Report | March 15, 2013

Defense Hotline Allegations Concerning Contractor-Invoiced Travel for U.S. Army Corps of Engineers' Contracts W912DY-10-D-0014 and W912DY-10-D-0024


Audit Objective

Our overall objective was to determine whether the contractor’s invoiced travel expenditures were allowable, reasonable, and allocable for task orders awarded against the USACE WERS contracts. Specifically, we determined whether the contractor charged profit on travel costs, an action that the contracts prohibit.


The hotline complainant alleged that the contractor profited on travel costs, specifically lodging costs, by negotiating firm-fixed-price (FFP) task orders using maximum per diem rates for lodging but requiring employees to stay at hotels charging far less than the maximum lodging rates. The complainant alleged that this practice resulted in the contractor’s profiting on lodging costs, a process contrary to the contract terms of not allowing profit on travel costs.

Federal Acquisition Regulation Provision and Contract Requirement

Federal Acquisition Regulation 31.205-46, “Travel Costs,” allows a contractor to negotiate travel costs at maximum Joint Travel Regulations per diem rates but does not restrict the contractor from incurring less than that rate during the performance of the contract.

Section A, paragraph 5, of contract W912DY-10-D-0014 states that travel costs are limited to maximum per diem rates by the Joint Travel Regulations and that profit is not allowed on travel costs. The hotline complainant stated that this language was inserted to stop the contractor from profiting from travel costs. The USACE Huntsville contracting officer explained that this language was not related to the contractor but was included in the solicitation to ensure that all contractors understood bidding requirements.

Hotline Allegation Not Substantiated

We did not substantiate the allegation that the contractor improperly realized profit on lodging costs on the eight task orders awarded under contract W912DY-10-D-0014 and one task order awarded under W912DY-10-D-0024:

  • The contractor did not always propose lodging costs at maximum per diem rates. We identified that the contractor proposed discounted per diem rates for long term site visits in task orders 4, 5, and 6. In addition, on task order 3, we identified an instance in which the contractor proposed lodging at the maximum rate but invoiced for a much lower rate. This instance contradicted the allegation that the contractor always negotiated lodging at maximum per diem and kept the difference between the discounted rate and the maximum rate.
  • The complainant stated that all work on contract W912DY-10-D-0014 was performed on FFP task orders. However, task orders 3, 4, and 6 included proposed travel costs on cost-plus-fixed-fee (CPFF) line items. We reviewed $48,456 of invoiced lodging costs on task orders 3 and 4 submitted by the contractor from September 2011 through October 2012 and found that the invoiced lodging costs were at or below the maximum per diem rates allowed by the Joint Travel Regulations.
  • The contract did not require the contractor to provide detailed supporting documentation of travel costs to receive payment on the five FFP task orders (1, 2, 5, 7, and DA02),
  • For task order CM01 under contract W912DY-10-D-0024, the contractor was a FFP subcontractor who did not identify travel costs on its invoices.