96-4197. Defense Federal Acquisition Regulation Supplement; Allowability of Costs

[Federal Register Volume 61, Number 38 (Monday, February 26, 1996)]
[Rules and Regulations]
[Pages 7077-7078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4197]



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DEPARTMENT OF DEFENSE

48 CFR Part 231

[DFARS Case 95-D309]


Defense Federal Acquisition Regulation Supplement; Allowability 
of Costs

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 1996 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: February 26, 1996.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before April 26, 1996, to be 
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulation Council, Attn: Ms. Sandra G. Haberlin, 
PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number [phone]. Please cite DFARS Case 95-
D309 in all correspondence related to this issue.

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

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule adds paragraph (f)(1) to DFARS Section 231.205-6 
to implement Section 8122 of the Fiscal Year 1996 Defense 
Appropriations Act (Pub. L. 104-61). Section 8122 prohibits DOD from 
using fiscal year 1996 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. The interim rule clarifies that the prohibition does not 
apply to severance and early retirement incentive payments.

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 8122 of the Defense 
Appropriations Act for Fiscal Year 1996 (Pub. L. 104-61), which was 
effective upon enactment on December 1, 1995. 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 are awarded on a competitive fixed-
price basis and cost principles, therefore, do not apply.

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 adding paragraph (f)(1) to read 
as follows:


231.205-6  Compensation for personal services.

* * * * *
    (f)(1) Costs for bonuses or other payments, that are in excess of 
the normal salary paid by the contractor to the employee and that are 
part of 

[[Page 7078]]
restructuring costs associated with a business combination, are 
unallowable under DOD contracts funded by fiscal year 1996 
appropriations (Pub. L. 104-61). 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. 96-4197 Filed 2-23-96; 8:45 am]
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