 31.205-46? PepeTheFrog is interested in what Vern Edwards is asking:

39 minutes ago, Vern Edwards said:

is routine unquestioned reimbursement at the maximum complaint with the contract?

here_2_help and Vern Edwards:

Assume the contractor has a cost-reimbursement contract including a clause that incorporates FAR 31.205-46. Contractor travels to support a convention training event for several days. The price of registration for the convention training event includes several, irregular meals provided by the organizers to attendees on some of the days-- light "Continental breakfast" here, a full lunch there. Some contractor employees eat all the meals, some eat none, some eat some. Contractor invoices for the full M&IE for each contractor employee, despite the fact that some meals were provided as part of the price of registration. Government questions contractor about the full M&IE.

Contractor says their practice of billing full M&IE is established from prior practice, is the company standard to make things easy (remember the irregular meals and variation and uncertainty of participation), and is supported by the contract and FAR 31.205-46. Contractor says FAR 31.205-46 only incorporates some of the Federal Travel Regulations-- such as the maximum M&IE-- not all of it, and that those regulations apply to Federal employees, not to contractor employees. Contractor says the regulations that mandate Federal employees to reduce M&IE are not incorporated by FAR 31.205-46 and do not apply to contractor employees.

What can the Government reference to deny the full M&IE, other than reasonableness? Do you know of any specific reference or logical conclusion?

Are there any other solid arguments for a contractor to always invoice for full M&IE as a standard practice?

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PepetheFrog,

My comment was based on 1st-hand experience with DCAA and contracting officers. Also, see 31.201-5, Credits: "The applicable portion of any income, rebate, allowance, or other credit relating to any allowable cost and received by or accruing to the contractor shall be credited to the Government either as a cost reduction or by cash refund."

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1 hour ago, Vern Edwards said:

I'm no expert on travel costs, but I wonder: Is routine unquestioned reimbursement at the maximum routinely and unquestionably reasonable? If not, then is routine unquestioned reimbursement at the maximum complaint with the contract?

Vern,

Per the language of the -46 cost principle, the contractor has choices regarding reimbursement of M&IE expense. The locality rates establish a ceiling over which any reimbursement amount expressly may not be found to be either allowable or reasonable. Generally, reimbursement amounts under the locality rates are routinely found to be allowable and reasonable, absent unusual circumstances. In my experience, if a contractor employee gets one or more free meals, or does not have a full day of travel, then those are considered to be circumstances in which reimbursement of the full locality rate results in an unreasonable -- and thus unallowable -- cost.

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32 minutes ago, PepeTheFrog said:

What can the Government reference to deny the full M&IE, other than reasonableness?

What does the Government need other than reasonableness?

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The question is whether the practice of billing for maximums instead of actuals would comply with the contract. If the contract is cost-reimbursement, then all of FAR Subpart 32.1 is incorporated, not just 31.205-46. In order to be allowable, incurred costs must be reasonable. In fact, that's the very first test.

Has the question been answered correctly? Just asking, because I'm not a travel cost guru.

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Vern, H2H, Retread, Pepe -

The question from Eager is  - "Are we complying with the prime contract if we bill the maximum daily per diem rate for M&IE rather than actuals?"  

 Who in fact from each of your points of view should answer the contract interpretation question?  

 

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2 hours ago, C Culham said:

Vern, H2H, Retread, Pepe -

The question from Eager is  - "Are we complying with the prime contract if we bill the maximum daily per diem rate for M&IE rather than actuals?"  

 Who in fact from each of your points of view should answer the contract interpretation question?  

 

It's not just a matter of contract interpretation -- though that's obviously a key aspect of the problem. The issue nobody has yet raised is ... what are the contractor's disclosed or established practices? And how was the contract proposed? If the contractor has an established practice of paying its employees the max M&IE locality rates and it proposed the contract that way and the negotiated estimated costs were agreed-to using that methodology, then as far as I'm concerned that's the end of the discussion, since 31.205-46 permits the practice.

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On 12/18/2016 at 5:54 AM, Eager2Learn said:

Section B:  Travel CLIN:  Authorized travel under this item shall be reimbursed at actual cost as limited by FAR 31.205-46(a).

Section H: Allowable Travel Costs 

b.       Lodging, meals, and incidental expenses may be based upon per diem, actual expenses, or a combination thereof, provided the method used results in a reasonable charge.

Emphasis added.

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THANKS EVERYONE FOR YOUR HELP!  It seems like the main question is what is considered a reasonable charge.  As a small business, we think a reasonable charge for M&IE is the full daily per diem rate, except for partial travel days. We are trying to keep our overhead under control, which is why we would prefer not to track actuals on M&IE.  We bill actuals on all other travel expenses.  Our DCAA approved accounting system reflects this.  And, the Govt seems to agree in this statement:  Lodging, meals, and incidental expenses may be based upon per diem, actual expenses, or a combination thereof, provided the method used results in a reasonable charge.  

However, I can see how this policy would be considered unreasonable to the Govt in situations where someone may skip a meal or eat a complimentary sandwich for lunch and we still invoice the full daily per diem.  But, those instances would always be a possibility when using the "per diem method".  So, I think we need to ask the CO how he interprets the contract so that we can make sure we are complying.  

Some additional requested info:  The contract type is an IDIQ.  We did not propose travel costs in our IDIQ proposal.  In our proposal, we stated that we would audit travel expense reports for compliance with TO requirements and DCAA/DCMA guidelines.  We have a DCAA approved accounting system.  

We have been awarded several task orders.  The Govt provided a travel plug for the TO RFPs.   Each TO Travel CLIN in Section B includes the same language...reimbursed at actual cost as limited by FAR 31.205-46(a)".  No G&A allowed on travel.  Each TO PWS states that Travel will be reimbursed IAW IDIQ Section H, Allowable Travel Costs.  

Thanks again!!!

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3 hours ago, Eager2Learn said:

However, I can see how this policy would be considered unreasonable to the Govt in situations where someone may skip a meal or eat a complimentary sandwich for lunch and we still invoice the full daily per diem.  But, those instances would always be a possibility when using the "per diem method".  So, I think we need to ask the CO how he interprets the contract so that we can make sure we are complying.  

Others have suggested you consult the CO and that is absolutely a viable plan. On the other hand ... perhaps you should consider implementing a policy telling your employees to expect reduced reimbursements when/if they receive a free meal. (Note skipping a meal is not grounds for a reduced M&IE reimbursement.) Have your employees identify any free meals on their expense reports. The FTR tells you how much to reduce the M&IE reimbursement for each meal (breakfast, lunch, or dinner). Use that value. It's not particularly hard to implement.

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10 hours ago, Eager2Learn said:

Each TO Travel CLIN in Section B includes the same language...reimbursed at actual cost as limited by FAR 31.205-46(a)".  

What's the "actual cost"? The cost incurred by the employee or the amount paid to the employee as reimbursement?

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4 hours ago, Vern Edwards said:

What's the "actual cost"? The cost incurred by the employee or the amount paid to the employee as reimbursement?

The actual cost is the amount recorded by the contractor as a cost on its books -- or the amount "incurred" by the contractor. See 31.201-1. Costs are supported by documents, including (in this case) employee expense reports requesting reimbursement for M&IE costs along with an employee certification. Depending on the amount of costs for which the employee is seeking reimbursement, a receipt may or may not be required to substantiate the legitimacy of those costs.

Not dramatically different from what a government employee would expect when submitting a TDY expense report.

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