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I began a discussion on this a few months ago, when certain agencies were disallowing G&A on Travel Costs.  The result of the discussion was that only GSA work would disallow G&A on Travel and even then only with negotiations with the contractor.

Since then, it appears Disallowance of G&A on Travel is sweeping the industry like an epidemic.  We are told (as several contractors in Huntsville AL have been told) that G&A is not going to be allowed on Travel.  One of the agencies said there is a new FAR clause disallowing it.  When I raised the discussion a few months ago, no one on this forum was aware of such a "new FAR clause."

I wish to raise the discussion again, because many customers all-of-a-sudden insist that no G&A be priced with Travel.  On the face of it, very few things require the administrative time like Travel does.

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It is permissible for the parties to a FAR contract to agree that contractor employee travel will be treated as a direct reimbursable, with no indirect costs (mark-up, G&A, and so forth) or profit.

If the contract includes the clause at FAR 52.212-4 with its Alt. I, and if the Alt. I fill-in allows travel as an ODC, then indirect costs on top of travel are not payable except as the parties memorialize in the Alt. I fill-ins -- no fill-ins, or a fill-in of "NONE," means no indirect costs payment will be made.

A contractor who insists on reimbursement of indirect costs on travel should include the matter in the negotiations for the contract.  If the solicitation includes FAR 52.212-4 with its Alt. I, the contractor should provide fill-ins with its offer.

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If you let your computer search for "travel" in FAR 52.212-4 with its Alt. I, you will find it.

  • If travel is agreed to be reimbursed as an other direct cost, it will be listed in the fill-in for ODCs.  If left blank, payment will not be made for travel costs.  See para. (i)(1)(ii)(D)(1).
  • The next paragraph deals with indirect costs on ODCs (such as travel, if listed above).  If left blank, payment will not be made for indirect costs on travel.  See para. (i)(1)(ii)(D)(2).

Different contracts have different clauses.  Does your contract include FAR 52.212-4 with its Alt. I?

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Thanks for your help ji20874.  So far, the problems have been with proposals submitted in the last several months - no awards.  The RFPs do not contain the FAR clause.

Forgive me, also, but I'm not familiar with Alt. I, and I don't encounter Alt. I in my searches.

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FAR 52.212-4 with its Alt. I is used in T&M contracts for commercial items.  

Other contracts will have other clauses, and payments will be governed by a contract's own clauses.

In my own contracting officer practice, I am generally willing to make payment for indirect costs on Government-directed contractor employee travel for--

  • T&M contracts for non-commercial items.
  • CR contracts.  

I am generally not willing to make payment for indirect costs on Government-directed contractor employee travel for--

  • T&M contracts for commercial items.
  • FP contracts where travel is authorized as a direct reimbursable.
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5 hours ago, ji20874 said:

In my own contracting officer practice, I am generally willing to make payment for indirect costs on Government-directed contractor employee travel for--

  • T&M contracts for non-commercial items.
  • CR contracts.  

I am generally not willing to make payment for indirect costs on Government-directed contractor employee travel for--

  • T&M contracts for commercial items.
  • FP contracts where travel is authorized as a direct reimbursable.

And the differentiation is because why?

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Because for FP contracts and contracts for commercial items, I don't want to turn them into cost-reimbursement contracts -- I don't want the burden of determining, negotiating, or allowing costs -- I don't want to impose the cost principles of FAR part 31 where they aren't needed -- I don't want audits -- I don't want any insight at all into the contractor's internal bookkeeping and G&A practices.

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35 minutes ago, ji20874 said:

Because for FP contracts and contracts for commercial items, I don't want to turn them into cost-reimbursement contracts -- I don't want the burden of determining, negotiating, or allowing costs -- I don't want to impose the cost principles of FAR part 31 where they aren't needed -- I don't want audits -- I don't want any insight at all into the contractor's internal bookkeeping and G&A practices.

Fair to say then concentrating (or however one might want to state it) on the overall price and not individual elements of the costs that go into the price?

