Summer brings both peak travel season and the busiest stretch of federal buying, and many service contracts and task orders include travel as a reimbursable line item. Contractors new to federal work are often surprised by how specific the reimbursement rules are. Here are answers to common questions, in general terms. Your contract’s terms control, so read them first.
How does the government decide what travel it will pay for?
On cost-reimbursement contracts, and on many other contracts that reimburse travel at cost, the FAR’s cost principles apply. They generally make costs for lodging, meals and incidental expenses allowable only to the extent they do not exceed the maximum per diem rates in effect at the time of travel, as set by the government’s travel regulations. The Federal Travel Regulation, maintained by GSA, covers travel within the continental United States. Separate regulations govern travel to nonforeign areas outside the continental United States, such as Alaska, Hawaii and the territories, and to foreign areas.
Where do the per diem rates come from?
GSA sets per diem rates for locations within the continental United States, generally once a year for the federal fiscal year that begins October 1, with a standard rate for most places and higher rates for many cities and counties. Rates for other areas are set by the Department of Defense and the Department of State. Because rates are updated each fiscal year, a trip in September and a trip in October to the same city may carry different limits. Look up current rates on gsa.gov before you estimate or book.
What about airfare?
Airfare costs are generally allowable only up to the lowest customary standard, coach or equivalent fare offered during normal business hours. Limited exceptions apply, for example when such accommodations would require circuitous routing, would require travel at unreasonable hours or would excessively prolong travel. When an exception applies, document why. Upgrades and premium seating beyond those limits generally cannot be charged to the contract.
Does the trip need approval, and how should we price and invoice it?
Often, yes. Many contracts and task orders require advance approval for travel from the contracting officer or the contracting officer’s representative, and they may cap the total travel budget in a line item. Travel without required approval may not be reimbursed even if the costs are otherwise reasonable. A few habits help:
- When a solicitation provides a travel estimate or a not-to-exceed amount, follow its instructions; some solicitations specify the trips to price.
- Estimate using current per diem rates and realistic airfare, and allow for rate changes on trips in the next fiscal year.
- Apply indirect rates to travel only as your disclosed accounting practices and the contract allow.
- Keep receipts and records of approvals for each trip, including justification for any exception.
- Invoice travel against the correct line item and stay within its funded amount.
What happens if we exceed the limits?
Amounts above allowable limits are generally unallowable and must not be billed to the government. Your firm can still choose to pay employees more generous allowances, but the excess comes out of your own funds. Including unallowable travel costs in billings or incurred cost submissions can lead to disallowances and, if repeated or knowing, more serious problems. The travel cost principle is in FAR Part 31 at acquisition.gov, and current per diem rates are published at gsa.gov.