Federal Acquisition Regulation; FAR Case 2008-039, Reporting Executive Compensation and First-Tier Subcontract Awards, 39414-39420 [2010-16691]

Agencies

• General Services Administration
• National Aeronautics and Space Administration
• DEPARTMENT OF DEFENSE

[Federal Register Volume 75, Number 130 (Thursday, July 8, 2010)]
[Rules and Regulations]
[Pages 39414-39420]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-16691]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 4, 12, 42, and 52

[FAC 2005-44; FAR Case 2008-039; Docket 2010-0093, Sequence 1]
RIN 9000-AL66


Federal Acquisition Regulation; FAR Case 2008-039, Reporting 
Executive Compensation and First-Tier Subcontract Awards

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

ACTION: Interim rule with request for comments.

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[[Page 39415]]

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are issuing an interim rule 
amending the Federal Acquisition Regulation (FAR) to implement section 
2 of the Federal Funding Accountability and Transparency Act of 2006, 
as amended by section 6202 of the Government Funding Transparency Act 
of 2008, which requires the Office of Management and Budget (OMB) to 
establish a free, public, website containing full disclosure of all 
Federal contract award information. This rule will require contractors 
to report executive compensation and first-tier subcontractor awards on 
contracts expected to be $25,000 or more, except classified contracts, 
and contracts with individuals.

DATES: Effective Date: July 8, 2010.
    Applicability Date: Contracting officers shall include the FAR 
clause at 52.204-10, Reporting Executive Compensation and First-Tier 
Subcontract Awards, in accordance with FAR 4.1403, in solicitations 
issued on or after the effective date of this rule, and resultant 
contracts. Contracting officers shall modify existing indefinite-
delivery indefinite-quantity (IDIQ) contracts on a bilateral basis in 
accordance with FAR 1.108(d)(3) to include the clause for future 
orders. This includes modifying blanket purchase agreements under IDIQ 
contracts. IDIQ contracts include Federal Supply Schedule contracts and 
task- and delivery-order contracts such as Governmentwide acquisition 
contracts.
    Comment Date: Interested parties should submit written comments to 
the Regulatory Secretariat on or before September 7, 2010 to be 
considered in the formulation of a final rule.

ADDRESSES: Submit comments identified by FAC 2005-44, FAR case 2008-
039, by any of the following methods:
     Regulations.gov: https://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by inputting ``FAR Case 
2008-039'' under the heading ``Enter Keyword or ID'' and selecting 
``Search''. Select the link ``Submit a Comment'' that corresponds with 
``FAR Case 2008-039''. Follow the instructions provided at the ``Submit 
a Comment'' screen. Please include your name, company name (if any), 
and ``FAR Case 2008-039'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (MVCB), 1800 F Street, NW., Room 4041, ATTN: Hada Flowers, 
Washington, DC 20405.
    Instructions: Please submit comments only and cite FAC 2005-44, FAR 
case 2008-039, in all correspondence related to this case. All comments 
received will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided.

FOR FURTHER INFORMATION CONTACT: Mr. Ernest Woodson, Procurement 
Analyst, at (202) 501-3775 for clarification of content. Please cite 
FAC 2005-44, FAR case 2008-039. For information pertaining to status or 
publication schedules, contact the Regulatory Secretariat at (202) 501-
4755.

SUPPLEMENTARY INFORMATION:

