Home Blog & Media Travel Costs under USAID Contracts & Grants: Fly America & Class of Travel

Travel Costs under USAID Contracts & Grants: Fly America & Class of Travel

December 20, 2019

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Olga Wall

Chief of Compliance and Contract Administration
Palladium: Make It Possible

I have slightly re-written the original blog post on this subject, updating information based on recent decisions and links to regulations, websites and papers.

Just to make you all feel better about not knowing all of these answers off hand, remember this – In order to compile this information, we have had to comb through the following sources:

  • Federal Acquisition Regulations (FAR)
  • 2 C.F.R. 200 Uniform Guidance for Grants and Cooperative Agreements
  • USAID ADS 303 Mandatory Provisions for US Recipients
  • ADS 302 Mandatory References and Additional Help
  • The Office of International Aviation Information Blog
  • U.S. Department of State Open Skies Agreements Webpage
  • GSA Open Skies Information Page for Fly America application
  • GSA Help Desk to answer burning questions about all the “other Open Skies” nobody has an answer to
  • Department of Transportation Air Agreements Information
  • Federal Registrar for Comptroller General Notices
  • DCAA Guidance Webpages
  • Federal Travel Regulations and
  • Finally, USAID Internal Policies and Internal Memos to Contracting and Agreement Officers

Just saying…. How could anyone know (or, for that matter, want to know) that they have to study all these regulations just to find an answer for every question that arises about whether a certain flight will be allowed or not?

This is a very long post because there are a lot of frequently asked questions and we wanted to put it all in one place for ease of reference.

The best way to explain the confusing travel cost principle and Fly America requirements is through the kind of questions that we all face all the time from our employees, and an answer to which is normally met with an inevitable “Why? This does not make any sense!”

We cannot help you with the second part, but perhaps answering with a link to this article would alleviate some of the pain:

Fly America Act

What is the Fly America Act and why is my travel subject to this? I can fly my native Nauru Airline for so much cheaper?

Federal travelers are required by 49 U.S.C. 40118 (International Air Transportation Fair Competitive Practices Act), commonly referred to as the Fly America Act, to use United States air carrier service for all air travel and cargo transportation services funded by the United States Government.

USAID US grantees are bound by Fly America Act through application of the standard provision at ADS 303 Mandatory Standard Provisions for US Recipients # M-17 International Travel & Transportation (December 2014)Non-US grantees have a similar provisions at Required as Applicable Provision 8

USAID contractors, are bound by Fly America through FAR 52.247-63 clause included in their contracts.

What airlines are qualified to provide passenger service under Fly America Rules?

In general, all airlines based in the United States qualify. Specifically, a US flag air carrier is one that holds a certificate under Section 401 of the Federal Aviation Act of 1958 (49 U.S.C.Chapter411) If you have questions on a particular airline, you can search this database.

Some non-US based airlines also qualify through air transport agreements between foreign carrier and the US Government, such as the United States-European Union “Open Skies” agreement (www.gsa.gov/openskies ) See more on this exception below.

What about code-shares?

Travelers are allowed to fly on code share flights operated by foreign carriers. A flight qualifies if your ticket identifies the U.S. carrier. For example: “AA 1234 operated by SAA 567” (AA = American Airlines, SAA = South African Airways).

How do I determine if a flight is a code share flight?

Tickets/electronic receipts include the information necessary to determine if a flight is a qualifying code share.

The US Comptroller General issued a decision on September 25, 1991 which states in part: Travel under a ticket issued by a U.S. certificated air carrier which leases space on the aircraft of a foreign air carrier under a code-share arrangement in international air transportation is considered to be transportation provided by air carriers holding certificates as required under 49 U.S.C. App. § 1517 (1988), the Fly America Act. Thus, passengers may properly use tickets paid for by the government under a code share arrangement if the tickets were purchased from the U.S. air carrier. Comptroller General Fly America 09 1991

When the code share is between a U.S. air carrier and a non-U.S. air carrier, the ticket stock or documentation for electronic tickets must identify the U.S. airlines designator code and flight number as the marketing carrier to be in compliance with the Fly America Act. See examples below:

Allowable code share : UA 1002 (Operated by LH 1224)

Not Allowable code share: IA 1224 (Air India) (Operated by UA 1002)

What are the exceptions to this requirement?

