[Federal Register Volume 63, Number 35 (Monday, February 23, 1998)]
[Rules and Regulations]
[Pages 9066-9067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4304]
[[Page 9066]]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 97-04; FAR Case 97-303; Item XIII]
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 with request for comments.
-----------------------------------------------------------------------
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 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. This regulatory action was not subject to
Office of Management and Budget (OMB) review under Executive Order
12866, dated September 30, 1993, and is not a major rule under 5 U.S.C.
804.
EFFECTIVE DATE: February 23, 1998.
Applicability Date: This policy applies to costs of compensation
incurred under Federal contracts after January 1, 1998, 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 April 24, 1998, 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. Beverly Fayson, Washington, DC 20405.
E-Mail comments submitted over the Internet should be addressed to:
farcase.97-303@gsa.gov
Please cite FAC 97-04, FAR case 97-303 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 97-04, 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. Section 808
requires the Administrator, Office of Federal Procurement Policy
(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. See OFPP's
``Determination of Executive Compensation Benchmark Amount'', as
published by GSA in the Notices Section of this Federal Register. This
determination shall be made in consultation with the Defense Contract
Audit Agency and other executive agencies, as the Administrator deems
appropriate. Section 808 defines benchmark compensation as 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 is made.
This interim rule revises FAR 31.205-6(p) to implement the
statutory ceiling on allowable compensation costs for senior
executives. Because the commercial survey used in making the benchmark
compensation determination is based on Securities and Exchange
Commission disclosure data (which cannot be separately broken down), it
includes the cost of employer contributions to defined contribution
pension plans (which are a form of deferred compensation). The
implementing language at FAR 31.205-6(p)(2)(i) specifies the components
of compensation subject to the benchmark compensation. This restriction
applies to costs of compensation incurred after January 1, 1998, under
contracts awarded before, on, or after the date of the enactment of
Public Law 105-85 (November 18, 1997). This restriction applies to the
chief executive officer (CEO), the four most highly compensated
employees in management positions other than the CEO, and the five most
highly compensated individuals in management positions at intermediate
home offices and segments if a contractor is organizationally
subdivided into such units.
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 are invited from small businesses and other
interested parties. Comments from small entities concerning the
affected FAR subpart also 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 97-303), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the interim rule
does not impose any new reporting, recordkeeping or information
collection requirements, or collections of information from offerors,
contractors, or members of the public which 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 rule
implements Section 808 of the National Defense Authorization Act for
Fiscal Year 1998 (Pub. L. 105-85) and applies to costs of compensation
incurred after January 1, 1998, under contracts entered into before,
on, or after the date of enactment (November 18, 1997) of this public
law. 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.
[[Page 9067]]
Dated: February 13, 1998.
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 by revising paragraph (p) to read as
follows:
31.205-6 Compensation for personal services.
* * * * *
(p) Limitation on allowability of compensation for certain
contractor personnel. (1) Costs incurred after January 1, 1998, 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 (OFPP),
under Section 39 of the OFPP Act (41 U.S.C. 435) are unallowable (10
U.S.C. 2324(e)(1)(P) and 41 U.S.C. 256(e)(1)(P)). This limitation is
the sole statutory limitation on allowable senior executive
compensation costs incurred after January 1, 1998, under new or
previously existing contracts. This limitation applies whether or not
the affected contracts were previously subject to a statutory
limitation on such costs.
(2) As used in this paragraph:
(i) Compensation means the total amount of wages, salary, bonuses,
deferred compensation (see paragraph (k) of this subsection), and
employer contributions to defined contribution pension plans (see
paragraphs (j)(5) and (j)(8) of this subsection), for the fiscal year,
whether paid, earned, or otherwise accruing, as recorded in the
contractor's cost accounting records for the fiscal year.
(ii) Senior executive means--
(A) The contractor's Chief Executive Officer (CEO) or any
individual acting in a similar capacity;
(B) The contractor's four most highly compensated employees in
management positions, other than the CEO; and
(C) If the contractor has intermediate home offices or segments
that report directly to the contractor's corporate headquarters, the
five most highly compensated employees in management positions at each
such intermediate home office or segment.
(iii) Fiscal year means the fiscal year established by the
contractor for accounting purposes.
[FR Doc. 98-4304 Filed 2-20-98; 8:45 am]
BILLING CODE 6820-EP-P
