GSA Publishes 2019 Travel Per Diem Rates

The U.S. General Services Administration (GSA) this week released the fiscal year (FY) 2019 travel per diem rates, which will take effect on October 1, 2018. By law, GSA sets these rates for travel in the continental United States each year.

Based on local market costs of mid-priced hotels, lodging per diem rates provide caps, or maximum amounts, that can be reimbursed to federal employees for lodging and meals while on official travel. As an additional savings measure, GSA's lodging per diem rate methodology includes taking five percent off of the final average daily rate in each location.

But these rates don't just apply to Government workers. They also represent caps on what the Government is willing to reimburse contractors. These rates, of course, are limit costs on cost-type contracts but are also used in pricing fixed-price contracts. The regulatory authority comes from FAR (Federal Acquisition Regulations) 31.205-46:

...costs incurred for lodging, meals, and incidental expenses (as defined in the [Federal Travel Regulations]) shall be considered to be reasonable and allowable only to the extent that they do not exceed on a daily basis the maximum per diem rates in effect at the time of travel as set forth in the --

The 2019 rates have not changed significantly from the 2018 caps. A few have gone up a couple of bucks and some have actually decreased by a few dollars (the peak season in San Francisco dropped from $302 per night to $299 per night but good luck finding that rate - Bloomberg reports that the average price for a hotel room in San Francisco is now $397 per night).

Contractors need to prepare to implement the new rate schedule beginning October 1st. To view the new per diem rates, visit the GSA website.

GSA Releases Per Diem Rates for Fiscal Year 2018

The General Services Administration (GSA) just released Government per diem rates for fiscal year 2018 (effective October 1, 2017 through September 30, 2018). Most Government contractors are well aware that travel costs charged to Government contracts are considered reasonable and allowable as long as they do not exceed the maximum rates in the JTRs (Joint Travel Regulations) and the FTRs (Federal Travel Regulations). Although FAR 31.205-46 provides for situations where higher rates are justified, many contractors will go out of their way to avoid the extra Government scrutiny that such justification attracts.

The basic per diem rate is now $144 per day broken down between lodging at $93 and meals and incidental expenses at $51. This rate represents a nominal increase from the current $142 per day and applies to about 2,600 locations throughout the lower 48. However, those 2,600 locations are not places where Government contractors frequently travel. The preponderance of contractor travel is to the 332 non-standard areas (NSAs) that have higher per diem rates than the standard (or basic) rate. These 332 locations include all of the major U.S. cities.

Most of the 332 NSAs have different rates depending upon the time of the year. For example, the lodging rate for San Francisco ranges from $222 per night to $302 per night depending upon the season. These rates are significantly higher than the fiscal year 2017 rates ranging from $172 to $242. For comparison, New York City ranges from $164 per night to $291 per night, dropping from $168 to $301 from fiscal year 2017.

As a reminder, the travel cost principle at FAR 31.205-46 is written in such a way that contractors are limited to the sum of lodging and per diem, not the individual components. The cost principle also requires an adjustment to the maximum rates when  no lodging is incurred. For simplicity purposes, many contractors reduce the rates to 75% on the first and last day of travel.

The fiscal year 2018 rates are available now. Click here to access them.

Travel Costs in Excess of Federal Travel Regulation Maximums

We are in the process of bringing you synopses of a recent ASBCA decision that decided a number of issues related to DCAA's (Defense Contract Audit Agency) audit of Technology Systems, Inc (TSI) fiscal year 2007 incurred costs, the ACO's subsequent sustention of the DCAA findings and recommendations, and TCI's appeal of the ACO's decision before the ASBCA. Yesterday we discussed the issue of capitalization versus expensing costs. Bottom line on that one is you can't use IRS regulations to justify your capitalization and depreciation practices. Today we will look at TCI's claim for travel expenses that exceeded the JTR (Joint Travel Regulations) maximums for lodging and per diem.

We will be spending the next few days discussing an ASBCA decision involving incurred costs at Technology Systems, Inc. (TSI). DCAA issued a report on incurred cost for fiscal year 2007 noting a number of unallowable costs. The ACO (Administrative Contracting Officer) sustained many of the DCAA findings, issued a final decision, whereupon TCI appealed to the ASBCA.