Grantees:  ADS 303 Mandatory Standard Provisions for US Recipients M-17 International Travel & Transportation (December 2014). Non-US grantees have a similar provisions at Required as Applicable Provision 8. The exception applies if:

  • The recipient uses a European Union (EU) flag air carrier, which is an airline operating from an EU country that has signed the US-EU “Open Skies” agreement
  • Travel to or from one of the following countries on an airline of that country when no city pair fare is in effect for that leg (Search City Pairs): (a) Australia on an Australian airline (b) Switzerland on a Swiss airline, or (c) Japan on a Japanese airline;
  • Only for a particular leg of a route on which no US Flag Air Carrier provides service on that route
  • For a trip of 3 hours or less, the use of a US Flag Air Carrier at least doubles the travel time;
  • If the US Flag Air Carrier offers direct service, use of the US Flag Air Carrier would increase the travel time by more than 24 hours; or
  • If the US Flag Air Carrier does not offer direct service: (a) Use of the US Flag Air Carrier increases the number of aircraft changes by 2 or more, (b) Use of the US Flag Air Carrier extends travel time by 6 hours or more, or (c) Use of the US Flag Air Carrier requires a layover at an overseas interchange of 4 hours or more.


  • If service on a foreign air carrier would be three hours or less, and use of the U.S. flag air carrier would at least double your en route travel time, you are not required to use a U.S. flag air carrier.
  • In addition, when flying between the United States and a foreign location, the following exceptions apply:
  1. If a U.S. flag air carrier offers nonstop or direct service (no aircraft change) from your origin to your destination, you must use the U.S. flag air carrier service unless such use would extend your travel time, including delay at origin, by 24 hours or more.
  2. If a U.S. flag air carrier does not offer nonstop or direct service (no aircraft change) between your origin and your des­tination, you must use a U.S. flag air carrier on every portion of the route where it provides service unless, when compared to using a foreign air carrier, such use would: (a) Increase the number of aircraft changes you must make outside of the U.S. by 2 or more; or (b) Extend your travel time by at least 6 hours or more; or (c) Require a connecting time of 4 hours or more at an overseas interchange point.
  • When flying between two foreign destinations and U.S. service is available, you may use a foreign air carrier if such use would:
  1. Increase the number of aircraft changes you must make en route by 2 or more; or
  2. Extend your travel time by 6 hours or more; or
  3. Require a connecting time of 4 hours or more at an overseas interchange point
  4.  If use of a foreign air carrier may, in certain circumstances, be deemed necessary for medical or safety reasons,
  5.  Finally, if the carrier is covered by an air transport agreement between the US and a foreign government that allows for the flight route you are taking.

Exceptions must be documented in writing and kept with the cost records.

Where does it say we are allowed to fly EU Airline and other non-US carriers?

For USAID grantees  – in the same standard provision at ADS 303 Mandatory Standard Provisions for US Recipients M-17 International Travel & Transportation (December 2014). For Non-US grantees – Required as Applicable Provision 8.

For USAID Contractors: FAR clause 52.247-63 under its prescription at FAR 47.403-1 Availability and Unavailability of U.S.-flag air carrier service includes exceptions to use of US Flag Carrier including FAR 47.430-2 Air transport agreements between the United States and foreign governments:

Nothing in the guidelines of the Comptroller General (see 47.403) shall preclude, and no penalty shall attend, the use of a foreign-flag air carrier that provides transportation under an air transport agreement between the United States and a foreign government, the terms of which are consistent with the international aviation policy goals at 49 U.S.C. 1502(b) and provide reciprocal rights and benefits. (Most) Open Skies agreements meet the requirements of 49 U.S.C. 1502 (b).