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1 hour ago, ji20874 said:

Yes.

So if you wont make payment one could conclude that you did not allow indirect on the direct reimbursable travel because you insisted by contract (negotiated or otherwise) that indirect would not be allowed therefore you are in direct contradiction to a position that you are only looking at overall price otherwise how the heck would you know there was indirect on the travel.

This said I am with Frog to the extent that there is nothing that prevents indirect on travel except the whime and negotiating position of an agency.  Likewise it is false, how should I say, economics to think that for fully reimbursable travel that a contractor doesnot have 1 cent worth of indirect to accomplish the travel.  Time ( to arrange the travel) is money!

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Oh, my — Was your question a trap?  And there is no contradiction.

But in the spirit of honest intellectual inquiry, let me ask:  in the context of FAR 52.212-4 with its Alt. I, would you hold that a fill-in of “None” in para. (i)(1)(ii)(D)(2) cannot stand if “Travel” is the fill-in for (i)(1)(ii)(D)(1)?  I think “None” is a permissible fill-in in such a case, and I am perceiving that you differ.

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13 hours ago, Corduroy Frog said:

Since then, it appears Disallowance of G&A on Travel is sweeping the industry like an epidemic.  We are told (as several contractors in Huntsville AL have been told) that G&A is not going to be allowed on Travel.  One of the agencies said there is a new FAR clause disallowing it.  When I raised the discussion a few months ago, no one on this forum was aware of such a "new FAR clause."

I direct your attention to 41 USC 1707:
 

Quote

 

(a)(1) Required comment period.—Except as provided in subsection (d), a procurement policy, regulation, procedure, or form (including an amendment or modification thereto) may not take effect until 60 days after it is published for public comment in the Federal Register pursuant to subsection (b) if it—

(A) relates to the expenditure of appropriated funds; and

(B)(I) has a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure, or form; or

(ii) has a significant cost or administrative impact on contractors or offerors.

 

1. Are agencies adopting a policy, regulation, or procedure to disallow G&A on travel?

2. Does this policy have a significant cost or administrative impact on contractors or offerors?

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Let's be practical about this situation. It doesn't matter whether there is a regulatory basis or not; what matters is that a government customer does not want to include G&A allocated to travel reimbursement dollars in the contract price. How might a practical businessperson with reasonable knowledge of FAR and CAS deal with this situation? Here are some options:

1. Agree to the contract-unique term that makes allocated G&A on travel reimbursement dollars unallowable. In that case, continue to allocate G&A to the contract, but do not bill it. Also do not include that amount of allocated G&A (or profit on that amount of G&A) in the fixed contract price or the estimated cost of the contract. Result: contractor experiences margin erosion. How much? Depends on the amount of travel and the amount of G&A allocated to that cost. This is the price paid for receiving the contract award.

2. Agree as above, but insist on a higher contract profit rate to cover the margin erosion. Result: contract margin is neutral and the contractor is no worse off than it would have been.

3. Agree to disagree on this point and drop to the bottom-line price, if this is an FFP contract. (Reference: FAR 31.102(b).) Negotiate the best deal possible. If this is a non-commercial T&M contract, follow 52.232-7, which invokes Part 31 for the "M" side of the contract. If it is a commercial item T&M contract, follow 52.212-4/Alt 1 (i)(1)(ii)(D)(1) and don't let the CO put "zero" if your customary commercial practice is to allocate G&A to Other Direct Costs, such as travel dollars. If the CO insists, then see #1 and/or #2, above

4. Change the G&A expense allocation base from Total Cost Input to another acceptable allocation base (see CAS 410). Result: G&A is no longer allocated to travel dollars. Consequence: the amount of G&A allocated to all other contract dollars increases and the customer pays roughly the same G&A expense as it would have, had the silly focus on G&A allocated to travel dollars not occurred. If the contractor games it correctly, the customer might even end up paying more G&A!

The point is: this situation is manageable. There's no need to treat it like an Ebola epidemic.

