Will DoD's Proposed Travel Reimbursement Policy Impact Contractors?

The Department of Defense, in an effort to control rising travel costs, has proposed reductions in its per diem rate policies. Since travel costs under FAR are tied in to the GSA per diem rate schedules, contractors are wondering whether the proposal, if implemented, will impact them.

DoD is proposing that employees on Government travel to one location for more than 30 days receive a flat per diem rate. For each day after 30 days up until 180 days, employees would receive 75 percent of the locality rate. The locality rate includes lodging, meals, and incidental expenses. For travel in excess of 180 days, employees would be reimbursed a flat rate of 55 percent of the locality rate.

The short answer is 'no, contractors would not be bound by this new policy. However that does not mean that some auditor, somewhere, might latch on to this policy as a test of reasonableness. The FAR limitations on travel expenses applies only to the maximum per diem rates, the definitions of lodging, means, and incidental expenses, and the regulatory coverage dealing with special or unusual situations (see FAR 31.205-46(a)(4). Nothing else in the Federal Travel Regulations (FTRs) applies to contracts or contractors (except where they have been specifically incorporated into a contract, as the Department of Energy likes to do).

Within those constraints, contractors are free to implement travel policies and procedures that make business sense. However, contractors are still bound by "reasonableness" criteria. So for example, FAR 31.205-46(a)(4) states that the maximum per diem rates generally would not constitute a reasonable daily charge when no lodging costs are incurred and/or on partial travel days (e.g. day of departure and return). That means whatever policies and procedures are developed, they must recognize reduced rates in some cases.