What is an Open Skies Air Transportation Agreement?

The Office of International Aviation and the U.S. Department of State negotiate bilateral and multilateral air service agreements with the United States’ foreign aviation partners. Such agreements provide the basis for airlines of the countries involved to provide international air services for passengers, cargo and mail. Through air service agreements, the United States develops a pro competitive operating environment for U.S. airline services between the United States and foreign countries.

Since 1992, The Office of International Aviation and the U.S. Department of State and have pursued an “open-skies” policy designed to eliminate government involvement in airline decision-making about routes, capacity, and pricing in international markets. Open-Skies agreements also contain provisions governing commercial opportunities, safety, and security. The United States has negotiated open-skies agreements with more than 100 aviation partners.

Which Open Skies Agreements provide an Exception to Fly America Act?

The biggest exception to the Fly America Act is the Open Skies Agreement with the European Union.

The United States and European Union (EU) “Open Skies” Air Transport Agreement (published here  Open Skies Amendment) qualifies under the exception to Fly America Act, which means that all the airlines of the countries listed in the agreement can be substituted for US-Flag Carries on international flights taken by USAID contractors and Grantees.

There are also Open Skies Travel Agreements with Australia, Japan and Switzerland, which qualify as exceptions under Fly American Act, but they carry additional restrictions as to the exact routes and city-pair limitations explained further.

All other Open Skies Agreements are more restrictive and do not qualify as an exception under Fly America Act.

Here are the details of qualifying agreements under Fly America exception:

European Union Airlines and Free Trade Association (EFTA) member states Norway and Iceland: You can use US Flag or an EU airline when traveling to a destination serviced by a European Union airline included in Open Skies Agreement (this means all destinations serviced by EU airlines, including between two points outside the US and also from and to US from EU or any other foreign point serviced by the qualifying EU airline).

Australia: Travelers using federal dollars can use an Australian airline only if a point of origin/destination is either the US or Australia and there is no city-pair contract flight between the two points (origin and destination). City Pair Search GSA

Switzerland: Travelers using federal dollars can use a Swiss airline only if a point of origin/destination is either the US or Switzerland and there is no city-pair contract flight between the two points (origin and destination). City Pair Search GSA

Japan: Travelers using federal dollars can use a Japanese airline only if a point of origin/destination is either the US or Japan and there is no city-pair contract flight between the two points (origin and destination). City Pair Search GSA

What countries are included in the EU Open Skies Agreement?

Austria (1995)Belgium (1952) Bulgaria (2007) Croatia (2013) Cyprus (2004) Czech Republic (2004) Denmark (1973) Estonia (2004) Finland (1995) France (1952) Germany (1952) Greece (1981) Hungary (2004) Ireland (1973) Italy (1952) Latvia (2004) Lithuania (2004) Luxembourg (1952) Malta (2004) Netherlands (1952) Poland (2004) Portugal (1986) Romania (2007) Slovakia (2004) Slovenia (2004) Spain (1986) Sweden (1995) United Kingdom (1973) Norway. Iceland (June 2011)

Do all existing Open Skies Agreements and associated country airlines qualify under Fly America?

No, at this writing, only the EU Open Skies Agreement Countries (see above) and Australia, Japan and Switzerland (with destination & city pair restrictions) qualify as exceptions to Fly America Act.

Do you have to fly only to EU destinations on an EU Open Skies listed airline for the flight to qualify as an exception to the Fly America Act?

No, that restriction was lifted on June 24, 2010 when the U.S. – EU Open Skies Agreement was amended (see GSA FTR 11-02). Now contractors/grantees can fly to any destination served by the qualifying EU airline under the Open Skies Agreement, including flights originating, arriving or stopping in the EU (for example from Miami to Munich to Ankara or from Atlanta to Mexico City on a flight that operates from Frankfurt to Atlanta to Mexico City).

Do I have to check city-pairs fare to qualify for Open Skies?

No – for airlines under the EU Open Skies Agreement (this requirement was removed in the June 2010 amendment to EU Open Skies Agreement).

