[Federal Register Volume 63, Number 90 (Monday, May 11, 1998)]
[Rules and Regulations]
[Pages 25779-25780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12413]
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DEPARTMENT OF ENERGY
48 CFR Part 970
RIN 1991-AB43
Acquisition Regulation: Limitation on Allowability of
Compensation for Certain Contractor Personnel
AGENCY: Department of Energy.
ACTION: Final rule.
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SUMMARY: The Department of Energy (DOE) amends its Acquisition
Regulation to incorporate the statutory provisions contained in Section
808 of the National Defense Authorization Act for Fiscal Year 1998
(Pub. L. 105-85). Section 808 establishes a cap on allowable
compensation costs for certain officers of Department of Defense and
civilian agency contractors which applies to costs of compensation
incurred after January 1, 1998 for executive compensation.
DATES: This rule is effective on May 11, 1998.
ADDRESSES: Terrence D. Sheppard, Office of Policy (HR-51), Office of
Procurement and Assistance Policy, Department of Energy, 1000
Independence Avenue S.W., Washington, D.C. 20585.
FOR FURTHER INFORMATION CONTACT: Terrence D. Sheppard (202) 586-8193;
e-mail terry.sheppard@hq.doe.gov; fax (202) 586-0545.
SUPPLEMENTARY INFORMATION:
I. Background
II. Section by Section Analysis
III. Procedural Requirements
A. Review Under Executive Order 12866
B. Review Under Executive Order 12988
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act
E. Review Under Executive Order 12612
F. Review Under Small Business Regulatory Enforcement Fairness
Act of 1996
G. Review Under the Unfunded Mandates Reform Act of 1995
I. Background
This notice amends the Department of Energy Acquisition Regulation
(DEAR) based on provisions contained in Section 808 of the National
Defense Authorization Act for Fiscal Year 1998 (Pub. L. 105-85).
Section 808 establishes a cap on allowable compensation costs for
certain officers of Department of Defense and civilian agency
contractors which applies to costs of compensation incurred after
January 1, 1998, under covered contracts entered into before, on, or
after the date of enactment of the Act. Section 808 states that costs
of compensation of senior executives of contractors for a fiscal year,
regardless of the contract funding source, to the extent that such
compensation exceeds the benchmark compensation amount determined
applicable for the fiscal year by the Administrator for Federal
Procurement Policy, are unallowable.
Further, for purposes of section 2324(e)(1)(P) of title 10, United
States Code, and section 306(e)(1)(P) of the Federal Property and
Administrative Services Act of 1949 (41 U.S.C. 256(e)(1)(P)), the
Administrator shall review commercially available surveys of executive
compensation and, on the basis of the results of the review, determine
a benchmark compensation amount to apply for each fiscal year. In
making determinations under this subsection the Administrator shall
consult with the Director of the Defense Contract Audit Agency and such
other officials of executive agencies as the Administrator considers
appropriate.
The benchmark compensation amount applicable for a fiscal year is
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 under subsection
(a) is made.
The term ``compensation'', for a fiscal year, means the total
amount of wages, salary, bonuses and deferred compensation for the
fiscal year, whether paid, earned, or otherwise accruing, as recorded
in an employer's cost accounting records for the fiscal year.
The term ``senior executive'', with respect to a corporation, means
the chief executive officer of the corporation or any individual acting
in a similar capacity for the corporation; the four most highly
compensated employees in management positions of the corporation other
than the chief executive officer; and in the case of a corporation that
has components which report directly to the corporate headquarters, the
five most highly compensated individuals in management positions at
each such component.
The term ``benchmark corporation'', with respect to a fiscal year,
means a publicly-owned United States corporation that has annual sales
in excess of $50,000,000 for the fiscal year.
The term ``publicly-owned United States corporation'' means a
corporation organized under the laws of a State of the United States,
the District of Columbia, the Commonwealth of Puerto Rico, or a
possession of the United States and the voting stock of which is
publicly traded.
The term ``fiscal year'' means a fiscal year established by a
contractor for accounting purposes.
II. Section by Section Analysis
1. The authority for Part 970 is restated.
2. Section 970.3102-2, Compensation for personnel services, is
revised by adding a new paragraph (q) which addresses the statutory
compensation limits.
3. Section 970.5204-13(d)(8) is revised by adding a new paragraph
(viii) which addresses the statutory compensation limits.
4. Section 970.5204-14(d)(8) is revised by adding a new paragraph
(viii) which addresses the statutory compensation limits.
III. Procedural Requirements
A. Review Under Executive Order 12866
Today's regulatory action has been determined not to be a
``significant regulatory action'' under Executive Order 12866,
``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993).
Accordingly, this action was not subject to review under that Executive
Order by the Office of Information and Regulatory Affairs of the Office
of Management and Budget (OMB).
B. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on
Executive agencies the general duty to adhere to the following
[[Page 25780]]
requirements: (1) Eliminate drafting errors and ambiguity; (2) write
regulations to minimize litigation; and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. With regard to the review
required by section 3(a), section 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable
effort to ensure that the regulation: (1) Clearly specifies the
preemptive effect, if any; (2) clearly specifies any effect on existing
Federal law or regulation; (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction:
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6) addresses other important issues affecting clarity
and general draftmenship under any guidelines issued by the Attorney
General. Section 3(c) of Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. The Department of Energy
has completed the required review and determined that, to the extent
permitted by law, the regulations meet the relevant standards of
Executive Order 12988.
C. Review Under the Paperwork Reduction Act
No new information or recordkeeping requirements are imposed by
this rulemaking. Accordingly, no OMB clearance is required under the
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).
D. Review Under the National Environmental Policy Act
DOE has concluded that promulgation of this rule falls into a class
of actions which would not individually or cumulatively have
significant impact on the human environment, as determined by DOE's
regulations (10 CFR Part 1021, Subpart D) implementing the National
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.).
Specifically, this rule is categorically excluded from NEPA review
because the amendments to the DEAR do not change the environmental
effect of the rule being amended (categorical exclusion A5). Therefore,
this rule does not require an environmental impact statement or
environmental assessment pursuant to NEPA.
E. Review Under Executive Order 12612
Executive Order 12612 (52 FR 41685, October 30, 1987) requires that
regulations, rules, legislation, and any other policy actions be
reviewed for any substantial direct effects on States, on the
relationship between the National Government and the States, or in the
distribution of power and responsibilities among the various levels of
Government. If there are sufficient substantial direct effects, then
the Executive Order requires the preparation of a federalism assessment
to be used in all decisions involved in promulgating and implementing a
policy action. This rule revises certain policy and procedural
requirements. States which contract with DOE will be subject to this
rule. However, DOE has determined that this rule will not have a
substantial direct effect on the institutional interests or traditional
functions of the States.
F. Review Under Small Business Regulatory Enforcement Fairness Act of
1996
As required by 5 U.S.C. 801, the Department of Energy will report
to Congress promulgation of the rule prior to its effective date. The
report will state that it has been determined that the rule is not a
``major rule'' as defined by 5 U.S.C. 804(3).
G. Review Under the Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally
requires a Federal agency to perform a detailed assessment of costs and
benefits of any rule imposing a Federal Mandate with costs to State,
local or tribal governments, or to the private sector, of $100 million
or more. This rulemaking only affects private sector entities, and the
impact is less than $100 million.
List of Subjects in 48 CFR Part 970
Government procurement.
Issued in Washington, DC on April 22, 1998.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.
For the reasons set out in the preamble, Chapter 9 of Title 48 of
the Code of Federal Regulations is amended as set forth below.
PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS
1. The authority citation for Part 970 continues to read as
follows:
Authority: Sec. 161 of the Atomic Energy Act of 1954 (42. U.S.C.
2201), sec 644 of the Department of Energy Organization Act, Public
Law 95-91 (42 U.S.C. 7254).
2. Section 970.3102-2 is amended by adding a new paragraph (q) to
read as follows:
970.3102-2 Compensation for personal services.
* * * * *
(q) Limitation on allowability of compensation for certain
contractor personnel. Costs incurred 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, are unallowable. Allowable costs of
executive compensation shall be determined pursuant to Federal
Acquisition Regulation 31.205-6(p).
3. Section 970.5204-13 is amended by adding a new paragraph
(d)(8)(viii) immediately after paragraph (d)(8)(vii) and before the
Note to read as follows:
970.5204-13 Allowable costs and fixed-fee (management and operating
contracts).
* * * * *
(d)(8) * * *
(viii) Compensation of a senior executive, provided that such
compensation does not exceed the benchmark compensation amount
determined applicable for the contractor fiscal year by the
Administrator, Office of Federal Procurement Policy. Costs of executive
compensation shall be determined pursuant to Federal Acquisition
Regulation 31.205-6(p).
* * * * *
4. Section 970.5204-14 is amended by adding a new paragraph
(d)(8)(viii) immediately after paragraph (d)(8)(vii) and before the
Note to read as follows:
970.5204-14 Allowable costs and fixed-fee (support contracts).
* * * * *
(d)(8) * * *
(viii) Compensation of a senior executive, provided that such
compensation does not exceed the benchmark compensation amount
determined applicable for the contractor fiscal year by the
Administrator, Office of Federal Procurement Policy. Costs of executive
compensation shall be determined pursuant to Federal Acquisition
Regulation 31.205-6(p).
* * * * *
[FR Doc. 98-12413 Filed 5-8-98; 8:45 am]
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