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  • Question

    Are General and Administrative expenses allowed under FAR part 31 and Joint Federal Travel Regulation (JFTR).


    Answer

    General and Administrative (G&A) expenses are not written to in the Joint Federal Travel Regulation (JFTR) this regulation only address the rules of travel and how travel is to be handled. In the matter of relating G&A to travel expenses within FAR Part 31 this too is not written about. The reason is because Travel has nothing to do with G&A. They are separate costs that are incurred by the contractor they are not combined.

    The issue is deciding if the G&A is allowable, reasonable and allocable to your particular contract with this contractor. If G&A expense is written into this contract then this particular expensed item needs to be assessed in relation to the below rules for determining allowability, reasonableness and allocability.

    Read this area of the FAR and determine if this G&A expense can be assessed against this contract.


    31.201-2 -- Determining Allowability.

    (a) A cost is allowable only when the cost complies with all of the following requirements:
      (1) Reasonableness.
      (2) Allocability.
      (3) Standards promulgated by the CAS Board, if applicable; otherwise, generally accepted accounting principles and practices appropriate to the circumstances.
      (4) Terms of the contract.
      (5) Any limitations set forth in this subpart.
    (b) Certain cost principles in this subpart incorporate the measurement, assignment, and allocability rules of selected CAS and limit the allowability of costs to the amounts determined using the criteria in those selected standards. Only those CAS or portions of standards specifically made applicable by the cost principles in this subpart are mandatory unless the contract is CAS-covered (see Part 30). Business units that are not otherwise subject to these standards under a CAS clause are subject to the selected standards only for the purpose of determining allowability of costs on Government contracts. Including the selected standards in the cost principles does not subject the business unit to any other CAS rules and regulations. The applicability of the CAS rules and regulations is determined by the CAS clause, if any, in the contract and the requirements of the standards themselves.
    (c) When contractor accounting practices are inconsistent with this incurred, are 31.201-3 -- Determining Reasonableness.allocable to the contract, and comply with applicable cost principles in this subpart and agency supplements. The contracting officer may disallow all or part of a claimed cost that is inadequately supported.

    (a) A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business. Reasonableness of specific costs must be examined with particular care in connection with firms or their separate divisions that may not be subject to effective competitive restraints. No presumption of reasonableness shall be attached to the incurrence of costs by a contractor. If an initial review of the facts results in a challenge of a specific cost by the contracting officer or the contracting officer’s representative, the burden of proof shall be upon the contractor to establish that such cost is reasonable.
    (b) What is reasonable depends upon a variety of considerations and circumstances, including --
      (1) Whether it is the type of cost generally recognized as ordinary and necessary for the conduct of the contractor’s business or the contract performance;
      (2) Generally accepted sound business practices, arm’s-length bargaining, and Federal and State laws and regulations;
      (3) The contractor’s responsibilities to the Government, other customers, the owners of the business, employees, and the public at large; and
      (4) Any significant deviations from the contractor’s established practices.

    31.201-4 -- Determining Allocability.

    A cost is allocable if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship. Subject to the foregoing, a cost is allocable to a Government contract if it --
    (a) Is incurred specifically for the contract;
    (b) Benefits both the contract and other work, and can be distributed to them in reasonable proportion to the benefits received; or
    (c) Is necessary to the overall operation of the business, although a direct relationship to any particular cost objective cannot be shown.
     

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