[Federal Register Volume 64, Number 100 (Tuesday, May 25, 1999)]
[Proposed Rules]
[Pages 28330-28331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13002]
[[Page 28329]]
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Part III
Department of Defense
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General Services Administration
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National Aeronautics and Space Administration
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48 CFR Part 31
Federal Acquisition Regulation; Relocation Costs; Proposed Rule
Federal Register / Vol. 64, No. 100 / Tuesday, May 25, 1999 /
Proposed Rules
[[Page 28330]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAR Case 97-032]
RIN 9000-AH96
Federal Acquisition Regulation; Relocation Costs
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council are proposing to amend the Federal
Acquisition Regulation (FAR) to remove the ceilings imposed on certain
types of relocation costs; to remove specific references to mortgage
interest differential and rental differential payments; to permit
reimbursement of relocation costs on a lump-sum basis in certain
situations; and to make allowable payments for spouse employment
assistance and for increased employee income and Federal Insurance
Contributions Act (FICA) taxes incident to allowable reimbursed
relocation costs.
DATES: Comments should be submitted on or before July 26, 1999, to be
considered in the formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (MVRS), 1800 F Street,
NW, Room 4035, Washington, DC 20405.
E-mail comments submitted over Internet should be addressed to:
[email protected].
Please cite FAR case 97-032 in all correspondence related to this
case.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC 20405 (202) 501-4755 for information
pertaining to status or publication schedules. For clarification of
content, contact Ms. Linda Nelson, Procurement Analyst, at (202) 501-
1900. Please cite FAR case 97-032.
SUPPLEMENTARY INFORMATION:
A. Background
The proposed FAR rule revises the cost principle at FAR 31.205-35,
Relocation costs, to remove the numerous ceilings imposed on specific
relocation costs; remove specific references to mortgage interest
differential and rental differential payments; recognize the growing
commercial practice of reimbursing relocation costs on a lump-sum basis
in certain situations; and make allowable payments for employment
assistance for spouses and for increased employee income and FICA taxes
incident to allowable reimbursed relocation costs.
The councils are proposing these revisions for the following
reasons:
Removal of ceilings on individual relocation cost elements. Over
the years, the relocation cost principle has been criticized as
being overly detailed particularly for the many allowability
ceilings it places on individual relocation cost elements (e.g., the
14% limitation at FAR 31.205-35(a) (3) and (4) for closing cost and
continuing costs of ownership of a former residence and the 5%
limitation at FAR 31.205-35(a)(6)(ii) on costs of purchasing a new
residence). These ceilings represent unnecessary micromanagement of
contractor business practices. Consistent with the move towards
increased reliance on commercial practices, the councils propose
that the Government rely on contractors' individual corporate
relocation policies to limit such costs to reasonable amounts.
Removal of specific references to mortgage interest differential
and rental differential payments. The rule removes the specific
references to these types of payments from the list of allowable
costs at 31.205-35(a). The specific guidance at 31.205-35(a) (7) and
(8) is no longer deemed necessary. However, allowability of these
types of costs will still be governed by the reasonableness criteria
at FAR 31.201-3.
Reimbursement on a lump-sum basis. The rule allows contractors
the option of claiming employee relocation costs on an actual cost
basis, an appropriate lump-sum basis, or a combination of the two
methodologies. However, the rule permits reimbursement on a lump-sum
basis only if a contractor has an advance agreement with the
Government. This change would recognize the widespread commercial
practice of utilizing a lump-sum approach in compensating employees
for their relocation expenses. Many contractors have adopted the
lump-sum methodology for its administrative ease, and because it
results in cheaper and faster relocations, with greater employee
satisfaction, than the actual cost approach. While individual
receipts are not required with the lump-sum approach, contractors
must still demonstrate that amounts paid are reasonable and
appropriate for the circumstances.
Two new categories of allowable relocation costs. The rule makes
allowable two categories of expenses that are currently unallowable:
payments for increased employee income and FICA taxes incident to
allowable reimbursed relocations costs; and payments for spouse
employee assistance. Since contractors incur these type of costs in
a good faith effort to keep transferred employees from being
adversely affected by the relocation, it appears equitable to
reimburse contractors for these types of costs. In addition, this
revision is consistent with a change to the Federal employee travel
regulations that now permits recovery of both of these types of
costs.
The councils anticipate that these changes to the relocation cost
principle will generate savings by reducing administrative costs for
both the contractor and the Government. The Government expects the
administrative cost savings to lessen any increased costs resulting
from this rule change. For example, the removal of the ceilings should
lead to a reduction of the Government's auditing and contract
administrative effort. In addition, the use of advance agreements for
the lump-sum payment methodology should lessen the incidence of post-
award disallowances and disputes. Another example of savings would be
that contractors would no longer need to monitor individual relocation
cost elements to ensure that amounts claimed do not exceed the numerous
ceilings.
However, there is some concern within the Government that removing
ceilings on individual relocation cost elements and permitting lump-sum
payments in lieu of actual costs may result in an increase in costs.
Therefore, to help estimate the potential costs and benefits to the
Government from these changes, the councils invite respondents to
provide the following information together with their comments. Note
that public comments provided in response to this notice will be
available in their entirety to any requester, including any requester
under the Freedom of Information Act (5 U.S.C. 552). Therefore, we
caution respondents not to provide proprietary or other business
sensitive information. Under no circumstances should respondents
provide any information unless they do so with a clear understanding
that it will be made available to the public.
