[Federal Register: January 29, 2004 (Volume 69, Number 19)]
[Proposed Rules]
[Page 4435-4438]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29ja04-32]
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Part III
Department of Defense
General Services Administration
National Aeronautics and Space Administration
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48 CFR Part 31
Federal Acquisition Regulation; Training and Education Cost Principle;
Proposed Rule
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAR Case 2001-021]
RIN 9000-AJ38
Federal Acquisition Regulation; Training and Education Cost
Principle
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 (Councils) are proposing to amend the
Federal Acquisition Regulation (FAR) ``Training and education costs''
cost principle.
DATES: Interested parties should submit comments in writing on or
before March 29, 2004 to be considered in the formulation of a final
rule.
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.2001-021@gsa.gov
Please submit comments only and cite FAR case 2001-021 in
all correspondence related to this case.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755
for information pertaining to status or publication schedules. For
clarification of content, contact Mr. Edward Loeb, Policy Advisor, at
(202) 501-0650. Please cite FAR case 2001-021.
SUPPLEMENTARY INFORMATION:
A. Background
The proposed amendment to FAR 31.205-44, Training and education
costs, is intended to increase the clarity of this cost principle and
to make it consistent with recent statutory changes that cover payment
of costs for Federal employee academic degree training. The proposed
rule makes training and education costs generally allowable, except for
training and education for the sole purpose of obtaining an academic
degree or as a means of qualifying for a position that requires a
degree, as well as six public policy exceptions that are retained from
the current cost principle. The reasonableness of specific contractor
training and education costs that are not subject to one of the
expressly unallowable cost exceptions can best be assessed by reference
to FAR 31.201-3, Determining reasonableness.
A proposed rule was published in the Federal Register at 67 FR
34810, May 15, 2002. In response to the public comments received (see
Section B, below), the Councils are proposing additional changes to FAR
31.205-44. Since the changes result in a rule that differs
significantly from the first proposed rule, it is being published as a
second proposed rule. It is noted that an amendment was published in
the Federal Register at 67 FR 40136, June 11, 2002, to correct an error
in the Supplementary Information section accompanying the first
proposed rule. The major differences between the two proposed rules are
summarized as follows:
1. The Councils eliminated the disparate treatment of full-time and
part-time undergraduate education by deleting FAR 31.205-44(b)(1)(i).
The cost of full-time undergraduate level education will be allowable.
(See Public Comment 3, paragraph 3, below.)
2. The cost allowability provisions for full-time graduate level
education at FAR 31.205-44(b)(2)(ii) are relocated to a separate new
paragraph (d). (See Public Comment 3, paragraph 4, below.)
3. The cost of salaries for attending part-time and full-time
undergraduate level classes and part-time graduate level classes during
working hours are unallowable, subject to an exception ``when unusual
circumstances do not permit attendance at such classes outside of
regular working hours.'' FAR 31.205-44(b)(2) was deleted and coverage
included in a new paragraph (c). (See Public Comment 3, paragraph 5,
below.)
B. Public Comments
Six respondents submitted comments on the first proposed rule. A
discussion of their comments is provided below.
Eliminate the Cost Principle
Comment 1: FAR 31.205-44 should be eliminated and the allowability
of training and education costs should be governed by the general
reasonableness provisions of FAR 31.201-3. The elimination of all
thresholds and other allowability criteria can be accomplished without
jeopardizing safeguards or increasing the risk to the Government.
Councils' response: Nonconcur that the cost principle should be
eliminated. The argument for eliminating the training and education
cost principle in its entirety is not compelling. There are several
expressly unallowable costs in the current cost principle that are
considered necessary for sound public policy reasons and are not
covered elsewhere in the FAR. Concur that the reasonableness of
specific contractor training and education costs can best be assessed
by reference to FAR 31.201-3, Determining reasonableness.
Overtime Costs
Comment 2: Delete the proposed FAR 31.205-44(a), which makes
overtime pay for training and education unallowable. The number of
instances in which an employee is paid overtime for training and
education do not justify the costs for tracking and treating overtime
payments as unallowable costs.
Council's Response: Nonconcur. It would not be sound public policy
to reimburse overtime pay for training and education.
