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Regardless of what contract type, a separate CLIN for travel can exist, and can be charged at the direction of the customer.  And the CLIN will be cost-reimbursable.

To my knowledge, these Travel CLINs have never allowed Fee to be applied, but conventionally, G&A could be applied to the reimbursable approved cost of travel.  In recent years, certain DoD contracts are insisting that G&A can no longer be applied.  This concept seems to be immensely popular and spreading like wildfire.  Government is going after this idea like a pig after slop.  Imagine - no delay in DCAA approval of incurred cost of G&A, not to mention the cost savings to begin with.  They should be deliriously happy.

I can understand if this is put into a contract, but the fact remains that administration of travel is arguably the most cumbersome and time-consuming things that a staff can do.  For the government not to at least reimburse G&A is not fair.  Is it common for contractors to compensate for this by adding about a 1/2 of one percent to the fee?

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It's a common thing, not so much with regard to contracts with Federal agencies, but more with state/local government contracts. And -- to be clear -- the G&A expense must be allocated to all costs in the input base. The G&A allocated to travel cost is not billable; it is unallowable by the terms of the contract.

Contractors who don't want to accept those contract terms should not bid on the work.

Or -- and this is a piece of advice I normally charge for -- they could consider changing their G&A expense pool allocation base.

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Guest Vern Edwards

H2H:

The anti-G&A thing has fascinated me, but not enough to prompt me to investigate its origins. Do you know anything about the history of the movement to include contract terms that make G&A unallowable?

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1 hour ago, Vern Edwards said:

H2H:

The anti-G&A thing has fascinated me, but not enough to prompt me to investigate its origins. Do you know anything about the history of the movement to include contract terms that make G&A unallowable?

Sorry I do not -- maybe ask Jim Nagle?

From my (biased) point of view, it's part of a long-standing attempt to cut contractor costs, piece by piece. But I don't know the origins of that movement.

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Here's a hypothesis: the Government may assume that travel costs for contractors should be no different than travel costs for the Government.  Since Government employees don't typically see the G&A behind their personal travel costs (they merely see the direct travel costs: airfare, rental car, hotel, per diem, etc.) the use of that as a baseline would result in the disconnect discussed here when trying to determine what travel costs the Government should or should not reimburse.

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A more likely hypothesis is that many government contracting officers merely do not understand G&A.  For example, I once had to deal with a contracting officer who did not understand why he should pay G&A for every year that a contract was in existence.  He thought that once he paid for G&A in the first year of the contract, that was all the government should pay.  In addition, some contracting officers do not believe that G&A is a real cost, but a hidden form of profit.

 

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Guest PepeTheFrog

PepeTheFrog agrees with both Matthew Fleharty and Retreadfed as possible reasons.

Here's another example of the government getting travel costs  wrong. Have a written travel policy. Understand the JTR applies to federal employees, not contractors. Be willing to push back. 

 

The Joint Travel Regulations (JTR) apply to federal employees, not to contractors. 

FAR 31.205-46, Travel Costs, states that travel costs incurred are reasonable and allowable up to the maximum per diem rate according to the JTR or other sources applicable to federal employees. It also states that FAR 31.205-46 does not: 

 

"incorporate the regulations cited in subdivisions (a)(2)(i), (ii), and (iii) of this subsection in their entirety. Only the maximum per diem rates, the definitions of lodging, meals, and incidental expenses, and the regulatory coverage dealing with special or unusual situations are incorporated herein"

 

Yet one of PepeTheFrog's amphibious clients faced the following situation. Government conference, requiring travel, serves a crappy lunch. Many choose not to eat the lunch, many don't even get to eat the lunch because the conference runs out of food! Contractor bills the maximum per diem per the terms of the cost-reimbursement contract and the contractor's travel policy. Government demands a reduction for the meals served at the conference. Contractor explains this creates a lot of unnecessary work and that their standard travel policy is XYZ. Government bullies contractor into giving up. Similar situation, except government now demands meal reduction for meals served, even on travel days. Read this FAQ below. You will see one of the reasons for the 75% per diem rate on travel days is specifically to avoid complications with such matters on travel days. So, the government will not only hold contractors to the wrong standards, they will also apply those standards incorrectly.

 

"9. Why was the M&IE computation for first and last days of travel changed to 75%?

To simplify travel by eliminating times and meal-by-meal construction on vouchers."

 

http://www.defensetravel.dod.mil/site/faqflday.cfm

 

http://www.defensetravel.dod.mil/site/faqctr.cfm

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2 hours ago, Matthew Fleharty said:

Here's a hypothesis: the Government may assume that travel costs for contractors should be no different than travel costs for the Government.  Since Government employees don't typically see the G&A behind their personal travel costs (they merely see the direct travel costs: airfare, rental car, hotel, per diem, etc.) the use of that as a baseline would result in the disconnect discussed here when trying to determine what travel costs the Government should or should not reimburse.

