Friday, May 6, 2016

Energy Department Bans Overtime for Training

The Department of Energy (DOE) recently issued one of its Acquisition Letters concerning, this time, the allowability of overtime paid for training and education. See Acquisition Letter No. AL 2016-05 dated May 3, 2016, Subject: Determining if an activity is a FAR 31.205-44 training and education activity (and consequently rendering the overtime costs caused by the activity specifically unallowable); and Managing all overtime costs.

We've known about the long-simmering feud between the Department of Energy and some of its major contractors at various clean-up sites throughout the States over contractor overtime payments to employees for training and education purposes. DOE has now taken the step of formalizing its position in a policy that applies to all DOE contractors.

The policy letter itself is long, rambling, repetitious, confusing, and contradictory. But we'll try to explain it.

FAR 31.205-44(a) states that overtime cost incurred during training or education related to the field in which the employee is working or may reasonably be expected to work is unallowable. DOE calls this an "absolute" ban on overtime and compares it to the prohibition on costs of alcoholic beverages at FAR 31.205-51. But perhaps it's not an "absolute" prohibition because the Acquisition Letter then states that if training is a "side effect" of another activity, overtime is okay. Try that logic on alcoholic beverages (my beer was only a side effect of a legitimate business luncheon so it is allowable). Then DOE describes situations where it may be in the Government's best interest to pay overtime for training. If so, contractors can ask for pre-approval from the contracting officer. So, the prohibition doesn't seem to be absolute after all. If it were absolute, a contracting officer could not allow overtime for training under any circumstances. A contracting officer cannot make allowable, costs that are expressly unallowable.

Perhaps the most significant issue in this brouhaha the Acquisition Letter does not cover is training that is a condition of the contract. Some DOE contracts require contractors to maintain minimum certifications and their employees to maintain certain certifications and competencies. Contractors have sought to minimize production interruptions through the judicious use of overtime. The alternative, everyone acknowledges, is to hire additional staff to cover absences due to training, something that would increase costs to the Government. DOE's response to that argument has been ostrich-like.

Another argument contractors have raised is that the "training and education" required as a condition of a contract is not the same definition of "training and education" contemplated in the FAR 31.205-44 cost principle. We would defer to attorneys to argue that position but it does seem to have merit.

Fortunately, this DOE Acquisition Letter only applies to DOE contracts and then, only until it is challenged and tossed out.

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