(c) Meetings and conferences. This item includes cost of meals, transportation, rental of facilities for meetings, and costs incidental thereto, when the primary purpose of the incurrence of such costs is the dissemination of technical information or stimulation of production. Such costs are allowable (see § 1-15.20546).

[29 F.R. 10285, July 24, 1964, as amended at 33 F.R. 5454, Apr. 6, 1968]

§ 1-15.205-44 Training and educa. tional costs.

(a) Costs of preparation and maintenance of a program of instruction at noncollege level, including but not limited to on-the-job, classroom, and apprenticeship training, designed to increase the vocational effectiveness of bona fide employees, including training materials, textbooks, salaries or wages of trainees (excluding overtime compensation which might arise therefrom), and

(1) Salaries of the director of training and staff when the training program is conducted by the contractor; or

(2) Tuition and fees when the training is in an institution not operated by the contractor;

are allowable.

(b) Costs of part-time education, at an undergraduate or postgraduate college level, related to the job requirements of bona fide employees, including only:

(1) Training materials;

(2) Textbooks;

(3) Fees charged by the educational institution;

(4) Tuition charged by the educational institution, or in lieu of tuition, instructors' salaries and the related share of indirect cost of the educational institution to the extent that the sum thereof is not in excess of the tuition which would have been paid to the participating educational institution; and

(5) Straight-time compensation of each employee for time spent attending classes during working hours not in excess of 156 hours per year where circumstances do not permit the operation of classes or attendance at classes after regular working hours;

are allowable.

(c) Costs of tuition, fees, training materials and textbooks (but not subsistence, salary, or any other emoluments) in connection with fulltime scientific and engineering education at a postgraduate (but not undergraduate) college level

related to the job requirements of bona. fide employees for a total period not to exceed one school year for each employee so trained, are allowable. In unusual cases where required by military technology, the period may be extended.

(d) Maintenance expense, and normal depreciation or fair rental, on facilities owned or leased by the contractor for training purposes are allowable to the extent set forth in §§ 1-15.205-20, 1-15.205-9, and 1-15.205-34, respectively. (e) Grants to educational or training institutions, including the donation of facilities or other properties, scholarships, or fellowships, are considered contributions and are unallowable.

§ 1-15.205-45 Transportation costs.

Transportation costs include freight, express, cartage, and postage charges relating either to goods purchased, in process, or delivered. These costs are allowable. When such costs can readily be identified with the items involved, they may be directly costed as transportation costs or added to the cost of such items (see § 1-15.205-22). Where identification with the materials received cannot readily be made, inbound transportation costs may be charged to the appropriate indirect cost accounts if the contractor follows a consistent, equitable procedure in this respect. Outbound freight, if reimbursable under the terms of the contract, shall be treated as a direct cost.

§ 1-15.205-46 Travel costs.

(a) Travel costs include costs of transportation, lodging, subsistence, and incidental expenses, incurred by contractor personnel in a travel status while on official company business.

(b) Travel costs may be based upon actual costs incurred, or on a per diem or mileage basis in lieu of actual costs, or on a combination of the two, provided the method used does not result in an unreasonable charge.

(c) Travel costs incurred in the normal course of overall administration of the business are allowable and shall be treated as indirect costs.

(d) Travel costs directly attributable to specific contract performance are allowable and may be charged to the contract in accordance with the principle of direct costing (see § 1-15.202).

(e) Necessary, reasonable costs of family movements and personnel movements of a special or mass nature are allowable, pursuant to §§ 1-15.205-25 and

1-15.205-33, subject to allocation on the basis of work or time period benefited when appropriate (see § 1-15.107).

(f) The difference in cost between first-class air accommodations and less than first-class air accommodations is unallowable except when less than firstclass accommodations are not reasonably available to meet necessary mission requirements, such as, where less than first-class accommodations would:

(1) Require circuitous routing;

(2) Require travel during unreasonable hours;

(3) Greatly increase the duration of the flight;

(4) Result in additional costs which would offset the transportation savings;

or

(5) Offer accommodations which are not reasonably adequate for the physical or medical needs of the traveler.

(g) (1) The cost of "contractor-owned, -leased, and -chartered aircraft," as that phrase is used herein, includes the cost of lease, charter, operation (including personnel), maintenance, depreciation, insurance, and other related costs. This cost is allowable, if reasonable, to the extent the contractor can demonstrate that the use of such aircraft is necessary for the conduct of his business and that the increase in cost, if any, in comparison with alternative means of transportation, is commensurate with the advantages gained.