I believe that the bases for overhead/G&A in my (former) Govt agency is direct labor, not including travel and other direct costs. 

Believe me, employees in my agency generally were aware of the multipliers used to determine our hourly labor rates.  

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Joel, G&A is to be computed using a base that best represents total activity of the contractor.  Under the CAS, there are three acceptable bases.  Total cost input is one of those bases and is the base most commonly used by contractors.  That base consists of all costs except G&A cost.  Obviously, travel would be a part of that base.  Another base is the value added base that excludes subcontracts and material from the base.  Travel could be included in that base.  The FAR does not address these bases but merely defines G&A and states in part that "G&A expense does not include those management expenses whose beneficial or causal relationship to cost objectives can be more directly measured by a base other than a cost input base representing the total activity of a business unit during a cost accounting period."  For many contractors, travel is a part of the G&A base.  Thus, for those contractors, if they incur travel costs, those travel costs will attract G&A to the contracts under which the travel was performed.  If the contract prohibits the contractor from claiming G&A costs on travel, the contractor will have incurred allowable costs that it cannot recover.

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Guest Vern Edwards
2 hours ago, Retreadfed said:

If the contract prohibits the contractor from claiming G&A costs on travel, the contractor will have incurred allowable costs that it cannot recover.

That's not true. The contractor will have incurred costs that, pursuant to the terms of the contract, are expressly unallowable, because the contract forbids the allocation of G&A to travel costs, a limitation to which the contractor assented. See the definition of "expressly unallowable cost" in FAR 31.001 and see FAR 31.201-2(a)(4).

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Retread, I was merely responding to Matthew’s comment that seemingly assumes that G&A is charged on travel for all government employees. 

Im not an accountant and don’t necessarily know all accounting terms.  However, I taught training classes from 1991 through 2017 for USACE, to USACE, non-USACE, non DoD and non-Government students,  where the cost of the courses, including the labor and travel instructor costs, were reimbursed by the students’ organizations.

We also charged the various programs and other government organizations for our labor and travel costs, as applicable to programs and projects on which we worked. 

In fact, as a consulting engineer in private industry before joining the civil service in 1980, my firm charged our clients for fully burdened labor costs plus reimbursement for direct travel costs. 

So, at least for services, I wouldn’t say that “everyone” charges indirect costs on travel costs. 

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7 hours ago, Vern Edwards said:

Some questions come up again and again. Check out this thread from more than three years ago. Check out the names of the participants:

http://www.wifcon.com/discussion/index.php?/topic/2626-ga-and-profit-to-travel-costs/

 

Vern the other thread concerned a modification to a firm fixed price construction contract with a determinable amount of travel by a subcontractor for a specific  work item.  There should be no legal reason to prohibit either general and administrative overhead costs or profit in such a situation  

 This thread concerns separate travel line item for an indeterminate amount of travel, presumably.  The reason that profit is not allowed for this separate line item, in my opinion, is that it could amount to a cost-plus percentage of cost situation, which is prohibited by law.

I have seen  where, but cannot remember the case, a decision discussed where adding G&A or other indirect costs to actual direct travel costs could also amount to CPPC.  That situation might be a reason for reluctance to alllow G&A on indeterminate amount of travel costs. I think that the question concerning whether allowing G&A on reimbursable travel costs  amounts to a cost plus percentage of cost situation has been discussed in a previous thread in this forum.  However, I do not have time to research the whole forum archive history 

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13 hours ago, Vern Edwards said:

That's not true. The contractor will have incurred costs that, pursuant to the terms of the contract, are expressly unallowable, because the contract forbids the allocation of G&A to travel costs, a limitation to which the contractor assented. See the definition of "expressly unallowable cost" in FAR 31.001 and see FAR 31.201-2(a)(4).

So I am going out on a limb here but had this quick thought (conclusion) with admittedly no research and limited expertise to defend it.  

FAR 31.201-2(a)(4) says "Only those CAS or portions of standards specifically made applicable by the cost principles in this subpart are mandatory unless the contract is CAS-covered (see Part 30)."   Further 31.203 Indirect costs states " (a) For contracts subject to full CAS coverage, allocation of indirect costs shall be based on the applicable provisions. For all other contracts, the applicable CAS provisions in paragraphs (b) through (h) of this section apply."  CAS standards are incorporated into the FAR.  

