[Federal Register Volume 62, Number 1 (Thursday, January 2, 1997)]
[Rules and Regulations]
[Pages 269-270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33215]
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DEPARTMENT OF DEFENSE
48 CFR Part 31
[FAC 90-45; FAR Case 96-325; Item XI]
RIN 9000-AH50
Federal Acquisition Regulation; Compensation of Certain
Contractor Personnel
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comment.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council have agreed to an interim rule amending
the Federal Acquisition Regulation (FAR) to implement Section 809 of
the Fiscal Year 1997 National Defense Authorization Act (Pub. L. 104-
201) by placing a Governmentwide ceiling on allowable compensation
costs for contractor personnel in senior management positions under
contracts that are awarded during fiscal year 1997. This regulatory
action was not subject to Office of Management and Budget review under
Executive Order 12866, dated September 30, 1993, and is not a major
rule under 5 U.S.C. 804.
DATES: Effective Date: January 1, 1997.
Comment Date: Comments should be submitted to the FAR Secretariat
at the address shown below on or before March 3, 1997 to be considered
in the formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (VRS),18th & F
Streets, NW, Room 4035, Attn: Ms. Beverly Fayson, Washington, DC 20405.
Please cite FAC 90-45, FAR case 96-325 in all correspondence related to
this case.
FOR FURTHER INFORMATION CONTACT: Mr. Ralph DeStefano at (202) 501-1758
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 90-45, FAR case 96-325.
SUPPLEMENTARY INFORMATION:
A. Background
Section 809 of the Fiscal Year 1997 National Defense Authorization
Act (Pub. L. 104-201) limits, during fiscal year 1997, allowable
compensation costs to $250,000 per year for contractor personnel in
senior management positions. Section 809 defines ``compensation'' as
the total amount of wages and elective deferrals for the year
concerned, as these terms are defined in Sections 3401(a) and
402(g)(3), respectively, of the Internal Revenue Code of 1986. Section
809 also limits the application of the compensation ceiling to an
``officer'' of a company ``who is determined to be in a senior
management position as established by regulation.'' The interim rule
defines an ``officer in a senior management position'' as the
contractor's Chief Executive Officer (CEO), or any individual acting in
a similar capacity, and the contractor's four most highly compensated
officers in senior management positions, other than the CEO. This
definition is consistent with the standard employed by the United
States Securities and Exchange Commission (SEC) in its executive
compensation disclosure rules. The SEC requires that publicly traded
companies disclose to their stockholders the compensation of the CEO
(or any individual acting in a similar capacity) as well as that of
their four most highly paid senior executive officers, other than the
CEO, who earn more than $100,000 per year in salary and bonus.
The interim FAR rule adds a new requirement at 31.205-6(p) to
implement the statutory ceiling on allowable compensation costs for
officers in senior management positions. This restriction applies to
contracts awarded during fiscal year 1997, for compensation costs of
certain contractor personnel that are incurred during fiscal year 1997,
and that are in excess of $250,000 per year. This restriction also
applies to the five most highly compensated individuals in senior
management positions at intermediate home offices and/or segments if a
contractor is organizationally subdivided into such units.
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 simplified acquisition
procedures or are awarded on a competitive, fixed-price basis, and do
not require application of the cost principle contained in this rule.
In addition, this rule is limited to businesses that incur costs prior
to October 1, 1997, under contracts awarded during fiscal year 1997,
for compensation in excess of $250,000 per year for an officer in a
senior management position. 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. (FAR Case 96-325), in
correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose recordkeeping or information collection
requirements, or collections of information from offerors, contractors,
or members of the public which require the approval of OMB 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 urgent and compelling reasons exist to promulgate this
interim rule without prior opportunity for public comment. This action
is necessary to ensure that contracting activities become aware of the
statutory ceiling on allowable compensation costs for certain
contractor personnel when forward pricing contracts to be awarded
during fiscal year 1997. This rule implements Section 809 of the Fiscal
Year 1997 National Defense Authorization Act (Pub. L. 104-201) and
applies to Governmentwide contracts awarded during fiscal year 1997.
However, pursuant to Public Law 98-577 and FAR
[[Page 270]]
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 24, 1996.
Edward C. Loeb,
Director, Office of Federal Acquisition Policy.
.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 adding paragraph (p) to read as
follows:
31.205-6 Compensation for personal services.
* * * * *
(p) Limitation on allowability of compensation for certain
contractor personnel. (1) For contracts awarded during fiscal year
1997, costs incurred from October 1, 1996, through September 30, 1997,
for compensation of an officer in a senior management position in
excess of $250,000 per year are unallowable (Section 809 of Public Law
104-201).
(2) As used in this paragraph:
(i) Compensation means--
(A) The total amount of taxable wages paid to the employee for the
year concerned; plus
(B) The total amount of elective deferred compensation earned by
the employee in the year concerned.
(ii) Officer in a senior management position means--
(A) The contractor's Chief Executive Officer (CEO) or any
individual acting in a similar capacity;
(B) The contractor's four most highly compensated officers in
senior management positions, other than the CEO; and
(C) If the contractor is organizationally subdivided into
intermediate home offices and/or segments, the five most highly
compensated individuals in senior management positions at each such
intermediate home office and/or segment.
[FR Doc. 96-33215 Filed 12-31-96; 8:45 am]
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