Friday, September 3, 2010

Training and Education Costs

Many contractors offer training programs for their employees. These programs vary considerably from contractor to contractor depending on the relative need for training, training objectives, the size, stability and composition of the work force and other factors. When the costs become significant, the Government’s interest also becomes significant. The allowability of training and education costs are based on the specific provisions of FAR 31.205-44 (Training) as well as the more general “reasonable” principle found in FAR 31.201-3. (For a more detailed look at “reasonableness” see our blog post from June 17, 2010).

The fundamental requirement for allowability is that the training must be related to the field in which the employee is working or may reasonably be expected to work. There is a lot of latitude within this parameter but there are also some specific prohibitions. These prohibitions include:
  1. Compensation for employees attending under-graduate level courses except where circumstances do not permit the operation of classes or attendance at classes after regular working hours
  2. Cost of full-time graduate level education in excess of two years or the length of the degree program, whichever is less. 
  3. Overtime premium paid to employees while attending training. 
  4. Grants, donations, scholarships, and fellowships are all considered contributions and are unallowable. 
  5. Training or educational costs for other than bona fide employees except in cases where the employee is working in a foreign country and suitable public education is not available. In these cases, the costs for education of the employee’s dependents are limited to primary and secondary level studies. 
  6. Contributions to college savings plans for employee dependents.
When training costs become significant, the Government will probably require contractors to maintain a well-defined training program based on formal policies and procedures. These policies and procedures should include

  • Criteria for determining employee eligibility and the need for specific training courses or activities.
  • Requirements to monitor the program to assure regular attendance and adequate course performance by the personnel enrolled.
  • Procedures for evaluating the suitability and sufficiency of each course of study or activity (e.g. relates to the field in which the employee is working or may reasonably be expected to work). Systematic post-training observation by the contractor of trainees’ progress on the job would assist in achieving this objective.
  • Provisions to prevent recipients from receiving reimbursement from both the contractor and other outside sources. For example, even though college tuition reimbursement for veterans would be allowable under FAR 31.205-44, it is not reasonable for a contractor to provide applicative reimbursements to veteran employees who are also eligible for reimbursement through the Veterans Administration. 

 Other considerations when developing training and education policies include:

  •  Training and education costs incurred by contractors, that are subsequently reimbursed under various initiatives provided by the Job Training Partnership Act, or any other similar programs, should be credited to government contracts in accordance with FAR 31.201-5.
  • Training and education costs should not discriminate against Government business or result in undue charges to Government contracts. This would occur if, for example, a company regularly hired new employees in its Government-oriented divisions, charged their training costs thereto, and then transferred the trained employees to their commercial-oriented divisions. Training and educational costs should properly be charged or allocated on a benefit basis. Such benefit would ordinarily be considered to accrue to the organizational segment(s) or profit center(s) of the company in which the personnel are expected to function (for a reasonable period of time) as a consequence of the training or education provided to them.


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