[Federal Register Volume 78, Number 123 (Wednesday, June 26, 2013)]
[Proposed Rules]
[Pages 38539-38540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15214]



  Federal Register / Vol. 78, No. 123 / Wednesday, June 26, 2013 / 
Proposed Rules  

[[Page 38539]]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 31 and 52

[FAR Case 2012-025; Docket 2012-0025; Sequence 1]
RIN 9000-AM39


Federal Acquisition Regulation; Applicability of the Senior 
Executive Compensation Benchmark

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

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to continue the implementation of the 
requirements of section 803 of the National Defense Authorization Act 
for Fiscal Year 2012. The proposed rule seeks public comments on 
applying section 803 with respect to that provision's expansion with 
respect to contracts that had been awarded by DoD, NASA, and the Coast 
Guard before the date of enactment of section 803 (which was December 
31, 2011) of the application of the senior executive compensation 
benchmark amount. Section 803 expands to a broader group of contractor 
employees the limitation on reimbursing compensation costs. As section 
803 provides, this proposed rule would apply section 803 retroactively 
to contracts awarded before December 31, 2011, with respect to the 
contractor compensation costs incurred after January 1, 2012. In 
addition, also as part of the implementation in the FAR of section 803, 
DoD, GSA and NASA are separately issuing an interim rule (FAR Case 
2012-017) that addresses the prospective application of section 803 to 
contracts awarded on or after December 31, 2011.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat at one of the addressees shown below on or 
before August 26, 2013 to be considered in the formation of the final 
rule.

ADDRESSES: Submit comments in response to FAR Case 2012-025 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching for ``FAR Case 
2012-025.'' Select the link ``Submit a Comment'' that corresponds with 
``FAR Case 2012-025.'' Follow the instructions provided at the ``Submit 
a Comment'' screen. Please include your name, company name (if any), 
and ``FAR Case 2012-025'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (MVCB), ATTN: Hada Flowers, 1800 F Street NW., 2nd Floor, 
Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR Case 2012-
025, in all correspondence related to this case. All comments received 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT: Mr. Edward N. Chambers, Procurement 
Analyst, at 202-501-3221, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAR Case 2012-025.

SUPPLEMENTARY INFORMATION: 

I. Background

    The National Defense Authorization Act for Fiscal Year 2012 (Pub. 
L. 112-81) was signed into law and effective on December 31, 2011. 
Section 803 of the law amended the standards for determining the 
individuals affected by the senior executive compensation benchmark 
amount. Specifically, section 803 expanded the applicability (reach) of 
the existing executive compensation cap, so that in the case of DoD, 
NASA, and Coast Guard contracts, the compensation cap would apply to 
all employees of a contractor (instead of just the ``five most highly 
compensated'' employees in management positions at each home office and 
each segment of the contractor). In section 803(c)(2), Congress stated 
that the expanded reach of the compensation cap ``shall apply with 
respect to costs of compensation incurred after January 1, 2012, under 
contracts entered into before, on, or after the date of the enactment 
of this Act'' (which was December 31, 2011). In addition, Congress in 
section 803(c)(1) stated that the amendments in section 803 shall be 
implemented in the FAR. In accordance with section 803(c)(1), DoD, GSA, 
and NASA are implementing section 803 in the FAR through the issuance 
of this proposed rule and a separate interim rule.
    In this proposed rule, DoD, GSA, and NASA are proposing to amend 
FAR 31.205-6(p) to require that the compensation costs incurred after 
January 1, 2012, for all contractor employees on all DoD, NASA, and 
Coast Guard contracts awarded before December 31, 2011, be subject to 
the senior executive benchmark compensation amount. The reference to 
31.205-6(p) in FAR 52.216-7 was updated in the interim rule to reflect 
the revision in 31.205-6(p). This proposed rule uses the interim rule 
as its baseline.
    DoD will separately handle the implementation of authority provided 
by 10 U.S.C. 2324(e)(1)(P), as amended by section 803(a), in which 
Congress has authorized the Secretary of Defense to establish ``one or 
more narrowly targeted exceptions for scientists and engineers upon a 
determination that such exceptions are needed to ensure that the 
Department of Defense has continued access to needed skills and 
capabilities.''
    As noted above, section 803(c)(2) states that the amendments made 
by section 803 ``shall apply with respect to costs of compensation 
incurred after January 1, 2012, under contracts entered into before, 
on, or after the date of the enactment of this Act,'' which was 
December 31, 2011. There are challenges with respect to the retroactive 
application of section 803 (i.e., to the application of section 803 to 
contracts awarded before the enactment of section 803). The 
implementation of section 803 is similar to the implementation of 
section 808 of the National Defense Authorization Act for Fiscal Year 
1998 (Pub. L. 105-85, November 18, 1997) which imposed a cap on 
Government contractor's allowable costs of ``senior executive'' 
compensation. Section 808, like section 803, retroactively applied to 
contracts that already existed on the date of its enactment; both 
statutes contain text which applied the statute to contracts awarded 
before, on, or after the date of enactment of the underlying act. In 
litigation on the application of section 808 to contracts awarded 
before the date of the enactment of the statute, the courts held that 
section 808 breached contracts awarded before the statutory date of 
enactment (General Dynamics Corp. v.  U.S., 47 Fed. Cl. 514 (2000); and 
ATK Launch Systems, Inc., ASBCA 55395, 2009-1 BCA ] 34118 (2009)).
    For these reasons, DoD, GSA, and NASA are implementing section 803 
with both an interim rule and a proposed rule. The separate interim 
rule (FAR Case 2012-017) addresses the prospective application of 
section 803, i.e., to contracts awarded on or after its enactment 
(December 31, 2011). This proposed rule addresses the retroactive 
application of section 803 to contracts

