Per Diem

Term Definition
Per Diem means by the day. In the United States, per diem rates are regulated by the Federal Acquisition Regulation (FAR).

Allowable costs for a contractor's travel and transportation allowances are usually governed by the Federal Acquisition Regulation (“FAR”) travel cost principle at FAR 31.205-46. This provision states that costs for lodging incurred by a contractor traveling on official company business under a Government contract are allowable if they do not exceed, on a daily basis, the “maximum per diem rates” in effect, at the time of travel in one of three different Government travel regulations – the GSA's Federal Travel Regulation (“FTR”), the DoD's Joint Travel Regulations (“JTR”), and the State Department's Standardized Regulations (“SR”). “Maximum per diem rates” are defined in the Defense Contract Audit Agency's (“DCAA”) Contract Audit Manual (“CAM”) as “a combination of lodging plus meals and incidental expenses.”

The FTR, JTR, and SR apply to Government employees. Except for a small number of key portions, these regulations do not apply to contractors. Among the key portions that apply to contractors are: (i) the maximum per diem rates; and (ii) the definitions of lodging, meals, and incidental expenses. For contractors, the starting point for any discussion of travel costs is almost always the travel cost principle in the FAR.

Under the FAR travel cost principle, for contractors traveling in the contiguous United States, maximum per diem rates are set in the FTR. For contractors traveling in Alaska, Hawaii, and possessions of the United States, the maximum per diem rates are set in the JTR. For contractors traveling to areas outside the United States and its possessions, the maximum per diem rates are set in the SR.

The FTR, JTR, and SR all provide for two separate ceiling amounts, one for lodging, and one for meals and incidental expenses.  Federal employees and military personnel are subject to the separate ceilings; however, Government contractors are subject to only one – the total of lodging plus meals and incidental expenses – otherwise known as the “maximum per diem rate.”

Area of Application
Cost Accounting