[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR31.205-13]

[Page 594]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents
 
          Subpart 31.2--Contracts With Commercial Organizations
 
Sec. 31.205-13  Employee morale, health, welfare, food service, and dormitory costs and credits.

    (a) Aggregate costs incurred on activities designed to improve 
working conditions, employer-employee relations, employee morale, and 
employee performance (less income generated by these activities) are 
allowable, except as limited by paragraphs (b), (c), and (d) of this 
subsection. Some examples of allowable activities are house 
publications, health clinics, wellness/fitness centers, employee 
counseling services, and food and dormitory services, which include 
operating or furnishing facilities for cafeterias, dining rooms, 
canteens, lunch wagons, vending machines, living accommodations, or 
similar types of services for the contractor's employees at or near the 
contractor's facilities.
    (b) Costs of gifts are unallowable. (Gifts do not include awards for 
performance made pursuant to 31.205-6(f) or awards made in recognition 
of employee achievements pursuant to an established contractor plan or 
policy.)
    (c) Costs of recreation are unallowable, except for the costs of 
employees' participation in company sponsored sports teams or employee 
organizations designed to improve company loyalty, team work, or 
physical fitness.
    (d) Losses from operating food and dormitory services may be 
included as costs only if the contractor's objective is to operate such 
services on a break-even basis. Losses sustained because food services 
or lodging accommodations are furnished without charge or at prices or 
rates which obviously would not be conducive to the accomplishment of 
the above objective are not allowable. A loss may be allowed, however, 
to the extent that the contractor can demonstrate that unusual 
circumstances exist (e.g., where the contractor must provide food or 
dormitory services at remote locations where adequate commercial 
facilities are not reasonably available; or where charged but 
unproductive labor costs would be excessive but for the services 
provided or where cessation or reduction of food or dormitory operations 
will not otherwise yield net cost savings) such that even with efficient 
management, operating the services on a break-even basis would require 
charging inordinately high prices, or prices or rates higher than those 
charged by commercial establishments offering the same services in the 
same geographical areas. Costs of food and dormitory services shall 
include an allocable share of indirect expenses pertaining to these 
activities.
    (e) When the contractor has an arrangement authorizing an employee 
association to provide or operate a service, such as vending machines in 
the contractor's plant, and retain the profits, such profits shall be 
treated in the same manner as if the contractor were providing the 
service (but see paragraph (f) of this subsection).
    (f) Contributions by the contractor to an employee organization, 
including funds from vending machine receipts or similar sources, may be 
included as costs incurred under paragraph (a) of this subsection only 
to the extent that the contractor demonstrates that an equivalent amount 
of the costs incurred by the employee organization would be allowable if 
directly incurred by the contractor.

[60 FR 42662, Aug. 16, 1995]

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