Restrictive, Confusing, and Contradictory Conditions
Comment 3: The language in proposed FAR 31.205-44(b) regarding
full-time, part-time, undergraduate, and graduate education costs is
restrictive, confusing and contradictory. The differing allowability
treatment of these types of education costs is confusing and
inconsistent with each other and with the accepted concepts of upward
mobility and job retraining. The proposed paragraph should be
eliminated, or at a minimum, the language should only list items that
are unallowable.
Councils' Response: Concur that language in paragraph (b) of the
first proposed rule is restrictive, confusing and contradictory;
changes in this second proposed rule eliminate the confusion and some
of the cost allowability limitations (as discussed below). Nonconcur
that all of the cost allowability limitations should be removed; the
cost allowability limitations that remain represent sound public
policy. Concur that only unallowable items should be listed; the
structure of the second proposed rule is to list only the specifically
unallowable costs.
FAR 31.205-44(b)(1)(i) of the first proposed rule and the current
FAR language disallow full-time undergraduate level education costs,
but implicitly allow part-time undergraduate level education costs. The
Councils believe that education costs should not become unallowable
just because an employee elects to accelerate the learning process.
Imposing restrictions that may cause
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some employees to slow the learning process serves no purpose.
Moreover, such a bifurcated approach to the allowability of contractor
employee education costs is inconsistent with recent statutory changes
that now broadly authorize Government payment of Federal employee
degree costs (Section 1121 of Public Law 106-398, the FY01 Defense
Authorization Act, and Section 1331 of Public Law 107-296, the Homeland
Security Act). Therefore, the disparate treatment of full-time and
part-time undergraduate education has been eliminated by deleting
paragraph (b)(1)(i) of the first proposed rule.
To further simplify the cost principle, the Councils extracted the
limitations regarding the unallowability of full-time graduate level
education costs from paragraph (b)(1)(ii) of the first proposed rule
and made them a separate new paragraph (c) in this second proposed
rule.
Paragraph (b)(2) of the first proposed rule disallows the costs of
salaries for attending undergraduate or graduate level classes on a
part-time basis, except for attending such classes during working hours
where circumstances do not permit attendance before or after regular
work hours. Similarly, the current FAR coverage allows the salaries of
employees for attending undergraduate or graduate level classes on a
part-time basis only where circumstances do not permit the operation of
classes or attendance at classes after regular working hours, but is
also capped at 156 hours per year. The Councils believe that the cost
of salaries for attending part-time and full-time undergraduate or
part-time graduate level classes should remain unallowable, subject to
an exception ``when unusual circumstances do not permit attendance at
such classes outside of regular working hours.'' This policy is
contained in a separate new paragraph (c) in this second proposed rule.
Advance Agreement
Comment 4: If the Councils still believe that FAR 31.205-44(b) is
required, then the provisions at FAR 31.205-44(h), which allow and
establish criteria for Advance Agreements, would have to be reinstated.
Without this reinstatement, costs that have been allowable in the past
could become unallowable.
Councils' Response: Nonconcur. The Councils believe that in light
of the changes made, the need for an advance agreement provision has
been eliminated.
Administrative Costs of College Savings Plan
Comment 5: With the advent of ``529 Plans'' (College Savings
Plans), companies are beginning to sponsor such plans for employees and
their dependents, including paying the administrative costs. The
Councils should make clear that the proposed language in FAR 31.205-
44(e) does not make the administrative costs of college savings plans
unallowable.
Councils' Response: The cost principle does not address the
administrative costs of such plans; therefore, the administrative costs
are allowable, subject to the reasonableness criteria at FAR 31.201-3.
However, any contributions to the plan by the company for employee
dependents would be unallowable under the redesignated paragraph (g) in
this second proposed rule.
Public Policy
Comment 6: If one agrees that training and educating employees is
good public policy, then there is no need for the five ``public policy
exceptions'' to cost allowability, and the cost principle is
unnecessary.
Councils' Response: The Councils support upward mobility, job
retraining, and educational advancement. Training that is beneficial
for the contractor, is also beneficial for the Government. But, while
Government support for training and education is sound overall public
policy, there are certain related costs the taxpayers should not
reimburse. The Councils believe the six public policy exceptions in
this second proposed rule are appropriate.
