[Federal Register Volume 74, Number 236 (Thursday, December 10, 2009)]
[Rules and Regulations]
[Pages 65612-65614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-28935]





48 CFR Part 31

[FAC 2005-38; FAR Case 2006-024; Item VI; Docket 2009-0044, Sequence 1]
RIN 9000-AK86

Federal Acquisition Regulation; FAR Case 2006-024, Travel Costs

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

ACTION: Final rule.


SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are issuing a final rule 
amending the Federal Acquisition Regulation (FAR) to change the travel 
cost principle to ensure a consistent application of the limitation on 
allowable contractor airfare costs.

DATES: Effective Date: January 11, 2010.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Mr. Edward N. Chambers, Procurement Analyst, at (202) 501-3221. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-38, FAR 
case 2006-024.

[[Page 65613]]


A. Background

    The travel cost principle at FAR 31.205-46(b) currently limits 
allowable contractor airfare costs to ``the lowest customary standard, 
coach, or equivalent airfare offered during normal business hours.'' 
The Councils are aware that this limitation is being interpreted 
inconsistently, either as lowest coach fare available to the contractor 
or lowest coach fare available to the general public, and these 
inconsistent interpretations can lead to confusion regarding what costs 
are allowable.
    The Councils believe that the reasonable standard to apply in 
determining the allowability of airfares is the lowest priced airfare 
available to the contractor. It is not prudent to allow the costs of 
the lowest priced airfares available to the general public when 
contractors have obtained lower priced airfares as a result of direct 
    Furthermore, the Councils believe that the cost principle should be 
clarified to omit the term ``standard'' from the description of the 
classes of allowable airfares since that term does not describe actual 
classes of airline service. The Councils further believe that the terms 
``coach, or equivalent,'' given the great variety of airfares often 
available, may result in cases where a ``coach, or equivalent'' fare is 
not the lowest airfare available to contractors, and should thus be 
    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 72 FR 72325, December 20, 2007.

B. Public Comments

    The comment period closed on February 19, 2008. Ten comments were 
received from nine respondents. All comments were reviewed and 
    General Comments.
    Since most of the comments submitted were unique and brief, it was 
decided to address all ten specific comments.
    Specific Comments:
    1. Comment: Does ``lowest priced coach class'' mean the cost of 
``non-refundable'' tickets when they are available and their cost is 
lower than refundable tickets?
    Response: If the lowest available airfare is a non-refundable 
ticket then it is the allowable cost unless one of the exceptions in 
FAR 31.205-46(b) applies.
    2. Comment: The requirement for supporting documentation and 
justification for airfare costs in excess of the ``lowest coach airfare 
available'' should include documentation justifying purchase of a 
higher-cost refundable ticket in those instances when a non-refundable 
ticket is available.
    Response: Concur in principle.
    3. Comment: The proposed change ``clarifies FAR 31.205-46 to the 
benefit of all contractors'' and is consistent with requiring that all 
income, rebates, allowances or other credit relating to any allowable 
cost shall be credited to the Government.
    Response: Concur in principle. This change is consistent with FAR 
31.201-5, Credits.
    4. Comment: How will the Government determine the lowest priced 
coach class airfare available to the contractor versus the lowest 
priced coach class airfare available to the general public if the 
contractor does not have a negotiated airfare agreement with air travel 
providers and, therefore, only has available to it the same airfare 
that is available to the general public?
    Response: In the situations described by this commenter, the lowest 
priced coach class airfare available to the contractor and the lowest 
priced coach class airfare available to the general public are the 
same. In this regard, the revision promulgated in this FAR case has no 
effect on the contractor. This amendment is intended to prohibit the 
contractor's practice where it has negotiated airfare agreements with 
travel providers and uses those agreements to purchase first class or 
business class seats but does not use the lowest priced airfare 
available under the agreements to determine the allowable cost baseline 
for the first class or business class seats, but instead determines the 
allowable cost based on the lowest airfare available to the general 
public instead of the lowest airfare available to the contractor under 
the agreements. This amendment will require the contractor to use the 
lowest airfare available to the contractor.
    5. Comment: Please address whether or not costs associated with 
cancelling or changing restricted tickets will be allowable; 
alternatively, insert the word ``unrestricted'' into the phrase, i.e., 
``lowest priced coach class unrestricted or equivalent airfare 
available to the contractor.''
    Response: The Councils believe that the revision does not impact 
the allowability of costs associated with cancelling or changing 
restricted tickets or a forfeiture of air travel tickets purchased in 
good faith but later determined to be unsuitable to the mission 
requirements. To answer the Commenter's questions, the costs before and 
after the revised cost principle should be allowable.
    6. Comment: The ``standard'' rate for contractors with negotiated 
airfare agreements should be those same, negotiated airfares, rather 
than airfares available to the general public. ``This is an issue of 
common sense.''
    Response: This cost principle amendment explicitly identifies the 
lowest airfares available to the contractor, including its negotiated 
airfare agreements and those available to the general public, should be 
the baseline in determining allowable airfare. This amendment should 
eliminate inconsistent allowable airfare baselines used by various 
contractors; that is, some contractors do not consider the lowest 
priced airfare available to them under their negotiated agreements in 
determining the allowable airfare cost.
    7. Comment: Does the phrase ``lowest priced coach class, or 
equivalent, airfare'' imply that the airfare tickets are refundable, as 
non-refundable tickets are typically lower than refundable tickets?
    Response: Same response as response to comment number 1.
    8. Comment: Airfare pricing is dynamic. Airlines provide for a 
variety of fares on given flights based upon available seat inventory. 
Therefore, employees of the same contractor, traveling on the same 
flight, may have different fares. Documenting and supporting Government 
inquiries as to why there is variation in the ``lowest fare'' among 
individuals on the same flight would be unduly burdensome. Under the 
existing regulation, travel agents provide a standard airfare that is 
readily available and clearly understood; the proposed amendment will 
increase costs by requiring additional administration to document the 
allowable airfare to satisfy Government audit inquiries.
    Response: The cost principle currently requires the justification 
and documentation of airfare costs in excess of the lowest customary, 
standard coach, or equivalent airfare. In view of the changes in the 
airline industry, the terms ``customary, standard, coach or 
equivalent'' increasingly do not describe an actual class of airline 
service. This amendment clarifies that the reasonable standard to apply 
in determining allowability of airfare cost is the lowest airfare 
available to the contractor. This clarification in the cost principle 
should not increase the documentation implicit in the existing cost 
    9. Comment: The proposed amendment is based upon the premise that 
there is a standard airfare rate that contractors pay each time for a 
negotiated fare. There are significant

