[Federal Register: October 1, 2003 (Volume 68, Number 190)]
[Rules and Regulations]
[Page 56686-56688]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc03-25]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 2001-16; FAR Case 2002-001; Item VIII]
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: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) by revising three
cost principles regarding economic planning costs; employee morale,
health, welfare, food service, and dormitory costs and credits; and
travel costs. The changes restructure the paragraphs and remove
unnecessary and duplicative language to increase clarity and
readability.
DATES: Effective Date: October 31, 2003.
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 Mr. Edward Loeb at (202) 501-0650. Please cite FAC
2001-16, FAR case 2002-001.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 67 FR 55686, August 29, 2002, with request for comments.
One respondent submitted comments; a discussion of the comments is
provided below. Differences between the proposed rule and final rule
are discussed in Section B, Comments 1 and 2, below.
[[Page 56687]]
FAR 31.205-12, Economic Planning Costs
Comment 1: Revise proposed FAR 31.205-12(a). The respondent agrees
with the deletion of the current paragraphs (b) and (c). However, the
respondent believes that by deleting the phrase ``and that may take
into account the eventual possibility of economic dislocation or
fundamental alterations in those markets in which the contractor
currently does business'' from the first sentence in the current
paragraph (a), the Councils may be unintentionally narrowing the
allowability of economic planning costs. Specifically, the respondent
stated that ``costs associated with the generalized planning of
possible divestitures may no longer be considered economic planning
costs by auditors and ACOs but be considered unallowable organization
costs instead.''
Councils' response: Partially concur. It was not the Council's
intent to change the scope of this cost principle; the Councils simply
concluded that the phrase in question was unnecessary. But, since
industry believes its deletion would narrow the allowability of costs
under this cost principle, the phrase is reinstated to the first
sentence in paragraph (a). However, the Councils also want to go on
record as not agreeing with the assertion that planning costs related
to divestiture efforts are economic planning costs covered by this cost
principle. Efforts by a contractor to analyze future market conditions
and assess the impact of those conditions on its current organization
are economic planning costs. Any efforts by a contractor to analyze,
initiate, or change its current organization to meet future market
conditions are organization or reorganization costs covered under FAR
31.205-27, Organization costs. Contractors' general long-range planning
efforts involving the contractor's organization will need to be
reviewed on a case-by-case basis.
Comment 2: Revise proposed FAR 31.205-12(a). The respondent
believes that it is not necessary to include the words ``determining
the allowability of'' in the last sentence of paragraph (a), since
there is no determination to be made under FAR 31.205-38, Selling
costs, regarding the allowability of other market planning costs.
Councils' response: Concur. The Councils agree and have deleted the
phrase from the last sentence in paragraph (a).
FAR 31.205-13, Employee Morale, Health, Welfare, Food Service, and
Dormitory Costs and Credits
Comment 3: Delete proposed FAR 31.205-13(d). The respondent
recommended the elimination of paragraph (d) regarding the cost
allowability of food and dormitory services provided for employees. The
respondent states that differing interpretations on how to apply the
detailed provisions in paragraph (d) often occur. The respondent
believes that the Government would still be adequately protected by FAR
31.201-3, Determining reasonableness, even if paragraph (d) is
eliminated.
Councils' response: Nonconcur. This section of the cost principle
clarifying the allowability of dining facilities costs is statutorily
required by 10 U.S.C. 2324 (f)(1)(G) and 41 U.S.C. 256 (f)(1)(G). In
addition, while the respondent provided some examples where they
believe subjective and interpretational differences may occur, they did
not cite any specific cost principle language that is problematic. The
Councils believe the current cost principle language provides adequate
criteria for properly determining cost allowability in their examples.
FAR 31.205-46, Travel Costs
Comment 4: Revise proposed FAR 31.205-46. The respondent has no
objection to the deletion of the current paragraphs (b) and (c) to
remove duplicative coverage. However, the respondent believes this cost
principle can be further streamlined by removing the existing per diem
ceiling limitations on the costs incurred for lodging, meals, and
incidentals by allowing reimbursement of such costs on a ``reasonable
charge'' basis. The respondent pointed out its endorsement of the
Government's proposed rule associated with FAR case 1994-753, Travel
Costs.
