FAR 47.403-3—Disallowance of expenditures.
Plain-English Summary
FAR 47.403-3 explains when the Government must disallow costs for commercial international air travel on foreign-flag carriers that is financed by U.S. Government funds. It covers the basic rule that such expenditures are not allowable unless the voucher includes a memorandum explaining why U.S.-flag service was unavailable or why foreign-flag service was necessary, the special disallowance method when a traveler takes an indirect route or otherwise does not use available U.S.-flag service, and the contractor-side justification method tied to the statement in the Preference for U.S.-Flag Air Carriers clause at 52.247-63. In practice, this section is about documentation and cost allowability: if the required justification is missing or inadequate, the agency must reduce or deny reimbursement. It also links the disallowance calculation to the loss of revenue suffered by U.S.-flag carriers, reflecting the policy preference for U.S.-flag air service when available. For contractors and travelers, the practical effect is that foreign-flag international air travel must be carefully justified and supported before payment is approved.
Key Rules
Foreign-flag costs are disallowed
Agencies must disallow expenditures for U.S. Government-financed commercial international air transportation on foreign-flag carriers unless the voucher includes an adequate memorandum explaining why U.S.-flag service was unavailable or why foreign-flag service was necessary.
Documentation must support payment
The justification must be attached to the appropriate voucher. Without that supporting memorandum, the expenditure is subject to disallowance even if the travel occurred and was otherwise authorized.
Indirect-route travel triggers disallowance
If the traveler uses an indirect route or otherwise fails to use available U.S.-flag carrier service, the amount disallowed is based on the loss of revenue to U.S.-flag carriers, using the formula referenced in the regulation and explained in 56 Comp. Gen. 209 (1977).
Contractor statement can satisfy justification
For contractor travel, the justification requirement is met by using a statement similar to the one in the clause at 52.247-63, Preference for U.S.-Flag Air Carriers. This ties the cost-justification process to the contract clause and its required certification language.
See related policy guidance
The section points readers to FAR 47.405 for additional guidance, indicating that the disallowance rule works together with the broader U.S.-flag air carrier preference requirements and related implementation procedures.
Responsibilities
Agency
Disallow expenditures for foreign-flag commercial international air transportation when the required justification memorandum is missing or inadequate, and apply the prescribed disallowance method when the traveler did not use available U.S.-flag service.
Contracting Officer
Ensure the contract includes and enforces the U.S.-flag air carrier preference requirements, review whether the contractor’s justification statement is acceptable, and coordinate with payment officials when costs must be reduced or denied.
Contractor
Provide the required justification statement or memorandum supporting foreign-flag air travel, use language similar to the clause at 52.247-63 when applicable, and retain documentation showing why U.S.-flag service was unavailable or foreign-flag service was necessary.
Traveler/Employee
Use available U.S.-flag air carrier service when required, and if foreign-flag service or an indirect route is used, ensure the trip is properly documented so the agency can determine whether any costs must be disallowed.
Voucher/Payment Official
Verify that the voucher includes the required memorandum or equivalent justification before approving payment, and apply the disallowance calculation when the travel does not comply with the U.S.-flag preference.
Practical Implications
Missing or weak documentation is the most common problem; even a valid travel need can become unallowable if the voucher does not include the required memorandum or equivalent statement.
The rule is not just about whether foreign-flag travel happened, but whether the traveler could have used U.S.-flag service and whether the record explains why that did not occur.
Indirect routing can create partial or full disallowance, so travelers and approving officials should compare the actual itinerary against available U.S.-flag options before booking.
Contractors should align travel approval and voucher support with the clause at 52.247-63 to avoid reimbursement delays or cost reductions.
Payment personnel should treat this as a compliance check, not a mere paperwork formality, because the regulation requires disallowance when the justification is absent or insufficient.
Official Regulatory Text
(a) Agencies shall disallow expenditures for U.S. Government-financed commercial international air transportation on foreign-flag air carriers unless there is attached to the appropriate voucher a memorandum adequately explaining why service by U.S.-flag air carriers was not available, or why it was necessary to use foreign-flag air carriers. (b) When the travel is by indirect route or the traveler otherwise fails to use available U.S.-flag air carrier service, the amount to be disallowed against the traveler is based on the loss of revenues suffered by U.S.-flag air carriers as determined under the following formula, which is prescribed and more fully explained in 56 Comp. Gen. 209 (1977): (c) The justification requirement is satisfied by the contractor’s use of a statement similar to the one contained in the clause at 52.247-63 , Preference for U.S.-Flag Air Carriers. (See 47.405 .)