A. Background

    On September 26, 2006, the Federal Funding Accountability and 
Transparency Act (Transparency Act), Public Law 109-282, 31 U.S.C. 6101 
note, was enacted to reduce ``wasteful and unnecessary spending,'' by 
requiring that OMB establish a free, public, website containing full 
disclosure of all Federal award information for awards of $25,000 or 
more. The Transparency Act required, by January 1, 2009, reporting on 
subcontract awards by Federal Government contractors and 
subcontractors. The Transparency Act's initial phase was conducted as a 
Pilot Program (Pilot), to test the collection and accessibility of the 
subcontract data. In order to implement the Pilot, a proposed rule was 
published in the Federal Register, March 21, 2007 (72 FR 13234).
    A final rule implementing the Pilot was published in the Federal 
Register, September 6, 2007 (72 FR 51306). Exempted from the Pilot were 
solicitations and contracts for commercial items issued under FAR part 
12 and classified solicitations and contracts. To minimize the burden 
on Federal prime contractors and small businesses, the Pilot applied to 
contracts with a value greater than $500,000,000 and required the 
awardees to report all subcontract awards, exceeding $1,000,000 to the 
Transparency Act database at https://www.esrs.gov. The Pilot terminated 
January 1, 2009.
    On June 30, 2008, Section 6202 of the Government Funding 
Transparency Act of 2008 (Pub. L. 110-252) amended the Transparency Act 
to require the Director of OMB to include an additional reporting 
element, requiring contractors and subcontractors to disclose 
information on the names and total compensation of their five most 
highly compensated officers.
    On March 31, 2009, the Councils published in the Federal Register 
at 74 FR 14639 FAR case 2009-009, American Recovery and Reinvestment 
Act of 2009 (the Recovery Act)--Reporting Requirements, which required 
contractors receiving a Recovery Act funded contract award to provide 
detailed information on subcontracts, including the data elements 
required to comply with the Transparency Act. Although the Transparency 
Act reporting requirements flow down to all subcontracts, regardless of 
tier, the Recovery Act limited the reporting on subcontract awards to 
the contractor's first-tier subcontractors.
    The Office of Management and Budget directed that the FAR be 
amended to initiate subcontract award reporting under the Transparency 
Act:
     Subcontract reporting would apply only to first-tier 
subcontracts;
     The rule would phase-in the reporting of subcontracts of 
$25,000 or more:
    [cir] Until September 30, 2010, any newly awarded subcontract must 
be reported if the prime contract award amount was $20,000,000 or more;
    [cir] From October 1, 2010, until February 28, 2011, any newly 
awarded subcontract must be reported if the prime contract award amount 
was $550,000 or more; and
    [cir] Starting March 1, 2011, any newly awarded subcontract must be 
reported if the prime contract award amount was $25,000 or more.
     By the end of the month following the month of award of a 
contract, and annually thereafter, the contractor shall report the 
names and total compensation of each of the five most highly 
compensated executives for the contractor's preceding completed fiscal 
year;
     Unless otherwise directed by the contracting officer, by 
the end of the month following the month of award of a first-tier 
subcontract, and annually thereafter, the contractor shall report the 
names and total compensation of each of the five most highly 
compensated executives for the first-tier subcontractor's preceding 
completed fiscal year;
     There would be a $300,000 gross income exception for prime 
contractors and subcontractors; and
     Data quality requirements would apply to agencies and 
contractors.
    Many of these directions minimize burden on contractors.
    The rule will require contractors to report subcontracts of $25,000 
or more, and any modifications made to those

[[Page 39416]]

subcontracts which change previously reported data.
    The reporting requirements of the Transparency Act are sweeping in 
their breadth, and are intended to empower the American taxpayer with 
information that may be used to demand greater fiscal discipline from 
both executive and legislative branches of Government. The Transparency 
Act reporting requirements apply to all businesses (large, small, 
disadvantaged small, veteran-owned small, women-owned small, HUBZone 
small), regardless of business size or ownership.
    This rule revises FAR subpart 4.14 and FAR 52.204-10 to implement 
the Transparency Act reporting requirements. Contracting officers must 
include the revised clause in solicitations and contracts of $25,000 or 
more. The clause is required in commercial item contracts, including 
commercially available off-the-shelf (COTS) item contracts, as well as 
actions under the simplified acquisition threshold, meeting the $25,000 
threshold. The clause is not required in classified solicitations and 
contracts, and contracts with individuals.
    Contractors will provide these subcontract reports to the Federal 
Funding Accountability and Transparency Act Sub-award Reporting System 
(FSRS) (https://www.fsrs.gov). FSRS is a module of the Electronic 
Subcontracting Reporting System (eSRS) designed specifically to collect 
the Transparency Act required data.
    Contracting officers will be required to modify existing contracts 
to cover future orders--see the Applicability Date above.

