[Federal Register Volume 60, Number 9 (Friday, January 13, 1995)]
[Rules and Regulations]
[Pages 3314-3316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-849]
[[Page 3313]]
_______________________________________________________________________
Part III
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Part 31
Federal Acquisition Regulation; Entertainment, Gift, and Recreation
Costs for Contractor Employees; Interim Rule
Federal Register / Vol. 60, No. 9 / Friday, January 13, 1995 / Rules
and Regulations
[[Page 3314]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 90-25, FAR Case 94-750]
RIN 9000-AG33
Federal Acquisition Regulation; Entertainment, Gift, and
Recreation Costs for Contractor Employees
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comment.
-----------------------------------------------------------------------
SUMMARY: This interim rule amends the Federal Acquisition Regulation to
revise the cost principles governing entertainment, gift and recreation
costs for contractor employees. This regulatory action was not subject
to Office of Management and Budget review under Executive Order 12866,
dated September 30, 1993.
DATES: Effective Date: January 13, 1995.
Comment Date: Comments should be submitted to the FAR Secretariat
at the address shown below on or before March 14, 1995 to be considered
in the formulation of a final rule.
ADDRESSES: All interested parties should submit written comments to:
General Services Administration, FAR Secretariat (VRS), 18th & F
Streets, NW, Room 4035, Attn: Ms. Beverly Fayson, Washington, DC 20405.
Please cite FAC 90-25, FAR case 94-750 in all correspondence
related to this case.
FOR FURTHER INFORMATION CONTACT: Mr. Clarence M. Belton, Team Leader,
Cost Principles Team, at (703) 602-2357, in reference to this FAR case.
For general information, contact the FAR Secretariat, Room 4037, GS
Building, Washington, DC 20405 (202) 501-4755. Please cite FAC 90-25,
FAR case 94-750.
SUPPLEMENTARY INFORMATION:
A. Background
The Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355,
provides authorities that streamline the acquisition process and
minimize burdensome government-unique requirements. Major changes that
can be expected in the acquisition process as a result of the Act's
implementation include changes in the areas of Commercial Item
Acquisition, Simplified Acquisition Procedures, the Truth in
Negotiations Act, and introduction of the Federal Acquisition Computer
Network.
This notice announces Federal Acquisition Regulation (FAR)
revisions developed under FAR case 94-750 to implement Section 2192 of
the Act. This interim rule revises the cost principles at FAR 31.205-13
and 31.205-14.
To comply with the requirements of paragraph (a)(1) of Section 2192
of the Act, the interim rule provides that the costs of gifts are
expressly unallowable and that the costs of recreation are expressly
unallowable, except for the costs of employee sports teams. The
allowability of costs for employee sports teams is further limited to
off-duty activities and to a nominal cost per participating employee.
``Recreation'' is removed from the examples of allowable costs at
31.205-13, and ``wellness/fitness centers'' are added to that listing
to differentiate them from recreation costs. The entire listing of
allowable costs for morale, health, welfare, food service, and
dormitory costs is further limited in allowability to reasonable
amounts per employee.
To comply with the requirements of paragraph (a)(2) of Section 2192
of the Act, the interim rule revises the cost principle at 31.205-14 to
incorporate the statutory wording relating to unallowability of
entertainment costs under any other cost principle.
These revisions specifically disallow gift, recreation, and
entertainment costs which some may have previously considered
allowable.
Paragraph (c) of Section 2192 of the Act states that ``[a]ny
amendments to the FAR made pursuant to subsection (a) shall apply with
respect to costs incurred after the date on which the amendments made
by Section 2101 apply (as provided in Section 10001) or the date on
which the amendments made by Section 2151 apply (as provided in Section
10001), whichever is later.'' Therefore, this interim rule is being
published now in order to meet the statutory deadlines imposed by
paragraph (a) of Section 2192 and is effective immediately. However,
the revised cost principles will apply only to costs incurred after all
of the proposed rules implementing requirements of Sections 2101 and
2151 become effective. The proposed rules at issue are being processed
under FAR cases 94-751, 94-752, and 94-754.
The FAR Council is interested in an exchange of ideas and opinions
with respect to the regulatory implementation of the Act. For that
reason, the FAR Council is conducting a series of public meetings.
