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19 hours ago, Corduroy Frog said:

Suffice it to say that unless a cost-reimbursable contract or CLIN is involved, the pursuit of application to reducing cost is really a dead-end street.

CF, what do you mean by this?

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H2H, or anyone else who cares to opine, what do you think of this hypothetical?  Contractor X has a credit card account that provides for the accumulation of usage points.  The points can be used for airfare.  The contractor has accumulated sufficient points to allow it to reduce the cost of air travel.  Over 90% of the points were earned in the performance of government contracts.  The contractor needs to travel by air in performing a cost reimbursement government contract.  If the points are used to reduce airfare, the cost would be $250.  If they are not used, the airfare is $500.  If the contractor does not use the points to reduce the airfare, would the $500 be reasonable and allowable under FAR 31.201-3 and 31.205-46?

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6 minutes ago, Retreadfed said:

H2H, or anyone else who cares to opine, what do you think of this hypothetical?  Contractor X has a credit card account that provides for the accumulation of usage points.  The points can be used for airfare.  The contractor has accumulated sufficient points to allow it to reduce the cost of air travel.  Over 90% of the points were earned in the performance of government contracts.  The contractor needs to travel by air in performing a cost reimbursement government contract.  If the points are used to reduce airfare, the cost would be $250.  If they are not used, the airfare is $500.  If the contractor does not use the points to reduce the airfare, would the $500 be reasonable and allowable under FAR 31.201-3 and 31.205-46?

 

PART 31—CONTRACT COST PRINCIPLES AND PROCEDURES 
Subpart 31.2—Contracts With Commercial Organizations

 

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. See 31.205-6(j)(3) for rules governing refund or credit to the Government associated with pension adjustments and asset reversions.

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9 minutes ago, Retreadfed said:

Contractor X has a credit card account that provides for the accumulation of usage points.  The points can be used for airfare.  The contractor has accumulated sufficient points to allow it to reduce the cost of air travel.  Over 90% of the points were earned in the performance of government contracts.  The contractor needs to travel by air in performing a cost reimbursement government contract.  If the points are used to reduce airfare, the cost would be $250.  If they are not used, the airfare is $500.  If the contractor does not use the points to reduce the airfare, would the $500 be reasonable and allowable under FAR 31.201-3 and 31.205-46?

I bolded a part. Please specify the contract type.

Assuming contract type was FFP then the contractor does not need to use the points to purchase a reduced fare. The full $500 would be allowable.

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The points were earned in the performance of cost reimbursement and T&M contracts for non-commercial items.  As stated in the hypothetical, the current contract requiring air travel is a cost reimbursement contract.

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1 hour ago, here_2_help said:

I bolded a part. Please specify the contract type.

Assuming contract type was FFP then the contractor does not need to use the points to purchase a reduced fare. The full $500 would be allowable.

Oops. Agreed!  My above post says as “applicable” and I should have clarified that for this situation. I am referring to “previous contracts”.  

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For those that are unaware, until the early 2000’s or so,  frequent flyer miles and any other points, rebates, free car rental days, etc.  by (DoD only?) government employees on official travel were supposed to be the property of the government.  I don’t know how they collected those - other than free car rental days.  Our organization didn’t track ff miles.

i always suspected that DoD would have used them for the Generals, SESers, Colonels and other HQ  big shots that flew all the time. 

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Joel, I dealt with procurement fraud while working for DoD.  I once had a conversation about this with an attorney from DoJ who prosecuted fraud cases.  It was his view that he would prosecute any government employee who applied  FF miles, or other points earned as a result of government activity, for personal use.  OGE has now changed the Governmentwide Ethics Regulation to permit such use.

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47 minutes ago, Retreadfed said:

GE has now changed the Governmentwide Ethics Regulation to permit such use.

Yes, it was years ago, before I retired from full time working. I still think the Pentagon, our HQ and our local Brass were using the freebie miles to jaunt around...

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4 hours ago, Retreadfed said:

The points were earned in the performance of cost reimbursement and T&M contracts for non-commercial items.  As stated in the hypothetical, the current contract requiring air travel is a cost reimbursement contract.

52.216-7 requires that the government share in the allocable portion of any rebate, income, or credit related to a direct or indirect cost that it originally paid. Thus, in your hypothetical the government has to share in any discounted fare(s) for which the points are used to achieve the discount. HOW to do that is, generally, left to the contractor's discretion (subject to audit). If the contractor wants to purchase a discounted fare and let the government share in the discount by charging the discounted fare to a current cost-type contract, that would generally be acceptable.

If what you're driving at is a potential different mix of contracts/customers between when incurred/earned and when taken (a la Hercules tax refund) then I would say we're talking about $250.00. Nobody cares. If we are talking about $250,000, then that nuance becomes more valid.

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H2H, thanks for the reply.  However, you did not address the application of FAR 31.201-3 and 31.205-46 to the transaction if the contractor claimed the full $500 when it could have bought the ticket for $250 using accumulated points.  The dollar values here are merely for discussion purposes, not necessarily to reflect reality.

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Retreadfed,

I feel as if I've sufficiently answered your question. In your hypothetical, the contractor is NOT REQUIRED to use the accumulated points to purchase a discounted airfare. It can choose to pass on the allocable portion of the value of the accumulated points in one of several different ways. THE CONTRACTOR HAS DISCRETION REGARDING THE METHODOLOGY IT CHOOSES.

If I'm still unclear on my position, please forgive me. I cannot do any better.

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