B. Determinations

    The Councils provide the following determinations with respect to 
the rule's applicability to contracts and subcontracts in amounts not 
greater than the simplified acquisition threshold, commercial items, 
and commercially available off-the-shelf (COTS) items.
    1. Applicability to contracts at or below the simplified 
acquisition threshold. 41 U.S.C. 429 governs the applicability of laws 
to contracts or subcontracts in amounts not greater than the simplified 
acquisition threshold. It is intended to limit the applicability of 
laws to such contracts or subcontracts. If a provision of law contains 
criminal or civil penalties, or if the Federal Acquisition Regulatory 
Council (FAR Council) makes a written determination that it is not in 
the best interest of the Federal Government to exempt contracts or 
subcontracts at or below the simplified acquisition threshold, the law 
will apply to them. Therefore, given that the Transparency Act was 
enacted to reduce ``wasteful and unnecessary spending'' by requiring 
that the Office of Management and Budget (OMB) establish a free, 
public, Web site containing full disclosure of all Federal contract 
award information, the FAR Council has determined that it is in the 
best interest of the Federal Government to apply this rule to 
solicitations and contracts at or below the simplified acquisition 
threshold, as defined at 2.101.
    2. Applicability to commercial item contracts. 41 U.S.C. 430 
governs the applicability of laws to commercial items and is intended 
to limit the applicability of laws to commercial items.
    Section 430 provides that if a provision of law contains criminal 
or civil penalties, or if the FAR Council makes a written determination 
that it is not in the best interest of the Federal Government to exempt 
commercial item contracts, the provision of law will apply to contracts 
for commercial items. The same applies for subcontracts for commercial 
items. Therefore, given that the Transparency Act was enacted to reduce 
``wasteful and unnecessary spending'' by requiring that OMB establish a 
free, public, Web site containing full disclosure of all Federal 
contract award information, the FAR Council has determined that it is 
in the best interest of the Federal Government to apply the rule to 
commercial items, as defined at FAR 2.101, both at the prime and 
subcontract levels.
    3. Applicability to commercially available off-the-shelf (COTS) 
item contracts. 41 U.S.C. 431 governs the applicability of laws to the 
procurement of COTS items, and is intended to limit the applicability 
of laws to them. Even if a law has been determined to apply to 
commercial items in general, COTS items may be exempt. Section 431 
provides that if a provision of law contains criminal or civil 
penalties, or if the Administrator for Federal Procurement Policy makes 
a written determination that it is not in the best interest of the 
Federal Government to exempt COTS item contracts, the provision of law 
will apply. The same applies for subcontracts for COTS items. 
Therefore, given that the Transparency Act was enacted to reduce 
``wasteful and unnecessary spending'' by requiring that OMB establish a 
free, public, online Web site containing full disclosure of all Federal 
contract award information, the Administrator for Federal Procurement 
Policy has determined that it is in the best interest of the Federal 
Government to apply the rule to COTS item contracts and subcontracts, 
as defined at FAR 2.101.
    This is a significant regulatory action and, therefore, was subject 
to review under Section 6(b) of Executive Order 12866, Regulatory 
Planning and Review, dated September 30, 1993. This rule is not a major 
rule under 5 U.S.C. 804.

C. Regulatory Flexibility Act

    This interim rule may 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 it requires 
contractors to report information on first-tier subcontract awards of 
$25,000 or more, except classified contracts and contracts with 
individuals. The rule also requires contractors to report the names and 
total compensation of each of the contractor's and first-tier 
subcontractors' five most highly compensated executives for the 
contractor and its subcontractor's preceding completed fiscal year. The 
rule requires that first-tier subcontractors provide the total 
compensation information to the contractor for reporting purposes. An 
Initial Regulatory Flexibility Analysis (IRFA) has been prepared. The 
analysis is summarized as follows:

1. Reasons for the action.

    This action implements the Federal Funding Accountability and 
Transparency Act (``Transparency Act''), (Pub. L. 109-282), as 
amended by section 6202 of the Government Funding Transparency Act 
of 2008 (Pub. L. 110-252), enacted to reduce ``wasteful and 
unnecessary spending'' by requiring that the Office of Management 
and Budget (OMB) establish a free, public, online database 
containing full disclosure of all Federal contract award 
information.

2. Objectives of, and legal basis for the rule.

    The objective of the rule is to empower the American taxpayer 
with information that may be used to demand greater fiscal 
discipline from both executive and legislative branches of 
Government. The legal basis for the rule is the Transparency Act and 
the Government Funding Transparency Act of 2008. According to the 
sponsors of the Transparency Act, the new database will deter 
``wasteful and unnecessary'' spending, since Government officials 
will be less likely to earmark funds for special projects if they 
know the public could identify how much money was awarded to which 
organizations, and for what purposes.

3. Description and estimate of the number of small entities to which 
the rule will apply.

    The rule applies to all contracts and subcontracts, of $25,000 
or more and any modifications to those subcontracts that change 
previously reported data. The clause is not required in classified 
solicitations and contracts, and contracts with individuals. The 
rule requires contractors to report first-

