Industry Groups Comment on Proposed FAR Cost Principles Changes
Two influential industry groups – the Aerospace Industries Association and the National Defense Industrial Association – issued two separate concurrent letters on recent proposals for changes to certain cost principles that we previously reported on.
Selling Cost Principle (FAR 31.205-38). Since most of the proposed changes either affirm allowability or cross reference other cost principles, the Associations propose the selling cost principle be eliminated where only paragraph (c) – pertaining to fees that are allowable only if paid to bona fide employees or selling agencies – be moved to another cost principle. Alternatively, if deleting the cost principle is not accepted, then the current statement “the costs of any selling efforts other than those addressed in this cost principle are unallowable” be changed to “The costs of selling efforts are allowable unless expressly identified as unallowable in this or any other cost principle.”
Economic Planning (FAR 31.205-12). The proposed wording of the cost principle may have inadvertently narrowed the scope of allowable costs by no longer including “generalized planning of possible divestitures” as economic planning costs. The Associations’ proposal substitutes language that would prevent such an interpretation.
Employee Morale (FAR 31.205-13). Paragraph (d) – allowing food and dormitory costs if they meet certain criteria – should be eliminated since this kind of cost is of little risk to the government. Since determination of whether food and dormitory costs are reasonable is subjective, it should be treated on a case-by-case basis under FAR 31.201-3, “determining reasonableness.”
Travel Costs (FAR 31.205-46). The Associations’ proposes that specific limitations on per diem requirements be replaced with reimbursement determination being based on what is a “reasonable charge.” This change would eliminate the significant inequities in government employees being able to take advantage of lower cost lodging than contractor employees.
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