Conclusion (reaching admittedly) - Before an agency can provide that G&A does not apply to direct travel they must first seek a deviation to make it so.

 

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2 hours ago, joel hoffman said:

This thread concerns separate travel line item for an indeterminate amount of travel, presumably.  The reason that profit is not allowed for this separate line item, in my opinion, is that it could amount to a cost-plus percentage of cost situation, which is prohibited by law.

I have seen  where, but cannot remember the case, a decision discussed where adding G&A or other indirect costs to actual direct travel costs could also amount to CPPC.  That situation might be a reason for reluctance to alllow G&A on indeterminate amount of travel costs. I think that the question concerning whether allowing G&A on reimbursable travel costs  amounts to a cost plus percentage of cost situation has been discussed in a previous thread in this forum.  However, I do not have time to research the whole forum archive history 

Joel, if you could find that case I would be very interested, because that conclusion would surprise me. In my view, adding an indirect burden does not create a CPPC situation. It simply adds more costs.

26 minutes ago, C Culham said:

Conclusion (reaching admittedly) - Before an agency can provide that G&A does not apply to direct travel they must first seek a deviation to make it so.

Carl, I think the issue here is that the agency is saying that G&A allocated to travel costs is unallowable, not that it is unallocable.

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13 minutes ago, here_2_help said:

Carl, I think the issue here is that the agency is saying that G&A allocated to travel costs is unallowable, not that it is unallocable.

h2h - I understand and won't push my thought but the FAR references I used in my post (as also provided by Vern) regard allowable and not allocable.

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Guest Vern Edwards
3 hours ago, joel hoffman said:

Vern the other thread concerned a modification to a firm fixed price construction contract with a determinable amount of travel by a subcontractor for a specific  work item.  There should be no legal reason to prohibit either general and administrative overhead costs or profit in such a situation  

My point was that the question about applying G&A to travel has come up before. I understand the differences in the situation.

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1 hour ago, here_2_help said:

Joel, if you could find that case I would be very interested, because that conclusion would surprise me. In my view, adding an indirect burden does not create a CPPC situation. It simply adds more costs.

Yes, I was surprised, too. I believe that what I read is based upon using pre-determined overhead rates.  See the following general info on CPPC, and more specifically, discussion of using pre-determined OH multipliers, starting at page 39.

http://www.dtic.mil/dtic/tr/fulltext/u2/a147779.pdf

i haven’t read the entire paper yet. However, if everyone is wondering why some agencies decided not to allow simple pre-determined OH rates to be added to direct costs, this AFIT Thesis research report  may explain it. 

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Guest Vern Edwards
1 hour ago, C Culham said:

Conclusion (reaching admittedly) - Before an agency can provide that G&A does not apply to direct travel they must first seek a deviation to make it so.

Yes, reaching, and I disagree. By declaring G&A charged to travel to be unallowable (or unbillable), the parties would not be making it unallocable.

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12 minutes ago, Vern Edwards said:

My point was that the question about applying G&A to travel has come up before. I understand the differences in the situation.

Vern, it has come up before in the Forum in the same context of disallowing certain G&A mumltipliees on direct cost under a reimbursable travel CLIN. I don’t have the time to fully research the issue now. I found an AFIT student’s Thesis paper that included discussion on whether allowing a predetermined G&A rate to be added to direct costs on a reimbursable Line item constitutes Cost Plus Percentage of Cost contracting.  

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Guest Vern Edwards
15 hours ago, Vern Edwards said:

The contractor will have incurred costs that, pursuant to the terms of the contract, are expressly unallowable, because the contract forbids the allocation of G&A to travel costs, a limitation to which the contractor assented.

I see what Carl was talking about. What I should have said was "because the contract forbids the allowance of allocable G&A costs to travel costs...." The agreement cannot limit the allocability of it.

Thanks, Carl.

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See also the recommendations concerning predetermined overhead rates for cost reimbursable contracts on pages 107 and 108.  I DONT know how current the paper is.  

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Guest Vern Edwards
21 minutes ago, joel hoffman said:

See also the recommendations concerning predetermined overhead rates for cost reimbursable contracts on pages 107 and 108.  I DONT know how current the paper is.  

See FAR 52.216-15.

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So, are you saying that this clause or something similar to it would have to be used in order to allow G&A percentage on direct travel costs for a reimbursable travel CLIN on a FFP or T&M contract?

if the Thesis reflects current legal principles concerning avoidance of CPPC contracting, then it would appear to me  that an agency should not and cannot allow use of predetermined overhead rates for reimbursement of travel cost line item on an FFP or T&M contract unless they are subject to adjustment.  Thus-   an answer to the G&A debate herein. 

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