TSI claimed travel costs in excess of the JTR ceilings for lodging and per diem expenses. There was no dispute on that fact and the ASBCA stated that TSI provided no good reason why the cost should not be challenged. Nevertheless, TSI came up with two arguments as to why this should not matter.

First, TSI argued that the ACO wrongly identified the applicable travel regulations. The ACO referenced the JTR which applies to travel outside of the Continental United States, instead of the FTR, which was truly applicable since all of the challenged travel was within the Continental United States. Second, TSI argue that its general travel policy saved the Government money.

The ASBCA called both arguments unpersuasive. Concerning the FTR/JTR argument, the Board called it a defect of form rather than substance. Concerning the argument that its travel policies saved the Government money, the Board rule it undeveloped and would not excuse it from compliance with travel regulation limits on per diem in any event.

TSI's arguments are rather silly and should never have risen to the ASBCA level.

Contractors May Be Able To Save Money by Using Alternative (Modern) Transportation Options

Earlier this year, several House Democrats and Republicans introduced a bipartisan bill to help solidify ridesharing and other innovative transportation services as part of the broader Government transportation "ecosystem". The Bill would give federal employees greater flexibility and choice when they travel on official business, and, according to the press release, "bring government travel into the 231st century".

Innovative modes of transportation refers to companies like Uber and Lyft but also includes bikesharing (popular in Europe but heavily subsidized in the US). At congressional request, GSA (General Services Administration) agreed to remind agencies that they can reimburse employees' ridesharing expenses for official travel. The new bill will require that Agencies keep transportation options for federal workers updated to reflect the most cost-effective technology.

GSA will be required to implement regulations to allow federal employees to use alternative transportation options such as Uber, Lyft, and bike-share for official travel. The Bill would also require GSA to submit annual reports to Congress on the implementation of these regulations and resulting amount of government savings.

Contractors may also have an opportunity to reduce travel costs by "encouraging" employees to use these alternative transportation options. The rapid rise in the popularity of Uber and Lyft for personal use means that the services are both convenient and cost-effective. Unless contractors have travel policies and procedures that encourage employees to consider these alternative options however, employees will often resort to the familiar methods (e.g. taxis, POVs, and airport shuttles).

It wouldn't surprise us if in the not too distant future, the FAR cost principles will be addressing these alternative transportation options.

GSA Released Per Diem Rates for Fiscal Year 2017

The General Services Administration (GSA) has just released Government per diem rates for fiscal year 2017. As most Government contractors are aware, travel costs charged to Government contracts are considered reasonable and allowable only if they do not exceed the maximum rates in the JTRs (Joint Travel Regulations) and the FTRs (Federal Travel Regulations). FAR 31.205-46 contains provision whereby higher rates may be claimed but those rates must be justified and contemporaneously documented. Most contractors try to avoid the extra Government scrutiny that comes with claiming lodging and meals that exceed the GSA maximums.

The basic per diem rate is $142 per day broken down between lodging at $91 and meals and incidental expenses at $51. This rate represents a nominal increase from the current $140 per day and applies to about 2,600 locations throughout the lower 48. However, those 2,600 locations are not places where contractors are likely to travel. The preponderance of contractor travel is to the 400 or so locations that justify higher rates based on higher cost of lodging and meals. These 400 locations include all of the major U.S. cities.

Most of the cities have different rates depending upon the time of the year. For example, the lodging rate for San Francisco ranges from $172 per night to $242 per night, depending upon month, while New York ranges from $168 to $301.

Fiscal Year 2017 is a bit unusual in that lodging rates have dropped from fiscal year 2016 in many instances. For example, October in New York dropped from $306 per night to $301 per night.  So contractors need to adjust the travel policies to ensure they don't incur excess lodging costs when the new rates go into effect. We know of a case a few years back where contract auditors (not the DCAA) cited a contractor for a system deficiency when it implemented a per diem reduction one month late.

All of the fiscal year 2017 per diem rates are now available. Click here and follow the instructions.

What are "Incidental Expenses"?