Yes – for flights on Japan, Australia or Switzerland airlines. City- Pairs are set fares available to US Government personnel and not available to contractors, however the contractors/grantees still have to check if such fares are available before they are able to use the exception to Fly America when using Australia, Japan and Switzerland airlines. City Pair Search GSA

Allowable Class of Airfares and Documentation

What class of travel is allowable under the FAR Cost Principles?

FAR 31.205-46(b) and 2 C.F.R. 200.474 generally limits the allowable cost for air travel to the lowest priced airfare available for flights during normal business hours (after consideration of any negotiated discounts, rebates, or other cost savings.)

Are there any exceptions to the lowest priced airfare available requirement?

Costs in excess of cheapest available airfare during regular business hours are not allowable, however, if the costs are documented and justified and fall within one or more of the exceptions contained in the rule, they should be allowable.

Once the baseline airfare cost is established (cheapest airfare available during regular business hours), a higher cost fare is nonetheless allowable if certain conditions are met.

For both Contractors and Grantees the conditions are the same:

FAR 31.205-46(b): Airfare costs in excess of the lowest priced airfare available to the contractor during normal business hours are unallowable except when such accommodations require circuitous routing, require travel during unreasonable hours, excessively prolong travel, result in increased cost that would offset transportation savings, are not reasonably adequate for the physical or medical needs of the traveler, or are not reasonably available to meet mission requirements. However, in order for airfare costs in excess of the above airfare to be allowable, the applicable condition(s) set forth above must be documented and justified.

2 C.F.R. 200.474 (d) Commercial air travel. (1) Airfare costs in excess of the basic least expensive unrestricted accommodations class offered by commercial airlines are unallowable except when such accommodations would: (i) Require circuitous routing; (ii) Require travel during unreasonable hours; (iii) Excessively prolong travel; (iv) Result in additional costs that would offset the transportation savings; or (v) Offer accommodations not reasonably adequate for the traveler’s medical needs. The non-Federal entity must justify and document these conditions on a case-by-case basis in order for the use of first-class or business-class airfare to be allowable in such cases.

What do the exceptions to “lowest priced airfare” mean and how can the exceptions be applied practically to international travel under USAID programs?

Below I break down some of the commonly asked questions that get to the exceptions.

Does purchasing lowest priced airfare mean you should purchase non-refundable tickets? Yes, in response to public comments on the revised cost principle, the FAR Councils affirmed that applying the “lowest priced airfare” could mean purchasing non-refundable tickets and the cost for changing such tickets or cancellation surcharges would be allowable costs.  See comments and responses here: Revised Travel Cost Principle Public Comments. However, auditors will not question airfare costs claimed in excess of nonrefundable airfare available during normal business hours if the contractor’s data show that its experience with cancelling nonrefundable tickets results in increased cost in comparison to the cost of refundable tickets.

Can I book any refundable or non-refundable ticket in economy and not the cheapest one available so that I can upgrade it with miles or additional payment? No, you must always buy on the basis of the lowest priced airfare available for travel during business hours, unless any of the exceptions discussed further apply.

What does “available during normal business hours” mean when traveling internationally? The contractor’s policies and procedures should provide for advance planning of travel to assure that the lowest priced airfare available to the contractor for flights during normal business hours is documented and utilized as the baseline allowable airfare cost (DCAA guidance). So, if you travel to Croatia and there are two flights per day, one leaves at 2 pm (during business hours) and one leaves at 9 pm (after business hours), the cheapest airfare available for the 2 pm flight is your baseline for the allowability amount. If you choose to leave at 9 pm, you still can, as long as the cost does not exceed the 2 pm cheapest available airfare cost. Document by getting printouts from travel agent and writing a memo/certificate.

What is “travel during unreasonable hours”? A more expensive fare flight that extends beyond normal business hours, requires overnight flying, or exceeds a defined maximum reasonable travel duration set by your company’s policy (for example: 14 hours or more – like USAID travel policy) should be allowable where properly documented.