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5 hours ago, ji20874 said:

contracts for commercial items, I don't want to turn them into cost-reimbursement contracts -- I don't want the burden of determining, negotiating, or allowing costs -- I don't want to impose the cost principles of FAR part 31 where they aren't needed -- I don't want audits -- I don't want any insight at all into the contractor's internal bookkeeping and G&A practices.

Why do you think this would happen if you allowed G&A on travel under 52.212-4 alt I?  If we look at the definition of material in Alt I(e)(iii), we see that there are five things that qualify as material.  Two of them are other direct costs, which includes travel, and indirect costs.  If we go down to Paragraph (i), we see that indirect costs that can be included in the contract cover all four of the elements in material other than indirect costs.  If you enter "none" for indirect costs, you are not allowing indirect costs on any of the items of material which seems rather unreasonable and harsh.  Indirect costs are real costs.  Further, is you look at Alt I(i)(ii)(D)(1), we see that only covers specifically identified other direct costs.  If you enter none there, you are not allowing the contractor to recover travel costs.  Thus, none and none means no recovery of travel costs or indirect costs on material.

As for FFP contracts, if the contract is subject to full CAS coverage and the contractor's approved CAS compliant accounting system is to allocate G&A to contracts using a base that includes travel (TCI), why do you think you are not bound to accept the use of that practice? 

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Retreadfed,

In this thread, we are only talking about travel costs.  If we start talking about other possibilities that could be covered under materials, then the goal posts are moving.

Talking about travel costs...

When administering a T&M contract for commercial items that included the clause at FAR 52.212-4 with its Alt. I, I do what the clause (with its fill-ins) says to do.  If the fill-in for para. (i)(1)(ii)(D)(2) is blank or "None," then I pay nothing.  If the fill-in provides an amount and a payment schedule, then that is what I pay.  When forming a contract, I ask prospective contractors to propose fill-ins for FAR 52.212-4 with its Alt. I.

When administering a FFP contract, I pay the price agreed to in the contract, without regard to the contractor's actual incurred costs or current indirect rates -- that's the nature of a FFP contract.  I don't want to turn a FFP contract into a cost-reimbursement contract.  When forming a contract, I negotiate a fair and reasonable price without necessarily coming to agreement on specific cost elements, and certainly without agreeing to rely on the cost principles of FAR part 31 for determining, negotiating, or allowing future costs.

All of that is fair.

May I ask you a question?  In the context of FAR 52.212-4 with its Alt. I, would you hold that a fill-in of “None” in para. (i)(1)(ii)(D)(2) cannot stand if “Travel” is the fill-in for (i)(1)(ii)(D)(1)?  It might look like this:

52.212-4 Contract Terms and Conditions-Commercial Items (MON YEAR)
.        Alternate I                                    (MON YEAR)
.        fill-ins:  (e)(1)(iii)(D):    None.
.                   (i)(1)(ii)(D)(1):  Travel.
.                   (i)(1)(ii)(D)(2):  None.

Can a prospective contractor negotiate for a different fill-in for (i)(1)(ii)(D)(2)?  Yes!

In my contracting officer practice, I ask prospective contractors to propose fill-ins for FAR 52.212-4 with its Alt. I -- so far, no one ever has, not even once, so every contract (or order) has a fill-in of "None" for (i)(1)(ii)(D)(2).  I have not been "rather unreasonable and harsh" with any of them in using "None" in these cases.  If the question arises during post-award administration, I point to the clause and its fill-ins which the contractor bargained for when the contract was awarded.  That's fair.

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Don,

I am unaware of any agency policy on this matter.  My teaching to my peers is that if the fill-ins for FAR 52.212-4 with its Alt. I are blank (they usually are), then they should be read as "None."  To me, that's the only fair reading.

I wish more contracting officers and contractors would actually read the text of the clauses in their contracts.

I admit taking a hard line on this matter because I really expect contracting officers and contractors to read the text of the clauses in their contracts.  There are two principles that guide me--

  1. If a prospective contractor wants something from a contract, it should negotiate for it pre-award. 
  2. A contracting officer should not make payment post-award unless the contract allows for it. 
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5 hours ago, ji20874 said:

Oh, my — Was your question a trap?

