Monday, October 25, 2010

International Air Travel and the "Fly America Act"

The "Fly America Act" requires that Government contractors traveling internationally on contract related business, fly on U.S. flag carriers. FAR 47.4 implements the Fly America Act and requires the contract clause at FAR 47.403-1 be included in contracts where international travel is anticipated. In practicality, this clause is routinely included in contracts, whether international travel is contemplated, or not. You should check your contracts to determine whether it has been included.

FAR 47.403-1, Availability and unavailability of U.S.-flag air carrier service, provides detailed requirements for determining the availability of U.S.-flag carrier service, as well as guidelines that must be followed to ensure that U.S.-flag carriers are used to the greatest extent possible. Contractors are required to use U.S.-flag carriers when they are available, even though a foreign carrier may offer lower fares for the same flight or flight segment. Contractors that frequently travel abroad should have processes and procedures in place to ensure compliance with the Fly America Act.

Although FAR 47.403 provides detailed implementation requirements of the Fly America Act, the regulations do not address code share carrier agreements. Code share carrier agreements are commonplace in the air transportation industry and involve arrangements between carriers where one carrier will book and provide air travel transportation services aboard another carrier’s aircraft. The Comptroller General’s Decision, B-240956, dated September 25, 1991, views code share arrangements between a U.S.-flag carrier and a foreign carrier as simply a lease of the seats and its crew aboard the aircraft, and as such, the U.S. carrier is responsible for the transportation service for passengers in the leased seats. Based on the Comptroller General’s decision, contractors are required under the Fly America Act to use U.S.-flag carriers, or foreign carriers under a code share arrangement with the U.S.-flag carrier, whenever available, unless the contractor can provide adequate justification and supporting documentation, as required by FAR 47.403-1.

To the extent that a U.S.-flag carrier, including code share flights booked through the U.S.-flag carrier, is not used for international air travel funded by the U.S. Government, FAR 47.403-3(a) provides that Agencies shall disallow the costs associated with the air transportation on the foreign air carrier unless adequate justification is attached to the voucher, which notes that a U.S.-flag carrier was unavailable.

When the travel is by indirect route or the traveler otherwise fails to use available U.S.-flag air carrier service, the amount to be disallowed is based on the loss of revenues suffered by U.S.-flag air carriers, determined by the formula provided in FAR 47.403-1. However, based on the Comptroller General’s decision, 56 Comp. Gen. 209, dated January 3, 1977, the disallowed amount shall not exceed the fare of the segment improperly traveled.

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