[Federal Register Volume 63, Number 243 (Friday, December 18, 1998)]
[Rules and Regulations]
[Pages 70287-70288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33516]


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DEPARTMENT OF DEFENSE

General Services Administration

National Aeronautics and Space Administration

48 CFR Part 31

[FAC 97-10; FAR Case 97-303; Item IV]
RIN 9000-AH90


Federal Acquisition Regulation; Limitation on Allowability of 
Compensation for Certain Contractor Personnel

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

ACTION: Interim rule adopted as final with changes.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed to adopt as final, with 
changes, the interim rule published in the Federal Register at 63 FR 
9066, February 23, 1998, as Item XIII of Federal Acquisition Circular 
97-04. The rule amends the Federal Acquisition Regulation (FAR) to 
implement Section 808 of the National Defense Authorization Act for 
Fiscal Year 1998 (Pub. L. 105-85) by limiting the allowable 
compensation costs for senior executives of contractors to the 
benchmark compensation amount determined applicable for each fiscal 
year by the Administrator for Federal Procurement Policy.

EFFECTIVE DATE: February 16, 1999.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC 20405, (202) 501-4755, for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Linda Nelson, Procurement Analyst, at (202) 501-
1900. Please cite FAC 97-10, FAR case 97-303.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 808 of the National Defense Authorization Act for Fiscal 
Year 1998 (Pub. L. 105-85) limits allowable compensation costs of 
senior executives of contractors for a fiscal year to the benchmark 
compensation amount determined applicable for each fiscal year by the 
Administrator, Office of Federal Procurement Policy (OFPP). Section 808 
requires OFPP to review commercially available surveys of executive 
compensation and, on the basis of the results of the review, determine 
the benchmark compensation amount for each fiscal year. This 
determination shall be made in consultation with the Defense Contract 
Audit Agency and other executive agencies as the Administrator deems 
appropriate.
    On February 23, 1998, a notice was published in the Federal 
Register (63 FR 8981) that indicated the Acting Administrator of OFPP 
had determined the benchmark compensation amount to be $340,650. The 
notice further indicated that this amount is to be used as the 
benchmark amount for contractor fiscal year 1998, and subsequent 
contractor fiscal years, unless and until revised by OFPP. To date, 
OFPP has not revised the amount.
    An interim FAR rule was published in the Federal Register on 
February 23, 1998 (63 FR 9066). Public comments were received from five 
sources. All comments were considered in developing the final rule.
    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.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not 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.

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 the Office of 
Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: December 14, 1998.
Ralph DeStefano,
Acting Director, Federal Acquisition Policy Division.

Interim Rule Adopted as Final With Changes

    Accordingly, the interim rule amending 48 CFR Part 31, which was 
published at 63 FR 9066, February 23, 1998, is adopted as a final rule 
with the following changes:

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 in paragraph (k) by revising the 
heading; and by revising paragraphs (p)(2)(ii) and adding (p)(2)(iv) to 
read as follows:


31.205-6  Compensation for personal services.

* * * * *
    (k) Deferred compensation other than pensions. * * *
* * * * *
    (p) * * *
    (2) * * *
* * * * *
    (ii) Senior executive means--
    (A) The Chief Executive Officer (CEO) or any individual acting in a 
similar capacity at the contractor's headquarters;
    (B) The four most highly compensated employees in management 
positions at the contractor's headquarters, other than the CEO; and
    (C) If the contractor has intermediate home offices or segments 
that report directly to the contractor's headquarters, the five most 
highly compensated employees in management positions at each such 
intermediate home office or segment.
* * * * *
    (iv) Contractor's headquarters means the highest organizational 
level from

[[Page 70288]]

which executive compensation costs are allocated to Government 
contracts.

[FR Doc. 98-33516 Filed 12-16-98; 8:45 am]
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