[Federal Register Volume 67, Number 168 (Thursday, August 29, 2002)]
[Proposed Rules]
[Pages 55685-55687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21620]

[[Page 55685]]


Part X

Department of Defense

General Services Administration

National Aeronautics and Space Administration


48 Part 31

Federal Acquisition Regulation; Economic Planning, Employee Morale, and 
Travel Cost Principles; Proposed Rule

Federal Register / Vol. 67 , No. 168 / Thursday, August 29, 2002 / 
Proposed Rules

[[Page 55686]]





48 CFR Part 31

[FAR Case 2002-001]
RIN 9000-AJ46

Federal Acquisition Regulation; Economic Planning, Employee 
Morale, and Travel Cost Principles

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.


SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) by revising three cost principles: 
(1) Economic planning costs; (2) Employee morale, health, welfare, food 
service, and dormitory costs and credits; and (3) Travel costs. The 
changes are to increase clarity and readability.

DATES: Interested parties should submit comments in writing on or 
before October 28, 2002 to be considered in the formulation of a final 

ADDRESSES: Submit written comments to--General Services Administration, 
FAR Secretariat (MVA), 1800 F Street, NW., Room 4035, ATTN: Laurie 
Duarte, Washington, DC 20405.
    Submit electronic comments via the Internet to--farcase.2002-
[email protected]
    Please submit comments only and cite FAR case 2002-001 in all 
correspondence related to this case.

Building, Washington, DC, 20405, at (202) 501-4755 for information 
pertaining to status or publication schedules. For clarification of 
content, contact Jeremy Olson at (202) 501-3221. Please cite FAR case 


A. Background

    The proposed rule amends FAR 31.205-12 by eliminating paragraphs 
(b) and (c). Paragraph (b) states that economic planning costs are 
allowable as ``indirect costs to be properly allocated.'' In the 
Councils' opinion, it duplicates coverage already at 31.202, Direct 
costs; 31.203, Indirect costs; and 31.201-4, Determining allocability. 
Paragraph (c) provides that Independent Research and Development (IR&D) 
costs are not allowable economic planning costs. We believe 31.205-18, 
Independent research and development and bid and proposal costs, 
clearly applies to IR&D costs, and that it is not necessary to state 
that economic planning costs do not include IR&D costs. The intent of 
the elimination of paragraphs (b) and (c) is to eliminate duplication 
and not to change the meaning of the current cost principle.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Councils do not expect this proposed rule 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 principles discussed 
in this rule. An Initial Regulatory Flexibility Analysis has, 
therefore, not been performed. We invite comments from small businesses 
and other interested parties. The Councils will consider comments from 
small entities concerning the affected FAR Part 31 in accordance with 5 
U.S.C. 610. Interested parties must submit such comments separately and 
should cite 5 U.S.C. 601, et seq. (FAR case 2002-001), in 

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that 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: August 20, 2002.
Al Matera,
Director, Acquisition Policy Division.
    Therefore, DoD, GSA, and NASA propose amending 48 CFR part 31 as 
set forth below:


    1. The authority citation for 48 CFR part 31 continues to read as 

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c). U.S.C. 2473(c).

31.205-6  [Amended]

    2. Amend section 31.205-6 in paragraph (m)(2) by removing ``(see 
31.205-46(f))'' and adding ``(see 31.205-46(d))'' in its place.
    3. Revise section 31.205-12 to read as follows:

31.205-12  Economic planning costs.

    Economic planning costs are allowable. Economic planning costs are 
the costs of general long-range management planning concerned with the 
future overall development of the contractor's business. Economic 
planning costs do not include organization or reorganization costs 
covered by 31.205-27. See 31.205-38 for determining the allowability of 
market planning costs other than economic planning costs.
    4. Amend section 31.205-13 by revising paragraphs (a), (d), and (f) 
to read as follows:

31.205-13  Employee morale, health, welfare, food service, and 
dormitory costs and credits.

    (a) 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, subject to the limitations contained in this subsection. 
Some examples of allowable activities are--
    (1) House publications;
    (2) Health clinics;
    (3) Wellness/fitness centers;
    (4) Employee counseling services; and
    (5) Food and dormitory services for the contractor's employees at 
or near the contractor's facilities. These services include--
    (i) Operating or furnishing facilities for cafeterias, dining 
rooms, canteens, lunch wagons, vending machines, living accommodations; 
    (ii) Similar types of services.
* * * * *
    (d)(1) The allowability of food and dormitory losses are determined 
by the following factors:
    (i) Losses from operating food and dormitory services are allowable 
only if the contractor's objective is to operate such services on a 
break-even basis.
    (ii) 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 objective 
in paragraph (d)(1)(i) of this subsection are not allowable, except as

[[Page 55687]]

described in paragraph (d)(1)(iii) of this subsection.
    (iii) A loss may be allowed to the extent that the contractor can 
demonstrate that unusual circumstances exist 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. The following are 
examples of unusual circumstances:
    (A) The contractor must provide food or dormitory services at 
remote locations where adequate commercial facilities are not 
reasonably available.
    (B) The contractor's charged (but unproductive) labor costs would 
be excessive if the services were not available.
    (C) If cessation or reduction of food or dormitory operations will 
not otherwise yield net cost savings.
    (2) Costs of food and dormitory services shall include an allocable 
share of indirect expenses pertaining to these activities.
* * * * *
    (f) Contributions by the contractor to an employee organization, 
including funds from vending machine receipts or similar sources, are 
allowable 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.

31.205-46  [Amended]

    5. Amend section 31.205-46 as follows:
    a. Remove paragraphs (b) and (c), and redesignate paragraphs (d), 
(e), and (f) as (b), (c), and (d), respectively; and
    b. In the introductory text of newly designated paragraph (c)(2), 
remove ``paragraph (d)'' each time it appears (twice) and add 
``paragraph (b)'' in their place; and remove ``paragraph (e)(3)'' and 
add ``paragraph (c)(3)'' in its place.

[FR Doc. 02-21620 Filed 8-28-02; 8:45 am]