The Government revised the Air Fare allowable cost rules (FAR 31.205-46) by further limiting allowable costs to the lowest air fare available to the contractor. DCAA chimed in and issued revised audit guidance by its MRD dated March 22, 2010. In this guidance DCAA is instructing its auditors to make assessments of contractor policies and procedures to secure the lowest air far available. It even goes as far as requiring its auditors to investigate the use of nonrefundable air fares or lower fares that have been negotiated by the contractor with airlines, travel agents, credit card companies, etc. Auditors will be making assessments of contractor policies relative overall travel management and advance planning to get the lowest possible air fares. It will also be investigating whether utilizing nonrefundable air fares will benefit the government net of cancellation fees.

I guess the government made a straight forward regulation more complicated. The added costs of administration may very well erode any real savings the government thinks it may recieve. DCAA is complicating this further with the added evaluation of non refundable airfares. In any event contractors should evaluate their policies and procedures relative to travel management and be aware that DCAA may be questioning normal coach air fare costs if there are possible lower cost air fares available to the contractor. Nonrefundable airfares will now be considered if the contractor’s history of cancellation fees does not outweigh any savings from non refundable air fares.

This regulation like most is aimed at the larger Defense contractors. In most cases these regulatory changes trickle down to small contractors. Small contractors are not immune to this new rule nor the DCAA audit guidance.