(2) Some of the factors to consider in determining the necessity for such aircraft are whether:

(i) Scheduled commercial airlines or other suitable less costly travel facilities are available at reasonable times, operate with reasonable frequency, and serve the required destinations conveniently;

(ii) It is likely that critical or emergency situations might arise which could not be accommodated as effectively by scheduled commercial airline or other suitable less costly travel facilities;

(iii) The increased flexibility in scheduling would result in time savings and more effective utilization of key personnel;

(iv) National or industrial security demands privacy for key personnel who must work en route; and

(v) There exists a contract requirement for flight testing of equipment.

(3) When the need for contractorowned, -leased, or -chartered aircraft has been demonstrated, additional factors such as the following shall be con

sidered in determining the reasonableness of costs:

(i) Number, type, and size of aircraft needed (involved in this determination are matters such as the number and physical aspects of locations to which flights are required, distances to these locations, number of passengers to be carried, and frequency of flights);

(ii) The appropriateness of the method of acquisition, i.e., purchase, lease, or charter; and

(iii) Whether, when the contractor has more than one type or size of aircraft, that available aircraft best suited to the requirements of each individual trip was used.

(4) Where the need for contractorowned, -leased, or -chartered aircraft has been demonstrated, optimum use of such aircraft, rather than scheduled commercial service, should be made where a cost advantage will result to the Government.

[29 F.R. 10285, July 24, 1964, as amended at 33 F.R. 5455, Apr. 6, 1968]

§ 1-15.205-47 Economic planning costs.

(a) This category includes costs of generalized long-range management planning which is concerned with the future overall development of the contractor's business and which may take into account the eventual possibility of economic dislocations or fundamental alterations in those markets in which the contractor currently does business.

(b) Economic planning costs are allowable as indirect costs to be properly allocated. Research and development and engineering costs designed to lead to new products for sale to the general public are not allowable under this provision.

§ 1-15.205-48 Page charges in scientific journals.

Page charges for scientific journal publication are allowable as a necessary part of research costs, where:

(a) The research papers report work supported by the Government;

(b) The charges are levied impartially on all research papers published by the journal, whether by non-Government or by Government authors;

(c) Payment of such charges is in no sense a condition for acceptance of manuscripts by the journal;

(d) The journals involved are not operated for profit; and

(e) The author does not receive an emolument from the journal for the research paper.

[33 F.R. 5455, Apr. 6, 1968] § 1-15.205-49

Preservation of records.

This category pertains to those costs arising from the retention, preservation, or storage of only those records that are necessary to the overall operation of the contractor's business, including the contract work, as well as costs resulting from contractual or statutory requirements for the preservation of necessary records after completion or termination of a contract and final settlement thereunder. Such costs generally are allowable. Usually those costs are allocated as indirect costs on a current basis to the contract and other work. Normally such costs should not be allocable to a specific contract after its completion or termination and final settlement thereunder. [33 F.R. 5455, Apr. 6, 1968]

Subpart 1-15.3-Principles for Determining Costs Applicable to Research and Development Under Grants and Contracts With Educational Institutions

SOURCE: The provisions of this Subpart 1-15.3 appear at 30 F.R. 9676, Aug. 4, 1965, unless otherwise noted.

§ 1-15.301 Purpose and scope. § 1-15.301-1 Objectives.

This subpart provides principles for determining the costs applicable to research and development work performed by educational institutions under grants from and contracts with the Federal Government. These principles are confined to the subject of cost determination and make no attempt to identify the circumstances or dictate the extent of agency and institutional participation in the financing of a particular research or development project. The principles are designed to provide recognition of the full allocated costs of such research work under generally accepted accounting principles. No provision for profit or other increment above cost is intended. § 1-15.301-2 Policy guides.

(a) The arrangements for agency and institutional participation in the financing of a research and development project are properly subject to negotiation between the agency and the institution concerned in accordance with such criteria as may be applicable.

(b) Each college and university, possessing its own unique combination of staff, facilities and experience, should be encouraged to conduct research in a manner consonant with its own academic philosophies and institutional objectives.

(c) Each institution, in the fulfillment of its contractual obligations, should be expected to employ sound management practices.

(d) The application of the principles established herein should require no significant changes in the generally accepted accounting practices of colleges and universities.

"Organized research" means all research activities of an institution that are separately budgeted and accounted for.

§ 1-15.302-2 Departmental research.

"Departmental research" means research activities that are not separately budgeted and accounted for. Such research work, which includes all research activities not encompassed under the term organized research, is regarded for purposes of this Subpart 1-15.3 as a part of the instructional activities of the institution.

§ 1-15.302-3 Research agreement.

"Research agreement" means any valid arrangement to perform Federallysponsored research, including grants, cost-reimbursement type contracts, costreimbursement type subcontracts, and fixed-price contracts and subcontracts for research.

§ 1-15.302-4 Other institutional activities.

