[Federal Register Volume 62, Number 228 (Wednesday, November 26, 1997)]
[Rules and Regulations]
[Pages 63035-63036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31113]


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DEPARTMENT OF DEFENSE

48 CFR Part 231

[DFARS Case 97-D312]


Defense Federal Acquisition Regulation Supplement; Allowability 
of Costs for Restructuring Bonuses

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 prohibit use of DoD funds to reimburse a contractor for costs paid 
by the contractor to an employee for a bonus or other payment in excess 
of the normal salary paid to the employee, when such payment is part of 
restructuring costs associated with a business combination. This rule 
implements Section 8083 of the Fiscal Year 1998 Defense Appropriations 
Act.

DATES: Effective date: November 26, 1997.

    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before January 26, 1998, 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), IMB 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350.
    E-mail comments submitted over the Internet should be addressed to: 
[email protected]
    Please cite DFARS Case 97-D312 in all correspondence related to 
this issue. E-mail comments should cite DFARS Case 97-D312 in the 
subject line.

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

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends paragraph (f) (1) of DFARS 231.205-6, 
Compensation for personal services, to implement Section 8083 of the 
Fiscal Year 1998 Defense Appropriations Act (Pub. L. 105-56). Section 
8083 prohibits DoD from using fiscal year 1998 funds to reimburse a 
contractor for costs paid by the contractor to an employee for a bonus 
or other payments in excess of the normal salary paid by the contractor 
to the employee, when such payment is part of restructuring costs 
associated with a business combination. Similar provisions were 
contained in the Fiscal Year 1996 and Fiscal Year 1997 Defense 
Appropriations Acts (Pub. L. 104-61 and Pub. L. 104-208, respectively).

B. Regulatory Flexibility Act

    The interim rule is not expected to have a significant economic 
impact on a substantial umber 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. 
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 subpart also will be considered in accordance with 5 
U.S.C. 610. Such comments should be submitted separately and should 
cite 5 U.S.C. 601, et seq. (DFARS Case 97-D312), in correspondence.

[[Page 63036]]

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the interim rule 
does not impose any information collection requirements that 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 that urgent and compelling reasons exist to publish an 
interim rule prior to affording the public an opportunity to comment. 
This action is necessary to implement Section 8083 of the Fiscal Year 
1998 Defense Appropriations Act (Pub. L. 105-56), which was effective 
upon enactment on October 8, 1997. However, comments received in 
response to the publication of this interim rule will be considered in 
formulating the final rule.

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 (f)(1) to 
read as follows:


Sec. 231.205-6  Compensation for personal services.

    (f)(1) In accordance with Section 8122 of Pub. L. 104-61, and 
similar sections in subsequent Defense appropriations acts, costs for 
bonuses or other payments in excess of the normal salary paid by the 
contractor to an employee, that are part of restructuring costs 
associated with a business combination, are unallowable under DoD 
contracts funded by fiscal year 1996 or subsequent appropriations. This 
limitation does not apply to severance payments or early retirement 
incentive payments. (See 231.205-70(b) for the definitions of 
``business combination'' and ``restructuring costs.'')

[FR Doc. 97-31113 Filed 11-25-97; 8:45 am]
BILLING CODE 5000-04-M