However, the FAR Council has not scheduled a public meeting on this
rule (FAR case 94-750). If the public believes such a meeting is needed
with respect to this rule, a letter requesting a public meeting and
outlining the nature of the requested meeting shall be submitted to and
received by the FAR Secretariat (see ADDRESSES caption) on or before
February 13, 1995. The FAR Council will consider such requests in
determining whether a public meeting on this rule should be scheduled.
B. Regulatory Flexibility Act
The interim rule is not expected to have a significant economic
impact on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because most
contracts awarded to small businesses are awarded through sealed
bidding on a firm fixed price basis. The cost principles apply only
where contracts are based on cost or pricing data. An Initial
Regulatory Flexibility Analysis has, therefore, not been performed.
Comments from small entities concerning the affected FAR subpart will
be considered in accordance with 5 U.S.C. 610. Such comments must be
submitted separately and cite 5 U.S.C 601, et seq. (FAR Case 94-750),
in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose recordkeeping or information collection
requirements, or collection of information from offerors, contractors,
or members of the public which require the approval of OMB under 44
U.S.C. 3501, et seq.
D. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense (DOD), the Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that compelling reasons exist to promulgate this interim rule
without prior opportunity for public comment. This action is necessary
because Section 2192 of the Federal Acquisition Streamlining Act of
1994 specifically requires that the cost principle at FAR 31.205-14 be
amended not later than 90 days after enactment of the Act and that
other FAR revisions addressing contractor costs of gifts or recreation
to improve employee morale or welfare be made within 120 days of
enactment of the Act. Pubic Law 103-355 was enacted October 13, 1994.
[[Page 3315]]
List of Subjects in 48 CFR Part 31
Government procurement.
Dated: January 9, 1995.
Edward Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.
Federal Acquisition Circular
Number 90-25
Federal Acquisition Circular (FAC) 90-25 is issued under the
authority of the Secretary of Defense, the Administrator of General
Services, and the Administrator for the National Aeronautics and Space
Administration.
Unless otherwise specified, all Federal Acquisition Regulation
(FAR) and other directive material contained in FAC 90-25 is effective
January 13, 1995.
Dated: January 4, 1995.
Thomas S. Luedtke,
Deputy Associate Administrator for Procurement, NASA.
Dated: January 9, 1995.
Ida M. Ustad,
Associate Administrator, Office of Acquisition Policy.
Dated: January 8, 1995.
Eleanor R. Spector,
Director, Defense Procurement.
Therefore, 48 CFR Part 31 is amended as set forth below:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
1. The authority citation for 48 CFR Part 31 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
2. Section 31.205-13 is revised to read as follows:
31.205-13 Employee morale, health, welfare, food service, and
dormitory costs and credits.
(a) This paragraph (a) applies to costs incurred before the
effective date of implementation in FAR of sections 2101 and 2151 of
the Federal Acquisition Streamlining Act of 1994 (Pub. L. 103-355).
(1) Aggregate costs incurred on activities designed to improve
working conditions, employer-employee relations, employee morale, and
employee performance (less income generated by these activities) are
allowable, except as limited by paragraph (a)(2) of this section, and
to the extent that the net amount is reasonable. Some examples are
house publications, health clinics, recreation, employee counseling
services, and food and dormitory services, which include operating or
furnishing facilities for cafeterias, dining rooms, canteens, lunch
wagons, vending machines, living accommodations, or similar types of
services for the contractor's employees at or near the contractor's
facilities.
(2) Losses from operating food and dormitory services may be
included as costs only if the contractor's objective is to operate such
services on a break-even basis. Losses sustained because food services
or lodging accommodations are furnished without charge or at prices or
rates which obviously would not be conducive to the accomplishment of
the above objective are not allowable. A loss may be allowed, however,
to the extent that the contractor can demonstrate that unusual
circumstances exist (e.g., (i) where the contractor must provide food
or dormitory services at remote locations where adequate commercial
facilities are not reasonably available, or (ii) where charged but
unproductive labor costs would be excessive but for the services
provided or where cessation or reduction of food or dormitory
operations will not otherwise yield net cost savings) such that even
with efficient management, operating the services on a break-even basis
would require charging inordinately high prices, or prices or rates
higher than those charged by commercial establishments offering the
same services in the same geographical areas. Costs of food and
dormitory services shall include an allocable share of indirect
expenses pertaining to these activities.
(3) When the contractor has an arrangement authorizing an employee
association to provide or operate a service, such as vending machines
in the contractor's plant and retain the profits, such profits shall be
treated in the same manner as if the contractor were providing the
service (but see paragraph (a)(4) of this section).
