Wednesday, May 22, 2013

Documenting Lowest Priced Airfares

Since January 2010, the FAR travel cost principle (FAR 31.205-46) has limited airfare costs to the lowest priced airfare available to the contractor during normal business hours. There are some exceptions including where circuitous routing would be required, travel during unreasonable hours, excessively prolonged travel, or to meet the medical needs of the traveler.

Many companies, including Government contractors allow certain employees to fly business class or even first class. The excess over the lowest priced airfare is unallowable and should be removed from any billing to the Government or the annual incurred cost submission. A problem arises however in determining what the lowest priced airfare was at the time the travel literary was arranged and paid for.

Contractors need to set up a process for contemporaneously documenting the lowest priced airfare when reservations are made. That way, its easy to apportion the business class or first class airfare between allowable and unallowable amounts. Barring that, what is a contractor to do after the fact - like when it is preparing its annual incurred cost submission?

One resource for determining the lowest priced available airfares in effect at the time of travel is to utilize the Department of Transportation's "Domestic Airline Consumer Airfare Report". DOT's Office of Aviation analysis collects air fare data and prepares them in compliance with public law, to be used in the development of Airport Competition Plans, not for determining the lowest priced airfare at a particular time. The quarterly report shows the average airfares between two cities, average airfare by the largest carrier and average airfare by the lowest priced carrier. For example, in the 4th quarter 2012, the average one way ticket from Seattle to Boston was $300, the average for the largest carrier in the market (Alaska Airlines) was $293, and the average for the lowest cost carrier (Jet Blue) was $242.

Using this information source should be a last resort - the best method is to set up a system that documents the lowest available airfare at the time reservations are made. However, using this method has some very good precedence - DCAA is utilizing the method to question costs when auditing annual incurred cost submissions.

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