[Federal Register Volume 61, Number 133 (Wednesday, July 10, 1996)]
[Rules and Regulations]
[Pages 36305-36306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17469]


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DEPARTMENT OF DEFENSE

48 CFR Part 231

[DFARS Case 96-D314]


Defense Federal Acquisition Regulation Supplement; 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 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement Section 8086 of Public Law 104-61 by placing a ceiling on 
allowable individual compensation under DoD contracts that are awarded 
after July 1, 1996, when payments are from funds appropriated in fiscal 
year 1996.

DATES: Effective date: July 10, 1996.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before September 9, 1996, to 
be considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Ms. Sandra G. Haberlin, 
PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 96-
D314 in all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra G. Haberlin, (703) 602-
0131.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 8086 of the National Defense Appropriations Act for Fiscal 
Year 1996 (Pub. L. 104-61) limits allowable costs for individual 
compensation to $200,000 per year unless the Office of Federal 
Procurement Policy (OFPP) establishes in the Federal Acquisition 
Regulations guidance governing the allowability of individual 
compensation. On June 10, 1996, OFPP advised that it has determined 
that it will not alter the $200,000 ceiling on allowable individual 
compensation costs contained in the Public Law. This restriction 
applies to DoD contracts awarded after July 1, 1996, when payments are 
from funds appropriated in fiscal year 1996.
    The interim DFARS rule amends 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 definition 
of compensation found in the FAR cost principle.

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. This rule implements Section 8086 of the National Defense 
Appropriations Act for Fiscal Year 1996 (Pub. L. 104-61) and applies to 
all DoD contracts issued after July 1, 1996. An interim rule is 
necessary to 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 July 1, 1996, 
using fiscal year 1996 funds. However, comments received in response to 
the publication of this interim 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 
contracts awarded to small entities use simplified acquisition 
procedures or are awarded on a competitive, fixed-price basis, and 
therefore the cost principles do not apply. In addition, this interim 
DFARS rule applies only to DoD contractors who incur individual 
compensation costs in excess of $200,000 per year in performing new 
contracts awarded after July 1, 1996, using funds appropriated in 
fiscal year 1996. An initial regulatory flexibility analysis has 
therefore not been performed. Comments are invited from small 
businesses 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

[[Page 36306]]

separately and cite 5 U.S.C. 601, et seq. (DFARS Case 96-D314), in 
correspondence.

D. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (Pub. L. 104-13) does not apply 
because the interim rule does not impose any additional reporting or 
recordkeeping requirements which require the approval of the Office of 
Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 231

    Government procurement.
Michele P. Peterson,
Executive Editor, 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:

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

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES

    2. Section 231.205-6 is amended by revising paragraph (a)(2) to 
read as follows:


231.205-6  Compensation for personal services.

    (a)(2)(i) 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 
(Section 8117 of Pub. L. 103-335).
    (ii) Costs for individual compensation in excess of $200,000 per 
year are unallowable under DOD contracts that are awarded after July 1, 
1996, and are funded by fiscal year 1996 appropriations (Section 8086 
of Pub. L. 104-61).
* * * * *
    3. Section 231.303 is amended by revising paragraph (3) to read as 
follows:


231.303  Requirements.

* * * * *
    (3) The limitations on allowable individual compensation at 
231.205-6(a)(2) (i) and (ii) also apply to this subpart.
    4. Section 231.603 is revised to read as follows:


231.603  Requirements.

    The limitations on allowable individual compensation at 231.205-
6(a)(2) (i) and (ii) also apply to this subpart.
    5. Section 201.703 is revised to read as follows:


231.703  Requirements.

    The limitations on allowable individual compensation at 231.205-
6(a)(2) (i) and (ii) also apply to this subpart.

[FR Doc. 96-17469 Filed 7-9-96; 8:45 am]
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