Is the contractor's invoice allowable to reflect COLA for travel to OCONUS locations?
A contractor's invoice can reflect any allowable costs that are permitted in the contract. For example, if the contract is fixed price with economic price adjustment, then escalation factors (including COLAs) can be paid in accordance with the escalation rate schedule referenced in the contract. If the contract is a cost reimbursement contract, COLAs may be paid in accordance with the applicable contract terms as well. There is nothing that specifically prohibits payment of COLAs to contractors. However, in order for the Government to pay them, the contract terms must provide for them— either in the original contract or via modification. Typically there is one or more CLINs for Other Direct Costs (ODCs) that authorize travel costs and COLAs. For more information on payment of COLAs to contract employees overseas, please also review this AAP response