[[Page 39417]]

tier subcontract award information and annually report the 
contractor's and first-tier subcontractors' five most highly 
compensated executives for the contractor and subcontractor's 
preceding completed fiscal year. To arrive at an estimate of the 
number of small businesses to which the rule would apply, the 
Councils queried the Federal Procurement Data System (FDPS) for FY 
09 contract award information. Based on the FPDS data collected 
there were 188,712 unique DUNS numbers for contractors 
Governmentwide. Within this group 146,905 were reported as small 
businesses based on the Contracting Officer's Determination of 
Business Size. The Government does not have a system in place that 
provides information on the actual number of first-tier subcontracts 
awarded by Government prime contractors, but believes the vast 
majority of first-tier subcontractors will be small businesses. 
Using a formula previously used in FAR Case 2009-009, American 
Recovery and Reinvestment Act of 2009 (Recovery Act)--Reporting 
Requirements, it is estimated that the number of small businesses 
that may be first-tier subcontracts and be subject to the rule will 
be three times the number of small businesses that received prime 
contract awards.
    Given that understanding, the number of small businesses that 
may be awarded first-tier subcontracts and be subject to the rule's 
reporting requirements under FAR 52.204-10(c)(1)(i) through (xiv) is 
estimated to be 440,715 (146,905 x 3). This does not take into 
account a reduction for the exception for entities that had gross 
income, from all sources, under $300,000.
    To calculate the number of small businesses that may be subject 
to the rule's requirement to report the contractor's and first-tier 
subcontractors' five most highly compensated executives, for the 
contractor and first-tier subcontractor's preceding completed fiscal 
year, the Councils estimate that number to be 29,381 or 20 percent 
of the number of unique DUNS numbers (146,905) Governmentwide in 
FPDS in FY 09. This estimate is based on the assumption that the 
vast majority of small businesses will be exempt from the 
compensation reporting requirement because they will meet the 
exemptions in section 2(e) and section 2(b)(1)(F) of the 
Transparency Act (see item 6 below).
    Accordingly, the Councils believe 617,001 is a reasonable 
estimate of the total number of small businesses, both as prime and 
first-tier subcontractors to whom the rule will apply.

4. Description of projected reporting, recordkeeping, and other 
compliance requirements of the rule, including an estimate of the 
classes of small entities which will be subject to the requirement and 
the type of professional skills necessary for preparation of the report 
or record.

    The rule requires prime contractors to report first-tier 
subcontract data on first-tier subcontract awards of $25,000 or 
more, in https://www.fsrs.gov. The rule also requires contractors to 
report, at https://www.ccr.gov, the names and total compensation of 
each of the contractor's five most highly compensated executives, 
for the contractor's preceding completed fiscal year in which the 
awards were made, and to make a similar report for subcontractors at 
https://www.fsrs.gov. The rule applies to all businesses (large, 
small, disadvantaged small, veteran-owned small, HUBZone small, 
women-owned small), regardless of business size or ownership. The 
professional skills necessary for the preparation of the report 
would probably be prepared by a company office or division manager 
or a company subcontract administrator.
    Section 2(e) of the statute allows the Director, OMB, to exempt 
any entity that demonstrates its gross income, from all sources, did 
not exceed $300,000 in the entity's previous tax year, from 
reporting the first-tier subcontract award information, until the 
Director determines that the imposition of the reporting requirement 
will not cause undue burden on the entity. The Director has exempted 
them.
    Also, contractors and first-tier subcontractors are not required 
to report the total compensation information required by the rule, 
unless--
    a. In the contractor or subcontractor's preceding fiscal year, 
the contractor or subcontractor received--
    1. 80 percent or more of its annual gross revenue in Federal 
contracts (and subcontracts), loans, grants (and subgrants), and 
cooperative agreements; and
    2. $25,000,000 or more in annual gross revenue from Federal 
contracts (and subcontracts), loans, grants (and subgrants), and 
cooperative agreements; and
    b. The public does not have access to information about the 
compensation of the senior executives through periodic reports filed 
under section 13(a) or 15(d) of the Securities Exchange Act of 1934 
(15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue 
Code of 1986.
    Additionally, the rule minimizes the burden on small entities by 
phasing-in reporting requirements. Beginning on the date of 
publication of the rule, contractors report newly awarded 
subcontracts exceeding $20 million; starting October 1, 2010, 
contractors report newly awarded subcontracts of $550,000 or more; 
starting March 1, 2011 they report newly awarded subcontracts of 
$25,000 or more.
    Many contractors received contract funds under the American 
Recovery and Reinvestment Act of 2009, and therefore are familiar 
with the basic idea of reporting this kind of information into a 
database.

5. Relevant Federal rules which may duplicate, overlap, or conflict 
with the rule.

    The rule follows the September 6, 2007 Pilot Program final rule 
FAR Case 2006-029, which has expired. It also follows the Recovery 
Act reporting rule, FAR Case 2009-009, which also requires the 
public to report into a database on Recovery Act monies; because of 
this, there will be some duplication of reporting into databases.

6. Description of any significant alternatives to the rule which 
accomplish the stated objectives of applicable statutes and which 
minimize any significant economic impact of the rule on small entities.

