[Federal Register Volume 61, Number 252 (Tuesday, December 31, 1996)]
[Rules and Regulations]
[Pages 69294-69295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32810]


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DEPARTMENT OF DEFENSE
48 CFR Part 31

[FAC 90-44; FAR Case 96-012; Item VI]
RIN 9000-AH43


Federal Acquisition Regulation; Foreign Differential Pay

AGENCIES: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed to an interim rule to amend 
the Federal Acquisition Regulation (FAR) by deleting the prohibition on 
the calculation of foreign differential pay based directly on an 
employee's specific increase in income taxes resulting from assignment 
overseas. This regulatory action was not subject to Office of 
Management and Budget review under Executive Order 12866, dated 
September 30, 1993. This is not a major rule under 5 U.S.C. 804.

DATES: Effective Date: December 31, 1996.
    Comments Due: To be considered in the formulation of a final rule, 
comments should be submitted to the address given below on or before 
March 3, 1997.

ADDRESSES: Comments should be submitted to: General Services 
Administration, Ms. Beverly Fayson, FAR Secretariat, 18th & F Streets 
NW, Room 4037, Washington, DC 20405.
    E-mail comments submitted over internet should be addressed to: 96-
012@www.ARNET.gov.

FOR FURTHER INFORMATION CONTACT:
Mr. Jeremy Olson at (202) 501-3221 in reference to this FAR case. For 
general information, contact the FAR Secretariat, Room 4037, GS 
Building, Washington, DC 20405 (202) 501-4755. Please cite FAC 90-44, 
FAR case 96-012.

SUPPLEMENTARY INFORMATION:

A. Background

    The current cost principle at FAR 31.205-6 prohibits contractors 
from calculating any increased compensation for foreign overseas 
differential pay on the basis of an employee's specific

[[Page 69295]]

increase in income taxes resulting from foreign assignment. Instead, 
contractors must employ an alternative, less accurate approach. This 
prohibition was intended to prevent a conflict with the policy at 
31.205-41(b)(1) that Federal income taxes are unallowable costs. 
However, FAR 31.205-6(e)(1) explicitly states that contractors may 
properly consider increased Federal income taxes in the allowable 
foreign differential pay provided to overseas employees.

B. 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 the simplified acquisition 
procedures, or are awarded on a competitive, fixed-price basis, and do 
not require application of the FAR cost principles. 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 FAR 
subpart also will be considered in accordance with 5 U.S.C. 610. Such 
comments must be submitted separately and cite 5 U.S.C. 601, et seq. 
(FAC 90-44, FAR case 96-012) in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the interim rule 
does not impose any reporting or recordkeeping requirements which 
require Office of Management and Budget approval under 44 U.S.C. 3501, 
et seq.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DOD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that, pursuant to 41 U.S.C. 418b, urgent and compelling reasons 
exist to publish an interim rule prior to affording the public an 
opportunity to comment. The rule is necessary because the cost 
principle at FAR 31.205-6 imposes unnecessary administrative and 
accounting requirements, since it prohibits contractors from 
calculating differential pay on the basis of an employee's specific 
increase in income taxes resulting from foreign assignment. Instead, 
contractors must employ an alternative, less accurate approach that may 
result in an employee being undercompensated (or overcompensated). It 
is necessary that an interim rule be published to eliminate 
expeditiously this unnecessarily burdensome requirement that results in 
unnecessary administrative costs to contractors and may cause financial 
hardship on certain individuals. However, pursuant to Public Law 98-577 
and FAR 1.501, public comments received in response to this interim 
rule will be considered in the formation of the final rule.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: December 19, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, 48 CFR part 31 is amended as set forth below:

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

    1. The authority citation for 48 CFR part 31 continues to read as 
follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

    2. Section 31.205-6 is amended by revising paragraph (e)(2) to read 
as follows:


31.205-6  Compensation for personal services.

* * * * *
    (e) * * *
    (2) Differential allowances for additional Federal, State, or local 
income taxes resulting from domestic assignments are unallowable.
* * * * *
[FR Doc. 96-32810 Filed 12-30-96; 8:45 am]
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