When evaluating a contractor’s policy for hardship travel, application of the exception to both USG funded and non USG funded work, pre-planning procedures, including leaving early to arrive and have a day of rest, alternative split travel arrangements etc., will be considered to determine if the policy really covers unreasonable travel time demands and is consistently applied to all contractor travel.

Emergency. If the business class was the only available fare when you learned the need to travel, which can not be postponed because of the need to accomplish a specific contract requirement, you could justify business class fare as the “cheapest” as long as your travel policies assure pre-planning/pre-booking travel to the maximum extent possible.

What is “circuitous routing”? The avoidance of “circuitous routing” is a justification for taking a more expensive flight, but would not unto itself justify business class if the total duration of travel was the same or nearly the same.  The example would be if you there were two flights available on the day that you need to travel and one flight was direct with one stop over but only available in business class and the other was cheaper in economy but required you to make additional stop-overs and change of planes, you would be justified in documenting “circuitous routing” as the exception to taking a more expensive business class flight, but only if the alternative circuitous routing would result in a longer travel. Again policy is key here.

What is “adequate medical needs of traveler”? The physical needs of travelers, including the need for rest during extended flights overseas, requires the comfort and accommodations of a higher class of travel including Business or First Class. All such medically required needs must be documented with a copy of physician or other medical professional’s letter confirming the need for such exception. No detailed medical information is required and should not be asked for due to privacy requirements under HIPAA ( HIPAA Privacy Rules established national standards to protect individuals’ medical records and other personal health information and applies to health plans, health care clearinghouses, and those health care providers that conduct certain health care transactions electronically.)

Temporary disabilities/needs: Certifications remain in effect for up to 6 months or the duration of the need, whichever is shorter.

Permanent disabilities/needs: require review and renewal by a physician EVERY 2 YEARS

What is the best way for Contractors to allow consideration of other than economy class travel if circumstances warrant it? In summary, the best practice for using exceptions to the “lowest available airfare” requires a written travel policy, defining “normal business hours”, “hardship travel durations”, pre-planning, exemption procedures and documentation for exceptions.

It should be applied equally at all levels of the organization –airfares for executives traveling in business class need the same justification as the rank and file employees; otherwise the excess portion of the executive’s business class fare is unallowable.

USAID’s direct employee policy, for example, allows premium class travel for travel exceeding 14 hours or when it is more expensive to break up the travel and pay per diem and travel time under a lower fare ticket than flying business class directly. No, it does not mean that it applies to contractors.

What is the downside of the Contractor’s policy mirroring USAID’s policy for its employees? The problem with having the same policy as USAID and mandating business class travel for all trips over 14 hours in duration is the cost. Since the policy is meant to apply equally to all employees under all programs, you would not be able to only offer economy or cheapest fare under the programs that do not have the budget to cover a more expensive class….   That would not be a fair policy and violate the rule of treating the US Government fairly when incurring costs.

This, in turn, will make your company less competitive on the price and probably result in long arguments during negotiations and potential loss of work.

USAID confirms and recognizes the same issue in its guidance to its Contracting and Agreement officers codified in ADS 302 Mandatory Reference dated 5/5/2006 – See Guidance to Contracting Staff Regarding Business Class Travel for Contractors:

If you agree to a contract/TO budget that reflects a reasonable number of trips and travelers at standard/ economy airfare that is sufficient to meet the requirements of the work needed in the Statement of Work, then why not let it go at that? Allow the contractor to manage the travel funds in accordance with the terms of the contract, including the relevant cost principle. If a situation arises during performance for which the contractor can document and justify using business class and doing so complies with the cost principle–and doesn’t result in any increased cost to the contract–then it’s their business decision to do so.

What is the alternative approach to allow flexibility? A better approach may be to have the following exceptions to your “lowest priced airfare” policy (apart from the medical need, which is pretty straightforward):

Aifares Available during business hours. Provided adequate pre-planning for travel is done and the booking is not the last minute booking for no reason. If there is a choice, allow the traveler to choose the more expensive fare available for a flight which departs during business hours vs a cheaper fare available outside such hours. The airfare available during business hours must be the cheapest available during business hours on that day.