No sir....wanted to make sure I understood your comment completely.  I understand the application of FAR Part 31 and feel a distinction between commercial, noncommercial is not present and application of cost analysis principles are not necessarily relegated to the end contract type.

I too appreciate h2h's view.

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Corduroy Frog,

When you speak of "Disallowance of G&A on Travel," do you mean (1) not agreeing to the costs during pre-award negotiations; or (2) disallowing the costs during post-award administration?

If (1), an unhappy prospective contractor can negotiate harder or try some of the techniques that here_2_help mentioned -- this really is manageable.

If (2), an unhappy contractor can use the Disputes clause of the contract to obtain redress.

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I think Don’s post was about disallowing G&A being an agency policy and that violates rule making procedures.  It wasn’t about how to deal with it.

The policy is crazy.  Probably someone who knows nothing about contractor operations thinks G&A on travel means profit.  So they made eliminating G&A a mandate.  To justify it, someone else started rumors that it’s becoming a FAR clause.  That’s even more ridiculous.  

If people in charge think companies are making too much money, let them objectively apply weighted guidelines and negotiate on that basis.

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formerfed,

I agree about the purpose of Don's post.

It has not been established that there is any new policy, so I stop short of saying the policy is crazy.  If it exists, I'll want to read it before passing judgment on it.  Sometimes people mis-interpret or mis-apply policies, but here, we don't even know that there is a policy.

Other than the original poster, it seems that no one in this forum is aware of any new policy.

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ji20874,

I just quickly searched through a couple dozen solicitations and awards, mostly from Huntsville and don’t see a single occurrence.  I think a year ago was a different story though.  If I remember correctly, the prohibition was a verbal rule and nothing formally was written.  So I think this now is a moot issue.  It may be applied on an individual basis for whatever reason but doesn’t appear to be a formal policy.

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6 hours ago, ji20874 said:

Don,

I am unaware of any agency policy on this matter.  My teaching to my peers is that if the fill-ins for FAR 52.212-4 with its Alt. I are blank (they usually are), then they should be read as "None."  To me, that's the only fair reading.

I wish more contracting officers and contractors would actually read the text of the clauses in their contracts.

I admit taking a hard line on this matter because I really expect contracting officers and contractors to read the text of the clauses in their contracts.  There are two principles that guide me--

  1. If a prospective contractor wants something from a contract, it should negotiate for it pre-award. 
  2. A contracting officer should not make payment post-award unless the contract allows for it. 

I think that's perfectly fair. However, I don't get why there would be a fill-in for "(e)(1)(iii)(D)":

6 hours ago, ji20874 said:

fill-ins:  (e)(1)(iii)(D):    None

(i)(1)(ii)(D)(1):  Travel.
(i)(1)(ii)(D)(2):  None.

I see the fill-ins for (1) and (2) in the clause, but why would there be the first "None" fill-in?

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Thanks to all who are participating in this discussion.  All of you are more knowledgeable than myself.

However:

  1. If a company is disclosed as a "total cost input" methodology for cost allocation, can they change as a result of this relatively new phenomenon?  Regardless of what Huntsville RFPs are saying, contracting officers are going after this new approach like a pig after slop.
  2. Incurred cost submissions address cost only and not revenue (except for the section addressing T&M).  And there are several instances where revenue does not flow as cost does.  So if G&A is not allowed on Travel and ODCs for purposes of capturing revenue, does a contractor still have to do so for cost purposes on an incurred cost submission?  If so, their G&A rate does not change, and they cannot recover the loss.

ji20874, thanks for your comments, but you tend to minimize the effect of this.  Chiefly, because no other element consumes as much administrative and G&A time as Travel.  Advances, JTR, Expense Reports, etc.  Not to mention application of JTR can result in a real loss if G&A is not allowed.  There is real cost involved, not just imagined indirects.

 

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