[Federal Register Volume 63, Number 90 (Monday, May 11, 1998)]
[Rules and Regulations]
[Pages 25779-25780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12413]


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DEPARTMENT OF ENERGY

48 CFR Part 970

RIN 1991-AB43


Acquisition Regulation: Limitation on Allowability of 
Compensation for Certain Contractor Personnel

AGENCY: Department of Energy.

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) amends its Acquisition 
Regulation to incorporate the statutory provisions contained in Section 
808 of the National Defense Authorization Act for Fiscal Year 1998 
(Pub. L. 105-85). Section 808 establishes a cap on allowable 
compensation costs for certain officers of Department of Defense and 
civilian agency contractors which applies to costs of compensation 
incurred after January 1, 1998 for executive compensation.

DATES: This rule is effective on May 11, 1998.

ADDRESSES: Terrence D. Sheppard, Office of Policy (HR-51), Office of 
Procurement and Assistance Policy, Department of Energy, 1000 
Independence Avenue S.W., Washington, D.C. 20585.

FOR FURTHER INFORMATION CONTACT: Terrence D. Sheppard (202) 586-8193; 
e-mail [email protected]; fax (202) 586-0545.

SUPPLEMENTARY INFORMATION:

I. Background
II. Section by Section Analysis
III. Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under Executive Order 12988
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act
    E. Review Under Executive Order 12612
    F. Review Under Small Business Regulatory Enforcement Fairness 
Act of 1996
    G. Review Under the Unfunded Mandates Reform Act of 1995

I. Background

    This notice amends the Department of Energy Acquisition Regulation 
(DEAR) based on provisions contained in Section 808 of the National 
Defense Authorization Act for Fiscal Year 1998 (Pub. L. 105-85). 
Section 808 establishes a cap on allowable compensation costs for 
certain officers of Department of Defense and civilian agency 
contractors which applies to costs of compensation incurred after 
January 1, 1998, under covered contracts entered into before, on, or 
after the date of enactment of the Act. Section 808 states that costs 
of compensation of senior executives of contractors for a fiscal year, 
regardless of the contract funding source, to the extent that such 
compensation exceeds the benchmark compensation amount determined 
applicable for the fiscal year by the Administrator for Federal 
Procurement Policy, are unallowable.
    Further, for purposes of section 2324(e)(1)(P) of title 10, United 
States Code, and section 306(e)(1)(P) of the Federal Property and 
Administrative Services Act of 1949 (41 U.S.C. 256(e)(1)(P)), the 
Administrator shall review commercially available surveys of executive 
compensation and, on the basis of the results of the review, determine 
a benchmark compensation amount to apply for each fiscal year. In 
making determinations under this subsection the Administrator shall 
consult with the Director of the Defense Contract Audit Agency and such 
other officials of executive agencies as the Administrator considers 
appropriate.
    The benchmark compensation amount applicable for a fiscal year is 
the median amount of the compensation provided for all senior 
executives of all benchmark corporations for the most recent year for 
which data is available at the time the determination under subsection 
(a) is made.
    The term ``compensation'', for a fiscal year, means the total 
amount of wages, salary, bonuses and deferred compensation for the 
fiscal year, whether paid, earned, or otherwise accruing, as recorded 
in an employer's cost accounting records for the fiscal year.
    The term ``senior executive'', with respect to a corporation, means 
the chief executive officer of the corporation or any individual acting 
in a similar capacity for the corporation; the four most highly 
compensated employees in management positions of the corporation other 
than the chief executive officer; and in the case of a corporation that 
has components which report directly to the corporate headquarters, the 
five most highly compensated individuals in management positions at 
each such component.
    The term ``benchmark corporation'', with respect to a fiscal year, 
means a publicly-owned United States corporation that has annual sales 
in excess of $50,000,000 for the fiscal year.
    The term ``publicly-owned United States corporation'' means a 
corporation organized under the laws of a State of the United States, 
the District of Columbia, the Commonwealth of Puerto Rico, or a 
possession of the United States and the voting stock of which is 
publicly traded.
    The term ``fiscal year'' means a fiscal year established by a 
contractor for accounting purposes.

II. Section by Section Analysis

    1. The authority for Part 970 is restated.
    2. Section 970.3102-2, Compensation for personnel services, is 
revised by adding a new paragraph (q) which addresses the statutory 
compensation limits.
    3. Section 970.5204-13(d)(8) is revised by adding a new paragraph 
(viii) which addresses the statutory compensation limits.
    4. Section 970.5204-14(d)(8) is revised by adding a new paragraph 
(viii) which addresses the statutory compensation limits.

III. Procedural Requirements

A. Review Under Executive Order 12866

    Today's regulatory action has been determined not to be a 
``significant regulatory action'' under Executive Order 12866, 
``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993). 
Accordingly, this action was not subject to review under that Executive 
Order by the Office of Information and Regulatory Affairs of the Office 
of Management and Budget (OMB).

B. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following

[[Page 25780]]

requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of Executive Order 12988 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) Clearly specifies the 
preemptive effect, if any; (2) clearly specifies any effect on existing 
Federal law or regulation; (3) provides a clear legal standard for 
affected conduct while promoting simplification and burden reduction: 
(4) specifies the retroactive effect, if any; (5) adequately defines 
key terms; and (6) addresses other important issues affecting clarity 
and general draftmenship under any guidelines issued by the Attorney 
General. Section 3(c) of Executive Order 12988 requires Executive 
agencies to review regulations in light of applicable standards in 
section 3(a) and section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. The Department of Energy 
has completed the required review and determined that, to the extent 
permitted by law, the regulations meet the relevant standards of 
Executive Order 12988.

C. Review Under the Paperwork Reduction Act

    No new information or recordkeeping requirements are imposed by 
this rulemaking. Accordingly, no OMB clearance is required under the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

D. Review Under the National Environmental Policy Act

    DOE has concluded that promulgation of this rule falls into a class 
of actions which would not individually or cumulatively have 
significant impact on the human environment, as determined by DOE's 
regulations (10 CFR Part 1021, Subpart D) implementing the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.). 
Specifically, this rule is categorically excluded from NEPA review 
because the amendments to the DEAR do not change the environmental 
effect of the rule being amended (categorical exclusion A5). Therefore, 
this rule does not require an environmental impact statement or 
environmental assessment pursuant to NEPA.

E. Review Under Executive Order 12612

    Executive Order 12612 (52 FR 41685, October 30, 1987) requires that 
regulations, rules, legislation, and any other policy actions be 
reviewed for any substantial direct effects on States, on the 
relationship between the National Government and the States, or in the 
distribution of power and responsibilities among the various levels of 
Government. If there are sufficient substantial direct effects, then 
the Executive Order requires the preparation of a federalism assessment 
to be used in all decisions involved in promulgating and implementing a 
policy action. This rule revises certain policy and procedural 
requirements. States which contract with DOE will be subject to this 
rule. However, DOE has determined that this rule will not have a 
substantial direct effect on the institutional interests or traditional 
functions of the States.

F. Review Under Small Business Regulatory Enforcement Fairness Act of 
1996

    As required by 5 U.S.C. 801, the Department of Energy will report 
to Congress promulgation of the rule prior to its effective date. The 
report will state that it has been determined that the rule is not a 
``major rule'' as defined by 5 U.S.C. 804(3).

G. Review Under the Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally 
requires a Federal agency to perform a detailed assessment of costs and 
benefits of any rule imposing a Federal Mandate with costs to State, 
local or tribal governments, or to the private sector, of $100 million 
or more. This rulemaking only affects private sector entities, and the 
impact is less than $100 million.

List of Subjects in 48 CFR Part 970

    Government procurement.

    Issued in Washington, DC on April 22, 1998.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.

    For the reasons set out in the preamble, Chapter 9 of Title 48 of 
the Code of Federal Regulations is amended as set forth below.

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

    1. The authority citation for Part 970 continues to read as 
follows:

    Authority: Sec. 161 of the Atomic Energy Act of 1954 (42. U.S.C. 
2201), sec 644 of the Department of Energy Organization Act, Public 
Law 95-91 (42 U.S.C. 7254).

    2. Section 970.3102-2 is amended by adding a new paragraph (q) to 
read as follows:


970.3102-2  Compensation for personal services.

* * * * *
    (q) Limitation on allowability of compensation for certain 
contractor personnel. Costs incurred for compensation of a senior 
executive in excess of the benchmark compensation amount determined 
applicable for the contractor fiscal year by the Administrator, Office 
of Federal Procurement Policy, are unallowable. Allowable costs of 
executive compensation shall be determined pursuant to Federal 
Acquisition Regulation 31.205-6(p).
    3. Section 970.5204-13 is amended by adding a new paragraph 
(d)(8)(viii) immediately after paragraph (d)(8)(vii) and before the 
Note to read as follows:


970.5204-13  Allowable costs and fixed-fee (management and operating 
contracts).

* * * * *
    (d)(8) * * *
    (viii) Compensation of a senior executive, provided that such 
compensation does not exceed the benchmark compensation amount 
determined applicable for the contractor fiscal year by the 
Administrator, Office of Federal Procurement Policy. Costs of executive 
compensation shall be determined pursuant to Federal Acquisition 
Regulation 31.205-6(p).
 * * * * *
    4. Section 970.5204-14 is amended by adding a new paragraph 
(d)(8)(viii) immediately after paragraph (d)(8)(vii) and before the 
Note to read as follows:


970.5204-14  Allowable costs and fixed-fee (support contracts).

* * * * *
    (d)(8) * * *
    (viii) Compensation of a senior executive, provided that such 
compensation does not exceed the benchmark compensation amount 
determined applicable for the contractor fiscal year by the 
Administrator, Office of Federal Procurement Policy. Costs of executive 
compensation shall be determined pursuant to Federal Acquisition 
Regulation 31.205-6(p).
* * * * *
[FR Doc. 98-12413 Filed 5-8-98; 8:45 am]
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