Every Government contractor with a cost-reimbursable contract is aware of the FAR (Federal Acquisition Regulations) limitations on lodging, meals, and incidental expenses. FAR 31.205-46 bases these limitations on the Federal Travel Regulations (FTR) for travel within the continental United States, the Joint Travel Regulations for travel to (or in) Alaska, Hawaii, and outlying areas of the United States and the Standardized Regulations for foreign travel.

Each of these regulations have separate limitations for lodging and for meals and incidental expenses. Contractors are not bound to the separate cap requirement - they can combine the separate limitations into a single cap. Nor are contractors bound to all of the other hundreds of pages of JTR and FTR regulations. Only the maximum per diem rates (i.e. the sum of lodging, meals, and incidental expenses), the definitions of lodging, meals, and incidental expenses, and the regulatory coverage dealing with special or unusual situations are incorporated (see FAR 31.205-46(a)(4)).

It is not uncommon for contractors - especially small contractors without robust internal controls systems - to run afoul of the "incidental expenses" provisions. And, the definitions are not the same between the JTR and the FTR.

Under the JTR, incidental expenses include fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Under the FTR, the definition of incidental expenses includes those listed in the JTR plus laundry, baggage tips and ATM fees. DoD expanded the definition in 2014 and estimated savings of $15.6 million per year.

Now, GSA (General Services Administration) is proposing to expand the definition of incidental expenses in the JTR to include ATM fees. Essentially, that means that contractors will not be able to reimburse employees for ATM charges as a separate miscellaneous expense. Although this does not appear to be a significant change, failure to implement it could become the basis for contract auditors to question costs and recommend penalties for expressly unallowable costs. Its best to be proactive in these matters.

Further details of the proposed change can be found here. The comment period ends on March 8, 2016.

Privately Owned Vehicle (POV) Mileage Rates Drop

This is just a reminder that the standard mileage rates for 2016 have dropped to $0.54 per mile from last year's $0.575 per mile. The 2016 is the same whether contractors are following the GSA (General Services Administration) benchmark or the IRS benchmark. Both are set at $0.54 per mile. That has not always been the case however. There have been situations where the rates are slightly different.

FAR does not specify that contractors follow a particular guideline - only that costs (reimbursements) be reasonable. For convenience and because no auditor will question the rate, contractors usually choose one or the other.

Click here for more information on the GSA reimbursable mileage rate.

Click here for more information on the IRS standard mileage rate.

GSA Releases Per Diem Rates for Fiscal Year 2016

The General Services Administration (GSA) has just released Government per diem rates for fiscal year 2016. As most Government contractors are aware, travel costs charged to Government contracts are reasonable and allowable only if they do not exceed these rates. See FAR 31.205-46. FAR contains mechanisms to claim higher than Government per diem when justified and contemporaneously documented. Most contractors though try to avoid the extra Government scrutiny that comes with claiming lodging and meals that exceed the GSA maximums.

The basic per diem rate is $140 per day broken down between lodging at $89 and meals and incidental expenses at $51. This rate represents an 8 percent bump from the fiscal year 2015 rate and applies to about 2,600 locations throughout the lower 48. However, those 2,600 locations are not places where contractor are likely to travel. The preponderance of contractor travel is to the 400 or so locations that justify higher rates based on higher cost of lodging and meals. These 400 locations include all of the major U.S. cities.

Most of the cities have different rates depending upon the time of the year. For example, the lodging rate for Las Vegas is $108 per night from September through January dropping to $93 from February through August. Seattle's lodging rate is $157 from November through March, increasing to $202 per night during the summer tourist season, May through October. Going to New York at certain times of the year gets you $304 per night.

All of the fiscal year 2016 per diem rates are now available. Click here and follow the instructions.

New Limitations on Reimbursing Travelers for "Incidental Expenses"

In yesterday's blog, we reported that the Department of Defense is proposing new limitations on per diem for continuous travel over 30 days and additional limitations on per diem for trips over 180 days. Although contractors might want to consider something like that in their own travel policies and procedures, they would not be bound by such a policy. FAR 31.205-46 provides otherwise.

After we published that article, we were alerted to a change that DoD has already made related to the reimbursement of "incidental expenses"  It became effective October 1st of this year. In this change, DoD has expanded the definition of "incidental expenses" to include other items that were previously reimbursed separately.