    The alternatives to the rule would have a heavier burden on 
small entities. For example, the reporting tier could go below the 
first-tier subcontract; the $300,000 exception would not be used; 
there would be no pre-population of some data elements; there would 
be no phase-in periods and the $25,000 threshold would apply 
immediately.

    The Regulatory Secretariat has submitted a copy of the IRFA to the 
Chief Counsel for Advocacy of the Small Business Administration. 
Interested parties may obtain a copy from the Regulatory Secretariat. 
The Councils invite comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    The Councils will also consider comments from small entities 
concerning the existing regulations in parts affected by this rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (FAC 2005-44, FAR Case 
2008-039) in correspondence.

D. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 104-13) applies because the 
interim rule contains information collection requirements. Accordingly, 
the Regulatory Secretariat forwarded an emergency information 
collection request for approval of a new information collection 
requirement to the Office of Management and Budget under 44 U.S.C. 
Chapter 35, et seq. OMB approved the new information collection 
requirement as OMB Control No. 9000-0177. Comments to the interim rule 
as well as the information collection requirement will be considered in 
the revisions to both the rule and the collection.
    The rule requires that all solicitations and contracts of $25,000 
or more contain the clause at FAR 52.204-10. The clause flows down to 
first-tier subcontracts. Reporting is phased-in.
    The rule also requires contractors, unless otherwise directed by a 
contracting officer, to report first-tier subcontracts in accordance 
with the data elements at FAR paragraphs 52.204-10(c)(1)(i) through 
(xiv) to https://www.fsrs.gov by the end of the month following the 
month in which the subcontract award is made. Additionally, FAR 52.204-
10(c)(2) and (3) require certain contractors and first-tier 
subcontractors to publicly disclose the names and total compensation of

[[Page 39418]]

each of the contractor and subcontractor's five most highly compensated 
executives for the preceding completed fiscal year in which the award 
was made. The FAR clause requires this compensation disclosure for 
contractors as well because to exclude contractors while requiring 
disclosure for first-tier subcontractors would be unsupportable given 
the transparency goals of the Transparency Act. The clause imposes 
public reporting burdens on contractors and first-tier subcontractors 
performing under a Government contract.
    Based on the FPDS data collected, there were 188,712 unique DUNS 
numbers for contractors Governmentwide. Of this amount 146,905 were 
small businesses and 41,707 were other than small businesses. The 
Councils believe that 6256 or 15 percent of the other than small 
businesses do not disclose the compensation information through 
periodic reports filed under section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the 
Internal Revenue Code of 1986, and therefore would be subject to the 
rule. Given the number of small businesses (29,381) that will be 
subject to the compensation reporting requirement, the Councils 
estimate that total number of prime contractors and first-tier 
subcontractors to whom the reporting requirement under FAR 52.204-
10(c)(2) and (3) would apply is 35,637.
    Based on the above and the calculations below, the Councils 
estimate the annual burden associated with reporting requirements of 
FAR 52.204-10 to be $22,608,776. The public reporting for this burden 
is estimated to average .5 hour per response for reporting under FAR 
52.204-10(c)(1)(i) through (xiv), and .5 reporting hour under FAR 
52.204-10(c)(2) and (3). The reporting burden includes the time for 
reviewing instructions, and reporting the data. It does not cover the 
time required to conduct research or the time to obtain the information 
for the data elements.
    1. Reporting Elements under FAR 52.204-10(c)(1)(i) through (xiv). 
We estimate the total annual public cost burden for these elements to 
be $21,397,118 based on the following:
    The annual reporting burden is estimated as follows:
    Respondents: 629,327 (number of first-tier subcontractors (440,715) 
+ prime small (146,905) and other than small businesses (41,707)).
    Responses per Respondent: 1.
    Total Annual Responses: 629,327.
    Preparation Hours per Response: .5.
    Total Response Burden Hours: 314,664.
    Average Hourly Wages ($50.00 + 36.35% overhead): $68.00.
    Estimated Cost to the Public: $21,397,118.
    2. Reporting Elements Under FAR 52.204-10(c)(2) and (3). Given FPDS 
data for unique DUNS numbers for FY 09, the Councils estimate that 
29,381 or 20 percent of small businesses with unique DUNS numbers in 
FPDS will be required to report the total compensation information due 
to the presumption that the majority of such businesses, both as prime 
and first-tier subcontractors will be exempt from the reporting 
requirement, because they meet the exceptions provided by the 
Transparency Act. The Councils believe that only 6256 or 15 percent of 
the other than small businesses (41,707) with unique DUNS in FPDS would 
be subject to the reporting requirement, because it presumes that 85 
percent of the other than small businesses already provide the total 
compensation information through periodic reports filed under section 
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.
    Therefore, the Councils believe that 35,637 first-tier 
subcontractors and prime contractors would be required to disclose the 
compensation information.
    We estimate the total annual public cost burden for this element to 
be $1,211,658 based on the following:
    Respondents: 35,637 subcontractors and prime contractors.
    Responses per Respondent: 1.
    Total Annual Responses: 35,637.
    Preparation Hours per Response: .5.
    Total Response Burden Hours: 17,819.
    Average Hourly Wages: ($50.00 + 36.35% overhead): $68.00.
    Estimated Cost to the Public: $1,211,658.