Job Relatedness
Comment 7: The job relatedness requirement should be eliminated in
proposed FAR 31.205-44(b)(1)(ii). The original Background section
accompanying the first proposed rule published in the Federal Register
dated May 15, 2002, indicated that the Councils proposed the
elimination of this requirement together with a supporting rationale.
The commenter agrees with that rationale and recommends the requirement
be deleted.
Councils' Response: Nonconcur. The language contained in the
Background section accompanying the first proposed rule was published
in error. The Background section language was corrected in the Federal
Register at 67 FR 40136, June 11, 2002. The current policy which
requires a relationship between education and work for full-time
graduate level education is retained.
Two-Year Maximum at Undergraduate Level
Comment 8: The proposed rule should be revised because FAR 31.205-
44(b)(1)(ii) can reasonably be interpreted as establishing a maximum
two (2) year completion requirement at both the undergraduate and
postgraduate levels.
Councils' Response: Nonconcur. The Councils believe it is clear in
the new FAR 31.205-44(d) that the two-year limitation only applies to
the full-time graduate level education.
Suitable Education
Comment 9: The proposed FAR 31.205-44(d) should be revised to
define ``suitable'' public education and permit ``suitable'' private
education where no ``suitable'' public education exists. The proposed
rule is ambiguous and restrictive in scope due to the lack of a
definition and the lack of an affirmative statement permitting private
school education.
Councils' Response: Nonconcur. A definition of the term
``suitable'' would limit flexibility. In addition, the proposed rule
already allows the use of private education and therefore, an
affirmative statement to this effect is not necessary.
Vocational Training and Specialized Programs
Comment 10: Recommend the reinsertion of the current FAR sections
addressing vocational training, specialized programs and other expenses
relating to maintenance and normal depreciation or fair rental on
facilities owned or leased by contractors for training purposes. The
deletion of these sections will place an undue financial burden on
Government contractors and small businesses and will discourage the
Government contractor workforce from pursuing non-traditional types of
training and education.
Councils' Response: Nonconcur. The allowability of these types of
expenses did not change in the proposed rule. The structure of the
proposed rule is to list only the specifically unallowable costs.
Format
In the past, the Councils have received several public comments
suggesting a standardized format for cost principles contained in FAR
part 31. While they believe that this second proposed rule conforms to
the suggested format, the Councils are interested in comments in this
regard. If additional standard format changes are deemed appropriate,
interested parties are
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required to submit a rewritten cost principle in the proposed format as
part of their response to this proposed rule.
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.
C. 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 principle 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 2001-021), in
correspondence.
D. 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: January 23, 2004.
Ralph de Stefano,
Acting Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA propose amending 48 CFR part 31 as
set forth below:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
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).
2. Revise section 31.205-44 to read as follows:
31.205-44 Training and education costs.
Training and education costs are allowable, except as follows:
(a) The costs of education and training for the sole purpose of
providing an employee an opportunity to obtain an academic degree or to
qualify for appointment to a particular position for which the academic
degree is a basic requirement are unallowable.
(b) Overtime compensation for training and education is
unallowable.
(c) The cost of salaries for attending undergraduate level classes
or part-time graduate level classes during working hours is
unallowable, except when unusual circumstances do not permit attendance
at such classes outside of regular working hours.
(d) Costs of tuition, fees, training materials and textbooks,
subsistence, and salary and any other costs in connection with full-
time graduate level education are unallowable, except where the course
or degree pursued is related to the field in which the employee is
working or may reasonably be expected to work and is limited to a total
period not to exceed 2 school years or the length of the degree
program, whichever is less, for each employee so trained.
(e) Grants to educational or training institutions, including the
donation of facilities or other properties, scholarships, and
fellowships, are unallowable.
(f) Training or education costs for other than bona fide employees
are unallowable, except that the costs incurred for educating employee
dependents (primary and secondary level studies) when the employee is
working in a foreign country where suitable public education is not
available may be included in overseas differential pay.
(g) Costs of university and college plans for employee dependents
are unallowable.
[FR Doc. 04-1876 Filed 1-28-04; 8:45 am]
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