[[Page 38540]]

that had been awarded before its enactment. In other words, under this 
bifurcated approach, DoD, GSA, and NASA are implementing section 803 
through the interim rule for contracts awarded on or after the date of 
enactment (December 31, 2011) and, at the same time, DoD, GSA, and NASA 
are addressing in this proposed rule the retroactive application of 
section 803. DoD, GSA, and NASA seek public comments on both the 
interim and proposed rules (and, on this proposed rule, especially with 
respect to the potential complexities associated with applying section 
803 to contracts that had been awarded before the date of its 
enactment).

II. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
The Office of Information and Regulatory Affairs (OIRA) has deemed that 
this is a significant regulatory action and, therefore, was subject to 
review under section 6(b) of E.O. 12866, Regulatory Planning and 
Review, dated September 30, 1993, and that this rule is not a major 
rule under 5 U.S.C. 804.

III. Regulatory Flexibility Act

    DoD, GSA, and NASA do not expect this proposed rule 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. However, an initial regulatory flexibility analysis (IRFA) has 
been prepared consistent with 5 U.S.C. 603, and is summarized as 
follows:

    An analysis of data in the Federal Procurement Data System 
(FPDS) revealed that 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. Furthermore, it is not expected 
that a substantial number of small entities will have any employees, 
other than possibly among the ``five most highly compensated'' 
management employees at each home office and each segment of the 
contractor, whose compensation costs exceed the executive 
compensation benchmark. The current benchmark amount is $763,029, 
for costs incurred after January 1, 2011 (77 FR 24226, April 23, 
2012). However, at this time an estimate of the number of small 
entities whose reimbursement for the compensation costs of their 
contractor employees will be limited by this rule is not available.
    The proposed rule imposes no reporting, recordkeeping, or other 
information collection requirements. The rule does not duplicate, 
overlap, or conflict with any other Federal rules, and there are no 
known significant alternatives to the rule.

    The Regulatory Secretariat has submitted a copy of the IRFA to the 
Chief Counsel for Advocacy of the Small Business Administration. A copy 
of the IRFA may be obtained from the Regulatory Secretariat. DoD, GSA, 
and NASA invite comments from small business concerns and other 
interested parties on the expected impact.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by this 
proposed rule in accordance with 5 U.S.C. 610. Interested parties must 
submit such comments separately and should cite 5 U.S.C. 610 (FAR case 
2012-025) in correspondence.

IV. Paperwork Reduction Act

    The proposed rule does not contain any information collection 
requirements that require the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 31 and 52

    Government procurement.

    Dated: June 10, 2013.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of 
Acquisition Policy, Office of Governmentwide Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 31 and 
52 as set forth below:

0
1. The authority citation for 48 CFR parts 31 and 52 are revised to 
read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20115.

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

0
2. Amend section 31.205-6 by--
0
a. Removing from paragraph (p)(1)(i)(B), ``December 31, 2011'' and 
adding ``December 31, 2011, for costs incurred until January 1, 2012'' 
in its place; and
0
b. Revising paragraphs (p)(2)(i) and (ii).
    The revisions read as follows:


31.205-6   Compensation for personal services.

* * * * *
    (p) * * *
    (2) * * *
    (i) Applicability. This paragraph (p)(2) applies to DOD, NASA, and 
the Coast Guard for contracts awarded before, on or after December 31, 
2011.
    (ii) Costs incurred after January 1, 2012, for compensation of any 
contractor employee in excess of the benchmark compensation amount, 
determined applicable for the contractor fiscal year by the 
Administrator, Office of Federal Procurement Policy (OFPP) under 41 
U.S.C. 1127 are unallowable (10 U.S.C. 2324(e)(1)(P)). This limitation 
applies whether or not the affected contracts were previously subject 
to a statutory limitation on such costs.

[FR Doc. 2013-15214 Filed 6-25-13; 8:45 am]
BILLING CODE 6820-EP-P