E. Request for Comments Regarding Paperwork Burden

    Submit comments, including suggestions for reducing this burden, 
not later than September 7, 2010 to: FAR Desk Officer, OMB, Room 10102, 
NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, Regulatory Secretariat (MVCB), 1800 F Street, NW., Room 
4041, Washington, DC 20405. Please cite OMB Control No. 9000-0177, 
Federal Funding Accountability and Transparency Act (Transparency Act), 
in all correspondence.
    Public comments are particularly invited on: whether this 
collection of information is necessary for the proper performance of 
functions of the FAR, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    Requester may obtain a copy of the justification from the General 
Services Administration, Regulatory Secretariat (MVCB), Room 4041, 
Washington, DC 20405, telephone (202) 501-4755. Please cite OMB Control 
No. 9000-0177, Federal Funding Accountability and Transparency Act 
(Transparency Act), in all correspondence.

F. 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 action 
is necessary because the Federal Funding Accountability and 
Transparency Act (Transparency Act) (Pub. L. 109-282), as amended by 
section 6202 of the Government Funding Transparency Act of 2008 (Pub. 
L. 110-252), required the reporting of subcontract award data by 
January 1, 2009. This rule is a follow-up to the Pilot Program rule in 
FAR Case 2006-029, published March 21, 2007 (72 FR 13234) as a proposed 
rule, and September 6, 2007 (72 FR 51306) as a final rule; the preamble 
discussions notified the public to expect the final program thresholds 
to be at the greatly lowered thresholds in the statute, for example, 
requiring the reporting of subcontracts of $25,000 or more. Failure to 
implement the statute as required will undermine the Transparency Act's 
intent to empower the American taxpayer with information that may be 
used to demand greater fiscal discipline from both executive and 
legislative branches of Government. However, pursuant to 41 U.S.C. 418b 
and FAR 1.501-3(b), the Councils will consider public comments received 
in response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 4, 12, 42, and 52

    Government procurement.


[[Page 39419]]


    Dated: July 2, 2010.
Edward Loeb,
Director, Acquisition Policy Division.


0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 4, 12, 42, and 52 as 
set forth below:
0
1. The authority citation for 48 CFR parts 4, 12, 42, and 52 continues 
to read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 4--ADMINISTRATIVE MATTERS

0
2. Revise subpart 4.14 to read as follows:
Subpart 4.14--Reporting Executive Compensation and First-Tier 
Subcontract Awards
Sec.
4.1400 Scope of subpart.
4.1401 Applicability.
4.1402 Procedures.
4.1403 Contract clause.

Subpart 4.14--Reporting Executive Compensation and First-Tier 
Subcontract Awards


4.1400  Scope of subpart.

    This subpart implements section 2 of the Federal Funding 
Accountability and Transparency Act of 2006 (Pub. L. 109-282), as 
amended by section 6202 of the Government Funding Transparency Act of 
2008 (Pub. L. 110-252), which requires contractors to report 
subcontract award data and the total compensation of the five most 
highly compensated executives of the contractor and subcontractor. The 
public may view first-tier subcontract award data at https://usaspending.gov.


4.1401  Applicability.

    (a) This subpart applies to all contracts with a value of $25,000 
or more, except classified contracts and contracts with individuals.
    (b) The reporting requirements will be phased-in according to the 
schedule in 52.204-10(e).
    (c) For all phases, reporting of subcontract information will be 
limited to the first-tier subcontractor.