"Other institutional activities" means all organized activities of an institution not directly related to the instruction and research functions, such as residence halls, dining halls, student hospitals, student unions, intercollegiate athletes, bookstores, faculty housing, student apartments, guest houses, chapels, theaters, public museums, and other similar activities or auxiliary enterprises. Also included under this definition is any category of cost treated as "unallowable," provided such category of cost identifies a function or activity to which a portion of the institution's indirect costs (as defined in § 1-15.305-1) are properly allocable.

§ 1-15.302-5 Apportionment.

"Apportionment" means the process by which the indirect costs of the institution are assigned as between (a) instruction and research, and (b) other institutional activities.

§ 1-15.303-1 Composition of total costs. The cost of a research agreement is comprised of the allowable direct costs incident to its performance, plus the allocable portion of the allowable indirect costs of the institution, less applicable credits.

§ 1-15.303-2 Factors affecting allowability of costs.

The tests of allowability of costs under these principles are: (a) They must be reasonable; (b) they must be allocable to research agreements under the standards and methods provided herein; (c) they must be accorded consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances; and (d) they must conform to any limitations or exclusions set forth in these principles or in the research agreements as to types or amounts of cost items.

§ 1-15.303-3 Reasonable costs.

A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved therefor, reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made. Major considerations involved in the determination of the reasonableness of a cost are: (a) Whether or not the cost is of a type generally recognized as necessary for the operation of the institution or the performance of the research agreement; (b) the restraints or requirements imposed by such factors as arm's length bargaining, federal and state laws and regulations, and research agreement terms and conditions; (c) whether or not the individuals concerned acted with due prudence in the circumstances, considering their responsibilities to the institution, its employees, its students, the Government, and the public at large; and (d) the extent to which the actions taken with respect to the incurrence of the cost are consistent with established institutional policies and practices applicable to the work of the institution generally, including government research.

§ 1-15.303-4 Allocable costs.

(a) A cost is allocable to a particular cost objective (i.e., a specific function, project, research agreement, department, or the like) if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship. Subject to the foregoing, a cost is allocable to a research agreement if it is incurred solely to advance the work under the research agreement; or it benefits both the research agreement and other work of the institution in proportions that can be approximated through use of reasonable methods; or it is necessary to the overall operation of the institution and, in the light of the standards provided in this Subpart 1-15.3, is deemed to be assignable in part to organized research. Where the purchase of equipment or other capital items are specifically authorized under a research agreement, the amounts thus authorized for such purchases are allocable to the research agreement regardless of the use that may subsequently be made of the equipment or other capital items involved.

(b) Any costs allocable to a particular research agreement under the standards provided in this Subpart 1-15.3 may not be shifted to other research agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the research agreement, or for other reasons of convenience.

§ 1-15.303-5 Applicable credits.

credits"

(a) The term "applicable refers to those receipt or negative expenditure types of transactions which operate to offset or reduce expense items that are allocable to research agreements as direct or indirect costs. Typical examples of such transactions are: Purchase discounts, rebates, or allowances; recoveries or indemnities on losses; sales of scrap or incidental services; and adjustments of overpayments or erroneous charges.

(b) In some instances, the amounts received from the Federal Government to finance institutional activities or service operations should be treated as applicable credits. Specifically, the concept of netting such credit items against related expenditures should be applied by the institution in determining the rates or amounts to be charged to Government research for services rendered whenever the facilities or other resources used in providing such services have been financed directly, in whole or in part, by Federal funds. (See §§ 1-15.306-6, 115.309-10(b), and 1-15.309-37 for areas of potential application in the matter of direct Federal financing.)

Direct costs are those that can be identified specifically with a particular cost objective. For this purpose, the term "cost objective" refers not only to the ultimate objectives against which costs are finally lodged such as research agreements, but also to other established cost objectives such as the individual accounts for recording particular objects or items of expense, and the separate account groupings designed to record the expenses incurred by individual organizational units, functions, projects and the like. In general, the administrative functions and service activities described in § 1-15.306 are identifiable as separate cost objectives, and the expenses associated with such objectives become eligible in due course for distribution as

indirect costs of research agreements and other ultimate cost objectives.

§ 1-15.304–2 Application to research agreements.

Identifiable benefit to the research work rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect costs of research agreements. Typical transactions chargeable to a research agreement as direct costs are the compensation of employees for the time or effort devoted to the performance of work under the research agreement, including related staff benefit and pension plan costs to the extent that such items are consistently treated by the educational institution as direct rather than indirect costs; the costs of materials consumed or expended in the performance of such work; and other items of expense incurred for the research agreement, including extraordinary utility consumption. The cost of materials supplied from stock or services rendered by specialized facilities or other institutional service operations may be included as direct costs of research agreements provided such items are consistently treated by the institution as direct rather than indirect costs and are charged under a recognized method of costing or pricing designed to recover only actual costs and conforming to generally accepted cost accounting practices consistently followed by the institution. § 1-15.305

§ 1-15.305-1

Indirect costs. General.