June 05, 2014

Analyzing Travel

I hate performing price analyses on travel. Why? Because I think from a practical perspective a pre-award evaluation of travel elements not defined by law or regulation (e.g. JTR) is a relatively useless exercise as the price proposed for air fare and rental cars will almost assuredly NOT be the prices invoiced during performance. In addition, the pricing you (the analyst) used to evaluate the proposed pricing is likely not the same pricing used to develop the quote as the difference of one day in the pricing request at a travel website can dramatically change the rates available.

So ... what to do with travel? An approach to consider:

Do not ask subcontractors to propose travel. Instead, take your travel estimate to the customer, estimate the number of those priced trips will be taken by the sub, and award the sub a ceiling amount for estimated travel. This will circumvent the price analysis requirement, as price analysis is required for prices proposed by the subcontractor. Here, the subcontractor was provided with a plug number determined by you the contractor (or your customer). No sub proposal, no sub proposal analysis requirement.

How to administer - award travel as an FFP EPA (Economic Price Adjustment) line item. EPA allows adjustment of the FFP amount when (among other events) the subcontractor experiences actual variances in proposed prices for labor or materials (ODCs) during performance. With FFP EPA, variations in the line item total ceiling resulting from market variations in airfare or car rental costs outside the control of the subcontractor would not change the FFP nature of the line item.

Using this process, you could potentially (a) avoid price analysis at the pre-award stage with an explanation of the plug number award and certification by the analyst that receipts for costs incurred will be evaluated in accordance with JTR prior to invoice acceptance; and (b) award an FFP type contract to a subcontractor without an adequate accounting system for flexibly priced contract administration without being locked into the plug number for final payment.