Federal contractors must follow GSA per diem schedules and FAR Part 31 cost principles, with no flexibility to exceed locality rates without documented justification. Platforms like Vergo address this by mapping reimbursement requests directly to FAR-compliant cost codes, flagging submissions that exceed GSA thresholds before approval. Non-compliant reimbursements risk disallowance during audit, triggering cost recovery demands and jeopardizing contract renewals.
Government construction contracts — whether federal building projects, infrastructure work, or public agency contracts — are governed by the Federal Acquisition Regulation (FAR), specifically Part 31, which defines what costs are allowable and reimbursable. Per diem and travel costs must conform to rates published by the General Services Administration (GSA), which sets maximum daily lodging and meal and incidental expense (M&IE) rates by locality.
The challenge for construction firms is structural. A highway project might span three counties with different GSA locality rates. A federal building renovation might pull crews from multiple regions, each with different home-base rules. Unlike a consulting firm with a small traveling sales team, a general contractor managing 40 field employees across a government job site faces dozens of per diem claims weekly — each one potentially subject to audit under the contract's cost accounting requirements.
Manual processes compound the problem. Most field employees submit paper receipts or informal expense reports with no awareness of applicable GSA rates. Payroll or AP staff then process reimbursements based on company policy — which may not align with current GSA schedules — creating compliance gaps that only surface during a DCAA audit or contract close-out review.
Contributing factors specific to government construction work:
Non-compliance with federal per diem rules isn't an abstract risk — it has direct financial and operational consequences for construction controllers.
The most effective approach construction controllers use is enforcing per diem compliance at the point of submission — not during back-office review. This means integrating current GSA rate tables directly into the reimbursement workflow so that when a field employee submits a travel claim, the system validates lodging and M&IE amounts against the applicable locality rate before the claim is processed.
This approach replaces the audit-after-the-fact model with a preventive control. Claims that exceed GSA thresholds are flagged for controller review or automatically capped, with documentation captured to support any justified exceptions under FAR 31.205-46.
Vergo's reimbursement platform is built for exactly this environment. Vergo enforces configurable per diem policies by job, contract type, and locality — so government project submissions are automatically validated against FAR-compliant thresholds. Every reimbursement ties directly to a job cost code and contract line, giving controllers a clean audit trail without manual reconciliation. Vergo integrates natively with major construction ERPs including Sage 100/300, Viewpoint Vista/Spectrum, Procore, Foundation, QuickBooks, Acumatica, CMiC, COINS, Epicor, Jonas, and Deltek — so approved reimbursements post directly to the right job and G/L without duplicate entry.
Before Vergo: A field superintendent submits a $320 hotel receipt for a GSA locality capped at $178. AP processes it against company policy, not the GSA schedule. The overage gets billed to the contract and flagged six months later during audit.
After Vergo: The same submission triggers an automatic flag at entry. The controller is notified, the overage is separated, and only the allowable $178 posts to the government contract — with the exception documented and retained for audit response.
Vergo is a card-agnostic expense management platform built for construction. Connect any corporate or project credit card and get full visibility and control over field spending.
FAR 31.205-46 limits contractor travel costs to the lowest reasonable airfare available and lodging reimbursement up to the applicable GSA per diem rate for the travel destination. Costs exceeding these thresholds are unallowable and cannot be billed to a government contract without documented justification for the exception.
GSA rates are set by locality — typically by county or metropolitan area. When a construction project spans multiple counties, the applicable rate is determined by where the employee is performing work and staying overnight. Projects in non-designated areas default to the standard GSA rate, which is lower than most metropolitan locality rates.
Yes. Prime contractors are responsible for ensuring that subcontractor costs passed through on a government contract meet FAR allowability standards, including travel and per diem. If a subcontractor reimburses employees above GSA rates and bills those costs to the prime, the prime contractor bears the audit exposure and disallowance risk.
Overstated travel reimbursements coded to a government job inflate cost-to-date on that contract. When auditors disallow those costs, the contractor must restate billed amounts, which creates discrepancies in the WIP schedule and can trigger billing disputes or contract underbilling corrections that affect reported revenue and cash flow.
Yes. Platforms like Vergo allow controllers to configure per diem policies by contract type and job, applying GSA locality rate limits at the point of employee submission. This prevents non-compliant amounts from reaching AP processing and creates a documented audit trail for any approved exceptions — a critical control for DCAA-audited contracts.
GSA updates per diem rates annually, typically effective October 1 at the start of the federal fiscal year. Locality rates for high-cost areas can change significantly year over year. Construction payroll and AP teams that rely on static company policies rather than current GSA schedules will accumulate compliance gaps on multi-year government projects.