In an effort to simplify policy, align with industry practices, and reduce travel costs for the Department, the Incidental Expense policy in Appendix A of the Joint Travel Regulations (JTR) will be revised to expand the definition of incidental expenses to include various miscellaneous reimbursable expenses including CONUS laundry, baggage tips, and ATM fees. As of October 1, 2014, these expenses will now be covered under the incidental expense portion of per diem ... and will no longer be reimbursed as separate miscellaneous expenses.

So, does the new policy apply to Government contractors? Yes, it does but only for travel to Alaska, Hawaii, and outlying ares of the United States. We'll explain.

According to FAR 31.205-46(a)(2), Government contractors are limited to the per diem rates listed in the FTRs (Federal Travel Regulations) for travel in the continental United States, the JTRs (Joint Travel Regulations) for travel in Alaska, Hawaii, and the outlying areas of the United States, and the State Department's Standardized Regulations for foreign travel.

FAR 31.205-46(a)(4) states that contractors are not required to incorporate those regulations into their own travel policies and procedures, they are only required to incorporate "... the maximum per diem rates, the definitions of lodging, meals, and incidental expenses ...",

Already, the definitions of incidental expenses between the FTR and the JTR were different. You can read more about those differences here. Now, the definitions in the FTRs and the JTRs are diverging even further.

This new DoD policy affects only the JTRs at this point - that is travel to Alaska, Hawaii, and outlying ares of the United States. It does not affect travel within the continental United States. Contractors, to the extent their employees travel to Alaska and Hawaii, must take care to adhere to the new definition of "incidental expenses".

Allowability of Lodging, Meals and Incidental Expenses under the Travel Cost Principle

When it comes to determining the maximum allowable costs for lodging, meals, and incidental costs under the Travel cost principle, FAR 31.205-46, contractors are directed to base those ceilings on Government travel regulations; either the Joint Travel Regulations, the Federal Travel Regulations or the Department of State Standardized Regulations, depending upon the destination.

These Government travel regulations provide for two ceiling amounts, one for lodging and the other for meals and incidental expenses. Government employees cannot exceed the individual ceiling amounts. Contractors on the other hand are held to one ceiling amount, the combined amount for lodging, meals, and incidental expenses. This is clear from the plain reading of the regulations (FAR 31.205-46(a)(2)) and the regulatory intent of the provision.

Some auditors have been trying to apply the caps individually rather than combined. They do this of course, to find questioned costs. A traveler might have spent a little too much on the hotel but spent less on food when compared to individual caps but the combined expenditure did not exceed the combined cap. The auditor would question the overage but not offset the underage. The deviation from accepted practice has become so chronic that DCAA (Defense Contract Audit Agency) Headquarters was forced to issue an Audit Alert last month telling its auditors to cease the practice. The alert states:

The Government travel regulations provide for two ceiling amounts: one for lodging and one for meals and incidental expenses. However, as provided in CAM 7-1002.3c(2), contractors are subject to only one ceiling, a total of lodging plus meals and incidental expenses. This CAM guidance is consistent with the regulatory intent that the “maximum per diem” rates represent a single combined ceiling. (CAM is DCAA's Contract Audit Manual).

GSA Revises Local Mileage Reimbursement Rates

We were visiting a client late last week and noted that they were still using an old rate for reimbursing employees for using privately owned vehicles (POVs) for company business. Many companies have tied their reimbursement policies into rates published by GSA (General Services Administration). Some companies check these rates at the beginning of the year and forget to monitor them for changes throughout the year.

GSA revised the local mileage rate effective April 17, 2012 from 51 cents to 55.5 cents per mile. Companies that have pegged their reimbursement policies to the GSA rate should note the change. FAR does not require companies to follow the GSA local mileage reimbursement rates. It only requires that reimbursement be reasonable. Most companies however, tie their policies into either the GSA rate or the IRS rate (there are often differences between the two) as a matter of convenience.

Sometimes these reimbursement rates fall. In January 2010, the GSA reimbursement rate fell from 55 cents to 50 cents per mile. One company failed to make corresponding changes to their own policy until later in the year. Consequently, the company reimbursed employees for their POV usage at the old rate and subsequently charge the cost to Government contracts.

