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Idle Facilities due to COVID-19


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Does anyone have experience with how DCAA is treating facilities costs for contractors that have not returned to the office or have only partially returned?

I see 2 scenarios:

1) The company plans to return, however delayed their plans due to Omicron and increased cases. 

- Still past the 1 year generally allowed for idle facilities per FAR 31.205-17 Idle Facilities and Idle Capacity, would DCAA question lease costs?

2) The company realized that they don't need either all or some of the office space and should be looking into breaking the lease or subleasing

- Would lease termination costs be allowed?

 

 

 

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1 minute ago, ji20874 said:

DCAA,

Are you thinking that an office that is mostly empty because of the contractor's expanded telework counts as idle facilities for cost principles purposes?

In the scenario I'm dealing with, maybe 5 out of 100 people are coming in due to essentially permanent telework. Without further DCAA guidance, I assume many auditors will take that position. 

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See FAR 31.205-17, which states, in part:

Quote

Facilities means plant or any portion thereof (including land integral to the operation), equipment, individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the contractor.

Idle facilities means completely unused facilities that are excess to the contractor’s current needs.

(b) The costs of idle facilities are unallowable unless the facilities-

(1) Are necessary to meet fluctuations in workload; or

(2) Were necessary when acquired and are now idle because of changes in requirements, production economies, reorganization, termination, or other causes which could not have been reasonably foreseen. (Costs of idle facilities are allowable for a reasonable period, ordinarily not to exceed 1 year, depending upon the initiative taken to use, lease, or dispose of the idle facilities (but see 31.205-42)).

I presume DCAA handles the matter in accord with FAR.

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16 hours ago, Former_DCAA said:

reasonableness

It might be that the "reasonableness" view could be supported by Section 3610 of the CARES Act.  While the Section deals with other than facilities the accommodations being provided by the Section might be used to support why facilities are idle.  Noted here the original dates of the Section were extended to September 30, 2021.  I do not pay specific attention to the winds of Congress but I do wonder if another extension is possible.

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Well, the original poster won't answer the question, but for me, an office that is mostly empty because of the contractor's expanded telework does not count as idle facilities for cost principles purposes under FAR 31.205-17, Idle Facilities and Idle Capacity

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1 hour ago, ji20874 said:

Well, the original poster won't answer the question, but for me, an office that is mostly empty because of the contractor's expanded telework does not count as idle facilities for cost principles purposes under FAR 31.205-17, Idle Facilities and Idle Capacity

Bingo!

If the contractor has one single employee in the facility, then it is not an idle facility. There may be excess capacity, but that's a different concept, the allowability of which is determined differently.

Generally speaking, I would expect the more specific cost principle at 31.205-17 to trump the general principle at 31.201-3. (See 31.204(d).) But it seems various judges have the own approach to cost allowability analyses, so who knows?

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If DCAA is questioning idle facilities costs during the height of a worldwide pandemic; my first two questions to DCAA would be (1) What is the current staffing situation in your GSA leased office spaces (i.e., are the DCAA auditor's in-office or teleworking)?  and (2) Is the Government still footing the bills for those leases when USG employees are still in maximum telework?

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