1. For industry respondents--
(a) How will your company ensure that relocation costs charged to
the Government are reasonable under the approach set forth in the
proposed rule? (Under no circumstances should respondents provide any
information unless they do so with a clear understanding that it will
be made available to the public.)
(b) If your company has little or no commercial business, how will
you ensure that relocation costs charged to the Government are
reasonable under the approach set forth in the proposed rule? (Under no
circumstances should respondents provide any information unless they do
so with a clear
[[Page 28331]]
understanding that it will be made available to the public.)
(c) What has been your company's experience in using a lump-sum
approach instead of an actual cost method for all or a portion of
relocation costs? (Under no circumstances should respondents provide
any information unless they do so with a clear understanding that it
will be made available to the public.)
(d) What are the types of savings that your company would expect if
the proposed rule becomes final? (Under no circumstances should
respondents provide any information unless they do so with a clear
understanding that it will be made available to the public.)
(e) Does your company now use commercially available data, such as
that developed by the Employee Relocation Council, in order to
establish limits on relocation costs? If so, what sources of
commercially available data do you use, and how do you use it? (Under
no circumstances should respondents provide any information unless they
do so with a clear understanding that it will be made available to the
public.)
2. For Government respondents, identify the types and amounts of
costs, savings, advantages or disadvantages that you anticipate would
result from implementing the proposed rule.
This regulatory action was not subject to Office of Management and
Budget review under Executive Order 12866, dated September 30, 1993.
This is not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
This proposed 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 entities use simplified acquisition
procedures or are awarded on a competitive, fixed-price basis, and do
not require application of the cost principle contained in this rule.
An Initial Regulatory Flexibility Analysis has, therefore, not been
performed. Comments are invited from small businesses and other
interested parties. Comments from small entities concerning the
affected FAR subpart will be considered in accordance with 5 U.S.C. 610
of the Act. Such comments must be submitted separately and should cite
5 U.S.C. 601, et seq. (FAR case 97-032), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
changes to the FAR do not impose recordkeeping or information
collection requirements, or collections of information from offerors,
contractors, or members of the public which require the approval of the
Office of Management and Budget under 44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Part 31
Government procurement.
Dated: May 18, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, it is proposed that 48 CFR Part 31 be 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. In section 31.205-35, revise paragraphs (a), (b), and (c) to
read as follows:
31.205-35 Relocation costs.
(a) Relocation costs are costs incident to the permanent change of
assigned work location (for an indefinite period or for a stated
period, but in either event for not less than 12 months) of an existing
employee or upon recruitment of a new employee. The following types of
relocation costs are allowable as noted, subject to the limitations in
paragraphs (b) and (f) of this subsection:
(1) Costs of travel of the employee and members of the employee's
immediate family (see 31.205-46) and transportation of the household
and personal effects to the new location.
(2) Costs of finding a new home, such as advance trips by the
employee and spouse to locate living quarters, and temporary lodging
during the transition period for the employee and members of the
employee's immediate family.
(3) Closing costs (i.e., brokerage fees, legal fees, appraisal
fees, points, finance charges, etc.) incident to the disposition of the
actual residence owned by the employee when notified of the transfer.
(4) Continuing costs of ownership of the vacant former actual
residence being sold, such as maintenance of building and grounds
(exclusive of fixing up expenses), utilities, taxes, property
insurance, mortgage interest, after the settlement date or lease date
of a new permanent residence.
(5) Other necessary and reasonable expenses normally incident to
relocation, such as disconnecting and connecting household appliances;
automobile registration; driver's license and use taxes; cutting and
fitting rugs, draperies, and curtains; forfeited utility fees and
deposits; and purchase of insurance against damage to or loss of
personal property while in transit.
(6) Costs incident to acquiring a home in the new work location,
except that these costs will not be allowable for existing employees or
newly recruited employees who, before the relocation, were not
homeowners.
(7) Costs of canceling an unexpired lease.
(8) Payments for increased employee income or Federal Insurance
Contributions Act taxes incident to allowable reimbursed relocation
costs.
(9) Payments for spouse employment assistance.
(b) The costs described in paragraph (a) of this section must also
meet the following criteria to be considered allowable:
(1) The move must be for the benefit of the employer.
(2) Reimbursement must be in accordance with an established policy
or practice that is consistently followed by the employer and is
designed to motivate employees to relocate promptly and economically.
Reimbursement may be on an actual cost or appropriate lump-sum basis,
or combination thereof. However, use of a lump-sum basis in lieu of an
actual cost basis is limited to those situations in which a contractor
has an advance agreement with the Government.
(3) The costs must not be otherwise unallowable under Subpart 31.2.
(c) The following types of costs are unallowable:
(1) Loss on the sale of a home.
(2) Costs incident to acquiring a home in the new location as
follows:
(i) Real estate brokers fees and commissions.
(ii) Costs of litigation.
(iii) Real and personal property insurance against damage or loss
of property.
(iv) Mortgage life insurance.
(v) Owner's title policy insurance when such insurance was not
previously carried by the employee on the old residence. (However, the
cost of a mortgage title policy is allowable.)
(vi) Property taxes and operating or maintenance costs.
(3) Continuing mortgage principal payments on a residence being
sold.
(4) Costs incident to furnishing equity or nonequity loans to
employees or making arrangements with lenders for employees to obtain
lower-than-market rate mortgage loans.
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[FR Doc. 99-13002 Filed 5-24-99; 8:45 am]
BILLING CODE 6820-EP-U