[[Page 65614]]

differences in airfare based upon timing and load factors. Employees of 
the same contractor on the same flight might incur different airfare 
prices based on supply and demand. Determination of allowable airfare 
based upon this proposed rule of the ``available air fare standard'' 
will be more difficult to determine than exists under the current cost 
principle. We see no need for the proposed revision as it appears to be 
based upon the premise that there is only one negotiated price a 
contractor will pay for a flight.
    Response: This amendment does not establish any ``available air 
fare standard'' nor does the amendment presume that there is only one 
negotiated price a contractor can pay for a particular flight. The 
final rule eliminates the reference to ``coach or equivalent''.
    10. Comment: There are two parts to this comment. (1) The proposed 
amendment is perceived to require a comparison of coach class fares 
available to determine the lowest available for allowability purposes; 
as such, the comparison would be impossible to apply systematically for 
a number of reasons, most notably the disparity in the nature of price 
reductions. A specific flight with a negotiated airfare may appear to 
be the lowest cost when purchasing the ticket, but in fact a flight 
with a different airline providing a volume rebate later has a lower 
net cost. Throughout the cost principles is the underlying concept that 
only reasonable costs will be reimbursed. The measure of what is 
reasonable has never been interpreted to represent only the absolutely 
lowest cost available. (2) Also, elimination of the word ``standard'' 
from paragraph (b) of the cost principle creates a conflict with 
paragraph (c)(2) of the cost principle which requires comparison to 
``standard airfare'' for travel costs by contractor-owed, -leased, or 
chartered aircraft.
    Response: With respect to the first comment, the Councils do not 
believe the revision will be impossible to apply systematically. The 
amendment is not intended to guide contractors through the decision-
making process of selecting the most economical airfare with the lowest 
net cost when multiple corporate airfare agreements are in place, as 
this is properly addressed in the contractor's policies and procedures 
that should be applied appropriately and reasonably in the 
circumstances of each travel mission and its associated scheduling 
requirements. In relying on the contractor's procedures to select the 
most economical airfare appropriate in the circumstances, this 
amendment only seeks to clarify for the contractor that it should use 
the lowest airfare available to the contractor that meets the schedule 
requirements of the trip rather than considering only airfare available 
to the general public for the same flight. This amendment makes 
explicit that the lowest of the two should be selected as the 
appropriate baseline.
    With respect to the second comment, the noted ``conflict'' created 
among paragraphs (b) and (c)(2) by the elimination of the word 
``standard'' from (b), the Councils appreciate the commenter's 
observation and have replaced the word ``standard'' with ``allowable'' 
in paragraph (c)(2) where applicable.
    This is a significant regulatory action and, therefore, was subject 
to review under Section 6(b) of Executive Order 12866, Regulatory 
Planning and Review, dated September 30, 1933. This rule is not a major 
rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not 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. The Councils believe that few 
small businesses have negotiated rate agreements with airlines. The 
rule will primarily affect businesses with negotiated rate agreements 
who otherwise might seek to charge negotiated rates for first class or 
business travel which are lower than the coach rate available to the 
general public. Finally, no comments were received from small 
businesses on the Regulatory Flexibility Act statement in the proposed 

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the 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. 
chapter 35, et seq.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: November 30, 2009.
Al Matera,
Director, Acquisition Policy Division.

Therefore, DoD, GSA, and NASA amend 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. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

2. Amend section 31.205-46 by revising paragraph (b); and by removing 
from paragraph (c)(2) introductory text the word ``standard'' and 
replacing it with the word ``allowable'' wherever it appears (twice). 
The revised text reads as follows:

31.205-46  Travel costs.

* * * * *
    (b) Airfare costs in excess of the lowest priced airfare available 
to the contractor during normal business hours are unallowable except 
when such accommodations require circuitous routing, require travel 
during unreasonable hours, excessively prolong travel, result in 
increased cost that would offset transportation savings, are not 
reasonably adequate for the physical or medical needs of the traveler, 
or are not reasonably available to meet mission requirements. However, 
in order for airfare costs in excess of the above airfare to be 
allowable, the applicable condition(s) set forth above must be 
documented and justified.
* * * * *
[FR Doc. E9-28935 Filed 12-9-09; 8:45 am]