What FAR 31.205-46 actually requires
FAR 31.205-46 applies wherever the FAR Part 31 cost principles govern: cost-reimbursement contracts, and the indirect rates and cost-based pricing that flow into other contract types. Its main rules:
- Per-diem ceiling, paragraph (a)(2). Lodging, meals and incidental expenses are reasonable and allowable only to the extent they do not exceed, on a daily basis, the maximum per-diem rates in effect at the time of travel: the Federal Travel Regulation for the contiguous United States, the Joint Travel Regulations for Alaska, Hawaii and outlying areas, and the State Department’s Standardized Regulations for foreign areas.
- Only parts of those regulations apply, (a)(4). The FAR incorporates the maximum rates, the definitions of lodging, meals and incidental expenses, and the coverage of special or unusual situations. It does not import every FTR or JTR rule. Many contractors still adopt FTR conventions, such as reduced meal allowances on travel days, as company policy; (a)(6) notes that maximum rates are generally not a reasonable daily charge on partial travel days or when no lodging is incurred.
- Special or unusual situations, (a)(3). Actual costs above per diem can be allowable up to the higher amounts permitted for federal civilian employees, but only if a condition for the actual expense method exists, an officer of the contractor approves a written justification, repetitive use in an area has advance contracting officer approval, and actual costs are documented, with receipts for each expenditure of $75 or more.
- Documentation, (a)(7). Costs are allowable only if the date and place, the purpose of the trip, and the traveler’s name and title or relationship to the contractor are documented.
- Airfare, paragraph (b). Airfare above the lowest priced airfare available to the contractor during normal business hours is unallowable, except where that fare requires circuitous routing, travel at unreasonable hours, excessively prolonged travel, increased cost that offsets the savings, is not adequate for the traveler’s physical or medical needs, or is not reasonably available to meet mission requirements. The exception must be documented and justified.
- Company aircraft, (c). Owned, leased or chartered aircraft costs are generally limited to the allowable airfare unless the contract requires the aircraft or the contracting officer approves more, with manifests or logs kept.
Alcohol (FAR 31.205-51) and entertainment (31.205-14) are separately unallowable, so a hotel folio with bar charges must be split before it is charged. Expressly unallowable costs included in a final indirect cost rate proposal can draw penalties under FAR 42.709.
Per-diem ceilings: who sets them and how to use them
- Contiguous U.S. (CONUS)
- GSA sets lodging and meals and incidentals rates by locality for each federal fiscal year, starting October 1, with some localities seasonal. Check the current GSA per-diem table for the date of travel; do not reuse last year’s figure.
- Alaska, Hawaii, U.S. territories
- Non-foreign OCONUS rates are set by the Department of Defense and published by the Defense Travel Management Office, and can change monthly.
- Foreign areas
- The State Department Office of Allowances publishes foreign per-diem rates, updated monthly.
- Lodging taxes
- The FTR treats lodging taxes as a separate allowable expense rather than part of the lodging rate; confirm your treatment with your auditor or counsel.
- GSA City Pair fares
- City Pair contract fares are a government program for federal travelers. Contractors are generally not eligible for them; check GSA’s eligibility rules before assuming a fare is available.
The procurement point: per diem is a ceiling for allowability, not a price. In most cities, a negotiated commercial LRA rate below the lodging ceiling is available near the sites contractors visit. Near installations and in Washington, the gap between commercial rates and per diem moves with the season; the Washington and Northern Virginia corridor guide covers how to benchmark it, and the LRA vs NLRA page covers rate structure.
Fly America Act and Open Skies exceptions
The Fly America Act, 49 U.S.C. 40118, requires international air travel financed by the U.S. government to use U.S.-flag air carrier service where it is available. It covers contractors, consultants and grantees whose travel the government pays for, not only federal employees. For contracts, FAR subpart 47.4 implements it through the clause at FAR 52.247-63, Preference for U.S.-Flag Air Carriers. Unjustified foreign-carrier costs are not reimbursed.
- Code-share counts as U.S.-flag service when the ticket is bought under the U.S. airline’s designator code and flight number, even if a foreign partner operates the aircraft.
- Open Skies exceptions. GSA recognizes four agreements with a government-procured transportation provision: the European Union, Australia, Switzerland and Japan. The United Kingdom is no longer covered by the EU agreement from January 1, 2021, so London itineraries need separate analysis. The Australia, Switzerland and Japan agreements apply only when no City Pair fare exists between the origin and destination.
- DoD-funded travel is excluded from the Open Skies exceptions. A defense contractor charging travel to a DoD contract cannot rely on them.
- Cost and convenience are not exceptions. Unavailability of U.S.-flag service, under the time-based tests in the FTR, is; document it on the PNR.
Transatlantic joint ventures complicate this, because the cheapest fare on a U.S. carrier’s code may be operated by a partner. The London corridor page and the DACH page cover the carriers involved.
Contractor travel compliance benchmarks
| Control | Typical contractor | Audited target |
|---|---|---|
| Trips with date, place, purpose and traveler documented | 85%–95% | 100%, captured in PNR |
| Lodging nights above ceiling without justification | 8%–15% | <1% |
| Lowest available fare documented at booking | 50%–75% | 100%, OBT fare log retained |
| International government-funded trips with Fly America record | 60%–85% | 100% |
| Folios split for alcohol and entertainment | 40%–70% | 100% before charging |
| Contract or charge number on every trip | 80%–95% | 100% |
| Commercial LRA rates at or below per diem in top cities | 20%–40% of nights | 70%+ |
Business Travel Consulting 2026 benchmarks from contractor travel files and audits. These are internal control rates, not DCAA findings.