96-29330. Defense Federal Acquisition Regulation Supplement; Restructuring Costs/Bonuses

[Federal Register Volume 61, Number 222 (Friday, November 15, 1996)]
[Rules and Regulations]
[Page 58490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29330]



[[Page 58490]]

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DEPARTMENT OF DEFENSE
48 CFR Part 231

[DFARS Case 96-D332]


Defense Federal Acquisition Regulation Supplement; Restructuring 
Costs/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 fiscal year 1997 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.

DATES: Effective date: November 15, 1996.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before January 14, 1997, 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, 
PDUDA (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number [phone]. Please cite DFARS Case 96-
D332 in all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT:
Ms. Sandra G. Haberlin, [phone].

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends paragraph (f)(1) of DFARS 231.205-6, 
Compensation for personal services, to implement Section 8095 of the 
Fiscal Year 1997 Defense Appropriations Act (Pub. L. 104-208). Section 
8095 prohibits DoD from using fiscal year 1997 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 by the contractor 
to the employee, when such payment is part of restructuring costs 
associated with a business combination.

B. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense to issue this rule as an interim rule. Compelling reasons 
exist to promulgate this rule without prior opportunity for public 
comment. This rule implements Section 8095 of the Defense 
Appropriations Act for Fiscal Year 1997 (Pub. L. 104-208), which was 
effective upon enactment on September 30, 1996. However, comments 
received in response to the publication of this rule will be considered 
in formulating the final rule.

C. 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 the 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.

D. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the interim rule 
does not impose any new reporting or recordkeeping requirements which 
require Office of Management and Budget approval under 44 U.S.C. 3501, 
et seq.

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) 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 
appropriations (Section 8122 of Pub. L. 104-61) or fiscal year 1997 
appropriations (Section 8095 of Pub. L. 104-208). 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. 96-29330 Filed 11-14-96; 8:45 am]
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