31.205-35
Relocation costs
Only reasonable, properly documented, and policy-consistent relocation costs are allowable, with strict limits and refund requirements if employees resign within 12 months.
Overview
FAR 31.205-35 outlines the rules for determining the allowability of relocation costs incurred by contractors when employees are permanently reassigned or newly recruited for work assignments of 12 months or more. It specifies which types of relocation expenses are allowable, sets monetary and procedural limitations, and identifies unallowable costs. The regulation also addresses lump-sum reimbursements, refund requirements if employees resign within 12 months, and special provisions for employees hired for specific contracts or field projects.
Key Rules
- Allowable Relocation Costs
- Includes travel, transportation of household goods, home finding, temporary lodging, certain closing and ownership costs, and other reasonable expenses, subject to specific limits (e.g., 14% of home sale price for certain costs, 5% for new home acquisition).
- Criteria for Allowability
- Moves must benefit the employer, follow consistent company policy, not exceed actual expenses (with some lump-sum exceptions), and not be otherwise unallowable under FAR 31.2.
- Unallowable Costs
- Loss on home sale, certain home acquisition costs (e.g., broker fees, litigation), continuing mortgage principal payments, and costs related to special mortgage arrangements are not allowable.
- Refund Requirement
- If an employee resigns within 12 months for reasons within their control, previously allowed relocation costs must be refunded or credited to the Government.
- Special/Mass Movements
- Family or mass personnel movements are allowable if costs are properly allocated.
- Field Project Employees
- Relocation costs for employees hired for specific contracts/field projects are allowable if employment is 12+ months and agreements specify return relocation, with certain exceptions for refunds.
Responsibilities
- Contracting Officers: Ensure claimed relocation costs meet FAR criteria, monitor for required refunds, and verify lump-sum calculations and documentation.
- Contractors: Maintain consistent relocation policies, document and justify all claimed costs, adhere to monetary limits, and refund costs if employees resign within 12 months for personal reasons.
- Agencies: Oversee contractor compliance, review cost allowability, and enforce refund provisions.
Practical Implications
- This section ensures only reasonable, necessary, and properly documented relocation costs are charged to government contracts, protecting government funds from excessive or inappropriate expenses. Contractors must be diligent in policy application, documentation, and monitoring employee tenure to avoid disallowed costs or refund obligations.