[Federal Register Volume 64, Number 42 (Thursday, March 4, 1999)]
[Rules and Regulations]
[Pages 10547-10548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5210]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 31

[FAC 97-11; FAR Case 98-301; Item VIII]
RIN 9000-AI32


Federal Acquisition Regulation; Compensation for Senior 
Executives

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

ACTION: Interim rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed on an interim rule amending 
the Federal Acquisition Regulation (FAR) to implement Section 804 of 
the Strom Thurmond National Defense Authorization Act for Fiscal Year 
1999 (Pub. L. 105-261). Section 804 revises the definition of ``senior 
executive'' at 10 U.S.C. 2324(1)(5) and at 41 U.S.C. 256(m)(2).

EFFECTIVE DATE: March 4, 1999.
    Applicability Date: This policy applies to costs of compensation 
incurred under Government contracts

[[Page 10548]]

after January 1, 1999, regardless of the date of contract award.
    Comment Date: Comments should be submitted to the FAR Secretariat 
at the address shown below on or before May 3, 1999 to be considered in 
the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVR), 1800 F Street, 
NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405. E-Mail 
comments submitted over the Internet should be addressed to: 
[email protected]
    Please cite FAC 97-11, FAR case 98-301 in all correspondence 
related to this case.

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 97-11, FAR case 98-301.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 808 of the National Defense Authorization Act for Fiscal 
Year 1998 (Pub. L. 105-85) revised 10 U.S.C. 2324 and 41 U.S.C. 256 to 
limit allowable compensation costs for senior executives of contractors 
for a fiscal year to the benchmark compensation amount determined 
applicable for each fiscal year by the Administrator for Federal 
Procurement Policy. Section 808 defined ``senior executive'' as--

    ``(A) The chief executive officer of the contractor or any 
individual acting in a similar capacity for the contractor;
    (B) The four most highly compensated employees in management 
positions of the contractor other than the chief executive officer; 
and
    (C) In the case of a contractor that has components which report 
directly to the contractor's headquarters, the five most highly 
compensated employees in management positions at each such 
components.''

    Section 804 of the Strom Thurmond National Defense Authorization 
Act for Fiscal Year 1999 (Pub. L. 105-261) revises the definition of 
``senior executive'' at 10 U.S.C. 2324(1)(5) and 41 U.S.C. 256(m)(2). 
Section 804 defines ``senior executives'' as ``the five most highly 
compensated employees in management positions at each home office and 
each segment of the contractor'' whether or not the home office or 
segment reports directly to the contractor's headquarters.
    This interim rule revises the definition of ``senior executive'' at 
FAR 31.205-6(p) to implement Section 804 of Pub. L. 105-261. This 
change applies to costs of compensation incurred after January 1, 1999, 
regardless of the date of contract award.
    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 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. 
An Initial Regulatory Flexibility Analysis has, therefore, not been 
performed. Comments from small entities concerning the affected FAR 
subpart will be considered in accordance with 5 U.S.C. 610. Such 
comments must be submitted separately and should cite 5 U.S.C 601, et 
seq. (FAR Case 98-301), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that 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 because this rule implements Section 804 of the Strom 
Thurmond National Defense Authorization Act for Fiscal Year 1999 (Pub. 
L. 105-621) and applies to costs of compensation incurred after January 
1, 1999, regardless of the date of contract award. 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: February 25, 1999.
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 in paragraph (p) introductory text 
by adding a sentence after the heading; by redesignating paragraphs 
(p)(2)(ii)(A) through (p)(2)(ii)(C) as (p)(2)(ii)(A)(1) through 
(p)(2)(ii)(A)(3), respectively; and by adding new paragraphs 
(p)(2)(ii)(A) introductory text and (p)(2)(ii)(B) to read as follows:


31.205-6  Compensation for personal services.

* * * * *
    (p) * * * (Note that pursuant to Section 804 of Pub. L. 105-261, 
the definition of ``senior executive'' in (p)(2)(ii) has been changed 
for compensation costs incurred after January 1, 1999.)
* * * * *
    (2) * * *
    (ii) * * *
    (A) Prior to January 2, 1999--
* * * * *
    (B) Effective January 2, 1999, the five most highly compensated 
employees in management positions at each home office and each segment 
of the contractor, whether or not the home office or segment reports 
directly to the contractor's headquarters.
* * * * *
[FR Doc. 99-5210 Filed 3-3-99; 8:45 am]
BILLING CODE 6820-EP-P