The auditors (a commercial accounting firm hired by DoE to conduct incurred cost audits) made an issue of this, claiming that the costs were unreasonable and threatened to issue a system deficiency report because the contractor had not adjusted its reimbursement rates downward. Ultimately things ended well for the contractor but there was a lot of time and effort spent in resolving the matter. The incident does illustrate the need to stay abreast of changes in regulations and reimbursement caps.

Standard Automobile Mileage Rates for 2012

The IRS standard mileage rate for 2012 remains at 55.5 cents per mile - the same as the last six months of 2011. The standard GSA (General Services Administration) mileage rate for 2012 remains at 51 cents per mile, the same as 2011. Concerning the difference in the rates, GSA stated:

The IRS recently announced its standard automobile mileage rate of 55.5 cents will not change effective January 1, 2012. Although the results of our internal evaluation indicate no change in the Federal privately owned automobile, airplane and motorcycle mileage rates beginning January 1, 2012, we will continue to monitor the fuel costs and will adjust these rates if warranted. Any adjustments will be posted in the Federal Register and on this web site. Note: IRS and GSA do NOT necessarily have the same rate.

This distinction is important for contractors who have tied their reimbursement policies into one or the other's rates. See our posting from last July for more information as to why this distinction is important.

IRS vs GSA Standard Mileage Rates

Go Here to View the 2012 Update.

By now, most everyone is aware that the IRS upped the standard mileage rates from 51 cents to 55.5 cents effective July 1, 2011. GSA (General Services Administration) however, did not. On their website, GSA states:

The IRS recently announced an increase to the standard automobile mileage rate from 51 cents to 55.5 cents effective July 1, 2011. Although the results of our internal evaluation do not support a change at this time, we plan to monitor the fuel costs monthly and will adjust the rate if warranted. Any adjustments will be posted in the Federal Register and on this web site.

This is an important distinction for contractors who have tied their own reimbursement policies and procedures to one or the other or, who might have contracts that require them to implement provisions of the FTR (Federal Travel Regulations). While the FTRs apply to Government employees, many contractors have tied their own policies and procedures to the FTR rules for expediency.

Many people mistakenly believe that the IRS and GSA rates are the same. Usually they are (with GSA often lagging a bit behind the IRS on the effective date), but not always. We are now in a period when they are not the same. Implementing the IRS rate when an internal travel policy is tied to the GSA rate could throw a contractor into a noncompliance situation.

The Federal Acquisition Regulations (FAR) do not require contractors to use a particular reimbursement rate. FAR 31.205-46 only requires that the method used to reimburse employees for business use of their privately owned vehicle "results in a reasonable charge". Based on this, both the IRS and the GSA would be presumptively reasonable.

Extended Travel

Most contractors are well aware of the FAR limitations on lodging and meal reimbursements paid to employees while in travel status (see FAR 31.205-46). These limits are variable based on location and season. They can be exceeded under limited circumstances and must be reduced for first and last day of travel.

Extended travel however gets a little tricky. There are no specific FAR requirements to guide us here – just the overarching “reasonableness” criteria (see FAR 31.201-3). While FAR makes it clear that contractors do not need to follow the JTRs (Joint Travel Regulations) beyond the maximum lodging and MI&E (meals and incidental expenses) rates and the definition of MI&E, those regulations can still be useful in helping contractors develop reasonable policies and procedures to cover long term travel. 

Under the JTR, long-term travel for more than 180 days is reimbursed for lodging and M&IE at 55% of the applicable standard lodging and M&IE rate, rounded to the nearest dollar (JTR C4552-1). The actual daily lodging rate is computed by dividing the total lodging cost by the number of days of occupancy in the rental period. Expenses of lodging include the rental cost for a furnished dwelling, or if unfurnished, the cost of appropriate and necessary furniture and appliances, utility connect/disconnect cost, cost of reasonable maid fees and cleaning services, monthly telephone fees, cable TV, etc.

Although not bound by this particular section of the JTR, contractors that do not adjust their reimbursement rates for long-term TDY, risk a “reasonableness” challenge by the government auditors.

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.