4.1402  Procedures.

    (a) Agencies shall ensure that contractors comply with the 
reporting requirements of 52.204-10, Reporting Executive Compensation 
and First-Tier Subcontract Awards. Agencies shall review contractor 
reports on a quarterly basis to ensure the information is consistent 
with contract information. The agency is not required to address data 
for which the agency would not normally have supporting information, 
such as the compensation information required of contractors and first-
tier subcontractors. However, the agency shall inform the contractor of 
any inconsistencies with the contract information and require that the 
contractor correct the report, or provide a reasonable explanation as 
to why it believes the information is correct. Agencies may review the 
reports at https://www.fsrs.gov.
    (b) When contracting officers report the contract action to the 
Federal Procurement Data System (FPDS) in accordance with FAR subpart 
4.6, certain data will then pre-populate from FPDS, to assist 
contractors in completing and submitting their reports. Contracts 
reported using the generic DUNS number allowed at FAR 4.605(b)(2) will 
interfere with the contractor's ability to comply with this reporting 
requirement, because the data will not pre-populate from FPDS.
    (c) If the contractor fails to comply with the reporting 
requirements, the contracting officer shall exercise appropriate 
contractual remedies. In addition, the contracting officer shall make 
the contractor's failure to comply with the reporting requirements a 
part of the contractor's performance information under Subpart 42.15.
    (d) There is a reporting exception in 52.204-10(d) for contractors 
and subcontractors who had gross income in the previous tax year under 
$300,000.


4.1403  Contract clause.

    (a) Except as provided in paragraph (b) of this section, the 
contracting officer shall insert the clause at 52.204-10, Reporting 
Executive Compensation and First-Tier Subcontract Awards, in all 
solicitations and contracts of $25,000 or more.
    (b) The clause is not required in--
    (1) Classified solicitations and contracts; or
    (2) Solicitations and contracts with individuals.

PART 12--ACQUISITION OF COMMERCIAL ITEMS


12.503  [Amended]

0
3. Amend section 12.503 by removing and reserving paragraph (a)(6).

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES


42.1501  [Amended]

0
4. Amend section 42.1501 by adding the words ``the contractor's 
reporting into databases (see subparts 4.14 and 4.15);'' after the word 
``satisfaction;''.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
5. Revise section 52.204-10 to read as follows:
    52.204-10 Reporting Executive Compensation and First-Tier 
Subcontract Awards.
    As prescribed in 4.1403(a), insert the following clause:

Reporting Executive Compensation and First-Tier Subcontract Awards (JUL 
2010)

    (a) Definitions. As used in this clause:
    Executive means officers, managing partners, or any other 
employees in management positions.
    First-tier subcontract means a subcontract awarded directly by a 
Contractor to furnish supplies or services (including construction) 
for performance of a prime contract, but excludes supplier 
agreements with vendors, such as long-term arrangements for 
materials or supplies that would normally be applied to a 
Contractor's general and administrative expenses or indirect cost.
    Total compensation means the cash and noncash dollar value 
earned by the executive during the Contractor's preceding fiscal 
year and includes the following (for more information see 17 CFR 
229.402(c)(2)):
    (1) Salary and bonus.
    (2) Awards of stock, stock options, and stock appreciation 
rights. Use the dollar amount recognized for financial statement 
reporting purposes with respect to the fiscal year in accordance 
with the Statement of Financial Accounting Standards No. 123 
(Revised 2004) (FAS 123R), Shared Based Payments.
    (3) Earnings for services under non-equity incentive plans. This 
does not include group life, health, hospitalization or medical 
reimbursement plans that do not discriminate in favor of executives, 
and are available generally to all salaried employees.
    (4) Change in pension value. This is the change in present value 
of defined benefit and actuarial pension plans.
    (5) Above-market earnings on deferred compensation which is not 
tax-qualified.
    (6) Other compensation, if the aggregate value of all such other 
compensation (e.g., severance, termination payments, value of life 
insurance paid on behalf of the employee, perquisites or property) 
for the executive exceeds $10,000.
    (b) Section 2(d)(2) of the Federal Funding Accountability and 
Transparency Act of 2006 (Pub. L. 109-282), as amended by section 
6202 of the Government Funding Transparency Act of 2008 (Pub. L. 
110-252), requires the Contractor to report information on 
subcontract awards. The law requires all reported information be 
made public, therefore, the Contractor is responsible for notifying 
its subcontractors that the required information will be made 
public.
    (c)(1) Unless otherwise directed by the contracting officer, by 
the end of the month following the month of award of a first-tier 
subcontract with a value of $25,000 or more, (and any modifications 
to these subcontracts that change previously reported data), the

[[Page 39420]]