(4) Contributions by the contractor to an employee organization,
including funds from vending machine receipts or similar sources, may
be included as costs incurred under paragraph (a)(1) of this section
only to the extent that the contractor demonstrates that an equivalent
amount of the costs incurred by the employee organization would be
allowable if directly incurred by the contractor.
(b) This paragraph (b) implements section 2192 of the Federal
Acquisition Streamlining Act of 1994 (Pub. L. 103-355). It applies to
costs incurred after the effective date of implementation in FAR of
sections 2101 and 2151 of Pub. L. 103-355.
(1) Aggregate costs incurred on activities designed to improve
working conditions, employer-employee relations, employee morale, and
employee performance (less income generated by these activities) are
allowable, except as limited by paragraphs (b)(2), (3), and (4) of this
section, and to the extent that the net amount per employee is
reasonable. Some examples of allowable activities are house
publications, health clinics, wellness/fitness centers, employee
counseling services, and food and dormitory services, which include
operating or furnishing facilities for cafeterias, dining rooms,
canteens, lunch wagons, vending machines, living accommodations, or
similar types of services for the contractor's employees at or near the
contractor's facilities.
(2) Costs of gifts are unallowable.
(3) Costs of recreation are unallowable, except for the costs of
contractor employees' participation in sports teams designed to improve
company loyalty, team work, or employee physical fitness, conducted
during off duty hours at a nominal cost per participating employee.
(4) Losses from operating food and dormitory services may be
included as costs only if the contractor's objective is to operate such
services on a break-even basis. Losses sustained because food services
or lodging accommodations are furnished without charge or at prices or
rates which obviously would not be conducive to the accomplishment of
the above objective are not allowable. A loss may be allowed, however,
to the extent that the contractor can demonstrate that unusual
circumstances exist (e.g., (i) where the contractor must provide food
or dormitory services at remote locations where adequate commercial
facilities are not reasonably available, or (ii) where charged but
unproductive labor costs would be excessive but for the services
provided or where cessation or reduction of food or dormitory
operations will not otherwise yield net cost savings) such that even
with efficient management, operating the services on a break-even basis
would require charging inordinately high prices, establishments
offering the same services in the same geographical areas. Costs of
food and dormitory services shall include an allocable share of
indirect expenses pertaining to these activities.
(5) When the contractor has an arrangement authorizing an employee
association to provide or operate a service, such as vending machines
in the contractor's plant and retain the profits, such profits shall be
treated in the same manner as if the contractor were providing the
service (but see paragraph (b)(6) of this section). [[Page 3316]]
(6) Contributions by the contractor to an employee organization,
including funds from vending machine receipts or similar sources, may
be included as costs incurred under paragraph (b)(1) of this section
only to the extent that the contractor demonstrates that an equivalent
amount of the costs incurred by the employee organization would be
allowable if directly incurred by the contractor.
3. Section 31.205-14 is revised to read as follows:
31.205-14 Entertainment costs.
(a) This paragraph (a) applies to costs incurred before the
effective date of implementation in FAR of sections 2101 and 2151 of
the Federal Acquisition Streamlining Act of 1994 (Pub. L. 103-355).
Costs of amusement, diversion, social activities, and any directly
associated costs such as tickets to shows or sports events, meals,
lodging, rentals, transportation, and gratuities are unallowable (but
see 31.205-1 and 31.205-13). Costs of membership in social, dining, or
country clubs or other organizations having the same purposes are also
unallowable, regardless of whether the cost is reported as taxable
income to the employees.
(b) This paragraph (b) implements section 2192 of the Federal
Acquisition Streamlining Act of 1994 (Pub. L. 103-355). It applies to
costs incurred after the effective date of implementation in FAR of
sections 2101 and 2151 of Pub. L. 103-355. Costs of amusement,
diversion, social activities, and any directly associated costs such as
tickets to shows or sports events, meals, lodging, rentals,
transportation, and gratuities are unallowable. Costs made specifically
unallowable under this cost principle are not allowable under any other
cost principle. Costs of membership in social, dining, or country clubs
or other organizations having the same purposes are also unallowable,
regardless of whether the cost is reported as taxable income to the
employees.
[FR Doc. 95-849 Filed 1-12-95; 8:45 am]
BILLING CODE 6820-34-U