[Federal Register Volume 60, Number 5 (Monday, January 9, 1995)]
[Rules and Regulations]
[Pages 2330-2331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-312]



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DEPARTMENT OF DEFENSE

48 CFR Part 231


Defense Federal Acquisition Regulation Supplement; Allowable 
Individual Compensation

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: The Director of Defense Procurement has issued an interim rule 
that places a ceiling on allowable individual compensation under DoD 
contracts.

DATES: Effective date: December 14, 1994.
    Comment date: Comments on the interim rule should be submitted in 
writing at the address shown below on or before March 10, 1995, to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, ATTN: Mr. Eric R. Mens, 
PDUSD(A&T)DP/DAR, IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 94-
D318 in all correspondence.

FOR FURTHER INFORMATION CONTACT:
Mr. Eric R. Mens, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 8117 of the Department of Defense Appropriations Act, 1995 
(Public Law 103-335), limits allowable costs for individual 
compensation to $250,000 per year. This restriction applies to DoD 
contracts awarded after April 15, 1995, when payments are from funds 
appropriated in fiscal year 1995.
    The interim DFARS rule revises DFARS Subpart 231.2, Contracts with 
Commercial Organizations; Subpart 231.3, Contracts with Educational 
Institutions; Subpart 231.6, Contracts with State, Local, and Federally 
Recognized Indian Tribal Governments; and Subpart 231.7, Contracts with 
Nonprofit Organizations to implement the statutory ceiling on allowable 
individual compensation costs. In supplementing the cost principle at 
FAR 31.205-6, this DFARS rule relies upon the same definition of 
compensation found in the FAR cost principle, i.e., ``all remuneration 
paid currently or accrued, in whatever form and whether paid 
immediately or deferred, for services rendered by employees to the 
contractor.''

B. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense to issue this rule as an interim rule. Compelling reasons 
exist to promulgate this rule without prior opportunity for public 
comment because section 8117 of the Defense Appropriations Act for 
Fiscal Year 1995 (Public Law 103-335) applies to DoD contracts awarded 
after April 15, 1995, using funds appropriated in FY 1995. An interim 
rule will ensure that DoD contracting activities become aware of the 
statutory ceiling on allowable individual compensation costs when 
forward pricing contracts which will be awarded after April 15, 1995, 
using FY 1995 funds. However, comments received in response to the 
publication of this rule will be considered in formulating the final 
rule.

C. Regulatory Flexibility Act

    The interim rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., because most 
small entities are not subject to the contract cost principles in FAR 
Part 31 or DFARS Part 231. The contract cost principles normally apply 
where contract award exceeds $500,000 and the price is based on 
certified cost or pricing data. Most contracts awarded to small 
entities are awarded on a competitive, fixed-price basis. This interim 
DFARS rule applies only to DoD contractors which incur individual 
compensation costs in excess of $250,000 per year in performing new 
contracts awarded after April 15, 1995, using funds appropriated in FY 
1995. An Initial Regulatory Flexibility Analysis has, therefore, not 
been performed. Comments are invited from small business entities and 
other interested parties. Comments from small entities concerning the 
affected DFARS Subparts will also be considered in accordance with 
section 610 of the Act. Such comments must be submitted separately and 
cite DFARS Case 94-D318 in correspondence.
[[Page 2331]]

D. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 96-511) does not apply because 
the interim rule does not impose any additional reporting or 
recordkeeping requirements which require the approval of OMB under 44 
U.S.C. 3501 et seq.

List of Subjects in 48 CFR Part 231

    Government procurement.
Claudia L. Naugle,
Deputy Director, Defense Acquisition Regulations Council.

    Therefore, 48 CFR Part 231 is amended as follows:
    1. The authority citation for 48 CFR Part 231 continues to read as 
follows:

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

    2. Section 231.205-6 is amended by adding a new paragraph (a)(2) 
preceding the existing paragraph (g)(2)(i) to read as follows:


231.205-6  Compensation for personal services.

    (a)(2) Costs for individual compensation in excess of $250,000 per 
year are unallowable under DoD contracts that are awarded after April 
15, 1995, and are funded by fiscal year 1995 appropriations (Public Law 
103-335).
* * * * *
    3. Section 231.303 is amended by adding paragraph (3) to read as 
follows:


231.303  Requirements.

    (1) * * *
    (2) * * *
    (3) The limitation on allowable individual compensation at 
231.2205-6(a)(2) also applies to this subpart.
    4. Section 231.603 is amended by redesignating paragraphs (1) 
through (15) as (i) through (xv) and redesignating paragraphs (11) (i) 
and (ii) as paragraphs (xi) (A) and (B); designating the introductory 
text as paragraph (1); and adding a new paragraph (2) to read as 
follows:


231.603  Requirements.

* * * * *
    (2) The limitation on allowable individual compensation at 231.205-
6(a)(2) also applies to this subpart.
    5. Section 231.703 is revised to read as follows:


231.703  Requirements.

    (1) Under 10 U.S.C. 2324(e), the costs cited in 231.603(a) are 
unallowable.
    (2) The limitation on allowable individual compensation at 231.205-
6(a)(2) also applies to this subpart.

[FR Doc. 95-312 Filed 1-6-95; 8:45 am]
BILLING CODE 5000-04-M