In other words, if you have a choice of fares leaving at 2 pm and midnight, and the airfare leaving at 2 pm is in economy and is more expensive than the same class airfare leaving at midnight, you can choose the 2 pm airfare. If the only available airfare at 2 pm is in economy plus or business, then it should also be allowable, because it meets the baseline definition: the cheapest available airfare during business hours.

Travel Duration – “Unreasonable hours”. Once you define what “unreasonable hours of travel” represent for your company (USAID defines it as 14 hours, IRS defines theirs at 12), to keep the costs low, your policy could (these are suggestions) break down what options are available:

  1.  Option One – break up the trip into increments with associated costs for per diem and hotel and extra pay for travel time (unless the combined cost of such increments is more expensive than flying a premium class airfare) or
  2.  Allow the traveler to take a rest day upon arrival if flying coach for more than your defined unreasonable hours of travel or
  3.  Allow the next available premium class fare: Economy Plus or Business Class
  4.  Document the decision in a certificate signed by an authorized compliance person.

You can further split it by types of employees and say that personnel permanently relocating (Long Term Personnel and Dependents), and traveling over 14 hours, have the right for Option 1 but will only fly cheapest airfare available (again unless the additional cost of splitting the trip will make it more expensive than direct premium class fare).

Short Term personnel who are required to report to work right away and have no time to recuperate and have to travel 14 hours or more can get the Option 2 and get Economy Plus or Business Class Fare – with Economy Plus being the default unless only Business is available.

This will keep the costs more competitive than simply allowing the next comfort class for all 14 hour trips.

Does travel by employees charging to Indirect Cost pools – not directly under a specific Government contract — follows the same rules ?

See the answer to this question in the previous blog post at Indirect Cost Restrictions Fly America Act (Spoiler alert – Yes it does).

What documentation does DCAA require?

All of the above exceptions to the class of travel or the use of non -US Flag Carrier airlines must be justified and documented in writing and kept with the vouchers which bill those costs to the Government.

When the traveler otherwise fails to use available U.S.-flag air carrier service without justification and signed certificate, the amount to be disallowed is based on the loss of revenues suffered by U.S.-flag air carriers, determined by the formula provided in FAR 47.403-1. However, based on the Comptroller General’s decision, 56 Comp. Gen. 209, dated January 3, 1977, the disallowed amount shall not exceed the fare of the segment improperly traveled.

Additionally, DCAA published audit guidelines on March 22, 2010 that require specific documentation to exceptions of the cheapest available airfare. First, the audit guidance asserts that in order to comply with the revised travel cost principle, “the contractor’s policies and procedures should provide for advance planning of travel to assure that the lowest priced airfare available to the contractor for flights during normal business hours is documented and utilized as the baseline for allowable airfare costs”. Second, it states that “documentation substantiating the lowest airfare available takes the form of quotations from competing airlines or travel service from which the lowest priced airfare can be selected; giving proper consideration to any potential discount or credits to the contractor’s cost”.  This means the lowest airfare should consider existence of special agreements between contractors and airlines or travel services offering discounted fares compared to publicly available airfares for the same travel route.

The audit guidance also advises auditors to consider questioning contractor’s policies and procedures if there are frequent instances in which a single quotation is obtained, however it acknowledges that there may be instances where only one flight is available for the mission.

The guidance also advises auditors that contractors can choose refundable tickets over non-refundable tickets when the contractor’s data shows that its experience with cancelling non-refundable tickets results in increased costs as compared to refundable tickets.

Do you have to return your earned miles to your company?

Not normally. However, if your company has a policy that results in its employees turning in the frequent flyer bonus credits for company use, then the auditors will look to make sure Government receives its applicable share of any credits actually received by the contractor.

This post originally appeared on LinkedIn on September 11th 2019

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