Councils' response: Partially concur. The Councils agreed to delete
paragraphs (b) and (c) to remove duplicative coverage.
The recommendation to remove the existing per diem ceiling
limitations provided in paragraph (a)(2) for lodging, meals, and
incidental expenses is outside the scope of this case. During the
deliberations on FAR case 1994-753, Travel Costs, several respondents
raised concerns over the potential for increased costs to the
Government and potential inequities between the treatment of contractor
travel costs and Federal employee travel costs. The FAR Council placed
the case on hold in November 2001, pending resolution of these
concerns. The Councils have not identified procedures to mitigate the
risks associated with the proposed change to the travel cost principle
and are taking no further action on FAR case 1994-753.
General Reformatting of FAR 31.205
Comment 5: The respondent also recommended that the Councils
consider a general reformatting of FAR part 31, Contract Cost
Principles and Procedures. Specifically, consideration should be given
to establishing a uniform structure for the selected costs detailed in
FAR 31.205, which the respondent believes will increase the clarity and
understanding of the cost principles and thereby reduce
misinterpretation.
Councils' response: Nonconcur. The Councils are unaware of any
significant clarity problems with the current FAR cost principles and
see no benefit in this recommendation. While it is true that the cost
principles do not all share an identical format, it does not follow
that this makes them difficult to understand. Moreover, such a
comprehensive revision of the cost principles could actually increase
disputes by substituting new wording for longstanding, court-tested
language.
Of the 48 current FAR cost principles, 16 are only one paragraph
long, and 11 more are only two or three paragraphs long. The Councils
question the need to ``force-fit'' such short cost principles into a
uniform format, particularly in the absence of any significant clarity
problems. Not only would the recommended general reformatting of the
cost principles be difficult to accomplish, but it would also offer no
obvious benefit to either industry or the Government.
The Councils recommend instead that industry continue to identify
those individual cost principles which it views as problematic and to
provide specific proposals for appropriate revisions. It should be
noted that the continuing Defense Procurement and Acquisition Policy
initiative to reduce accounting and administrative burdens in the cost
principles, without jeopardizing the Government's interests, has
resulted in significant changes or deletions involving more than 20
different cost principles to date, including the recent major revisions
to the relocation cost principle (FAR 31.205-35) that made employee
``tax gross-ups'' and spouse employment assistance payments allowable
for the first time, as well as increased the maximum allowable lump-sum
amount for miscellaneous expenses from $1,000 to $5,000. In addition,
cost principle
[[Page 56688]]
streamlining cases are currently in process regarding compensation (FAR
31.205-6), training and education (FAR 31.205-44), selling (FAR 31.205-
38), depreciation (FAR 31.205-11), and expanded relocation lump-sum
(FAR 31.205-35). The Councils continue to believe that such a case-by-
case cooperative effort with industry offers the best opportunity for
meaningful change in this often controversial area.
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 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., 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 discussed in this rule.
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.
3501, et seq.
List of Subjects in 48 CFR Part 31
Government procurement.
Dated: September 24, 2003.
Laura G. Auletta,
Director, Acquisition Policy Division.
0
Therefore, DoD, GSA, and NASA amend 48 CFR part 31 as set forth below:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
0
1. The authority citation for 48 CFR part 31 is revised to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
31.205-6 [Amended]
0
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.
0
3. Revise section 31.205-12 to read as follows:
31.205-12 Economic planning costs.
Economic planning costs are the costs of general long-range
management planning that is concerned with the future overall
development of the contractor's business and that may take into account
the eventual possibility of economic dislocations or fundamental
alterations in those markets in which the contractor currently does
business. Economic planning costs are allowable. Economic planning
costs do not include organization or reorganization costs covered by
31.205-27. See 31.205-38 for market planning costs other than economic
planning costs.
0
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;
and
(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
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]
0
5. Amend section 31.205-46 as follows:
0
a. Remove paragraphs (b) and (c), and redesignate paragraphs (d), (e),
and (f) as (b), (c), and (d), respectively; and
0
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 ``subparagraph (e)(3)''
and add ``paragraph (c)(3)'' in its place.
[FR Doc. 03-24589 Filed 9-30-03; 8:45 am]