Contractor shall report the following information at https://www.fsrs.gov for each first-tier subcontract. (The Contractor shall 
follow the instructions at https://www.fsrs.gov to report the data.)
    (i) Unique identifier (DUNS Number) for the subcontractor 
receiving the award and for the subcontractor's parent company, if 
the subcontractor has a parent company.
    (ii) Name of the subcontractor.
    (iii) Amount of the subcontract award.
    (iv) Date of the subcontract award.
    (v) A description of the products or services (including 
construction) being provided under the subcontract, including the 
overall purpose and expected outcomes or results of the subcontract.
    (vi) Subcontract number (the subcontract number assigned by the 
Contractor).
    (vii) Subcontractor's physical address including street address, 
city, state, and country. Also include the nine-digit zip code and 
congressional district.
    (viii) Subcontractor's primary performance location including 
street address, city, state, and country. Also include the nine-
digit zip code and congressional district.
    (ix) The prime contract number, and order number if applicable.
    (x) Awarding agency name and code.
    (xi) Funding agency name and code.
    (xii) Government contracting office code.
    (xiii) Treasury account symbol (TAS) as reported in FPDS.
    (xiv) The applicable North American Industry Classification 
System code (NAICS).
    (2) By the end of the month following the month of a contract 
award, and annually thereafter, the Contractor shall report the 
names and total compensation of each of the five most highly 
compensated executives for the Contractor's preceding completed 
fiscal year at https://www.ccr.gov, if--
    (i) In the Contractor's preceding fiscal year, the Contractor 
received--
    (A) 80 percent or more of its annual gross revenues from Federal 
contracts (and subcontracts), loans, grants (and subgrants) and 
cooperative agreements; and
    (B) $25,000,000 or more in annual gross revenues from Federal 
contracts (and subcontracts), loans, grants (and subgrants) and 
cooperative agreements; and
    (ii) The public does not have access to information about the 
compensation of the executives through periodic reports filed under 
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code 
of 1986. (To determine if the public has access to the compensation 
information, see the U.S. Security and Exchange Commission total 
compensation filings at https://www.sec.gov/answers/execomp.htm.)
    (3) Unless otherwise directed by the contracting officer, by the 
end of the month following the month of a first-tier subcontract 
with a value of $25,000 or more, and annually thereafter, the 
Contractor shall report the names and total compensation of each of 
the five most highly compensated executives for each first-tier 
subcontractor for the subcontractor's preceding completed fiscal 
year at https://www.fsrs.gov, if--
    (i) In the subcontractor's preceding fiscal year, the 
subcontractor received--
    (A) 80 percent or more of its annual gross revenues from Federal 
contracts (and subcontracts), loans, grants (and subgrants) and 
cooperative agreements; and
    (B) $25,000,000 or more in annual gross revenues from Federal 
contracts (and subcontracts), loans, grants (and subgrants) and 
cooperative agreements; and
    (ii) The public does not have access to information about the 
compensation of the executives through periodic reports filed under 
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code 
of 1986. (To determine if the public has access to the compensation 
information, see the U.S. Security and Exchange Commission total 
compensation filings at https://www.sec.gov/answers/execomp.htm.)
    (d)(1) If the Contractor in the previous tax year had gross 
income, from all sources, under $300,000, the Contractor is exempt 
from the requirement to report subcontractor awards.
    (2) If a subcontractor in the previous tax year had gross income 
from all sources under $300,000, the Contractor does not need to 
report awards to that subcontractor.
    (e) Phase-in of reporting of subcontracts of $25,000 or more.
    (1) Until September 30, 2010, any newly awarded subcontract must 
be reported if the prime contract award amount was $20,000,000 or 
more.
    (2) From October 1, 2010, until February 28, 2011, any newly 
awarded subcontract must be reported if the prime contract award 
amount was $550,000 or more.
    (3) Starting March 1, 2011, any newly awarded subcontract must 
be reported if the prime contract award amount was $25,000 or more.

(End of clause)


0
6. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (b)(4) through (b)(42) as (b)(5) through 
(b)(43), respectively; and adding a new paragraph (b)(4);
    The revised and added text reads as follows:


52.212-5  Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders--Commercial Items (JUL 2010)

* * * * *
    (b) * * *
    --(4) 52.204-10, Reporting Executive Compensation and First-Tier 
Subcontract Awards (JUL 2010) (Pub. L. 109-282) (31 U.S.C. 6101 
note).
* * * * *

0
7. Amend section 52.213-4 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (a)(2)(i) through (a)(2)(vii) as (a)(2)(ii) 
through (a)(2)(viii), respectively; and adding a new paragraph 
(a)(2)(i);
    The revised text reads as follows:


52.213-4  Terms and Conditions--Simplified Acquisitions (Other Than 
Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial 
Items) (JUL 2010)

    (a) * * *
    (2) * * *
    (i) 52.204-10 Reporting Executive Compensation and First-Tier 
Subcontract Awards (JUL 2010) (Pub. L. 109-282) (31 U.S.C. 6101 
note).
* * * * *
[FR Doc. 2010-16691 Filed 7-7-10; 8:45 am]
BILLING CODE 6820-EP-P