The majority of the Post Allowance (COLA) changes effective 10/11/2020 were the result of a revised COLA process that was an outcome of a GAO and Congressional inquiry, and a 2017 OIG recommendation that the Department develop an objective method of generating COLA rates.
The major change in the process from the prior method was with respect to collection of market data. Rather than task posts with collecting the data, the Department's contractor obtains it for 210 locations, including Washington, D.C. suburbs, from Mercer, AirInc, and ECA International. These three companies provide similar support to major U.S. multinational enterprises with worldwide presence. The contractor then used a uniform methodology, adjusting for costs of housing and utilities since these are provided by USG agencies for their employees assigned to foreign posts, to calculate an index that assigned a base score of 100 to the Washington, D.C. suburbs and compared foreign locations to that base. The rate for each post is based on how the post index compares to the base index.
The data for the foreign post's expat basket of goods and services is compared to that of the Washington, D.C. suburbs. The contractor provides updated index information to the Department of State's Office of Allowances every August. New COLA rates based on that data will be implemented during the first quarter of the Fiscal Year. Post indexes will be reviewed on a biweekly basis for exchange rate fluctuations and post allowances will be adjusted when necessary. More information about how COLA levels are determined is available in DSSR 228.
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Post Allowance: Commonly referred to as the "cost-of-living" allowance, this is an allowance based on a percentage of "spendable income," i.e. money you can really put your hands on to spend on goods and services. The amount varies depending on salary level and family size. The post allowance is calculated by comparing costs for goods and services at the foreign post with the costs for the same items in the Washington, D.C. area. Categories of goods and services and standard weights are: Food At and Away from Home (32%); Alcohol/Tobacco (3%); Clothing (7%); Personal Care (3%); Household Furnishings (8%); Medical (3%); Recreation (15%); Public and Private Transportation (14%); and Household Operations (15%).