Federal Acquisition Regulation; Applicability of the Senior Executive Compensation Benchmark, 38539-38540 [2013-15214]
Download as PDF
Federal Register / Vol. 78, No. 123 / Wednesday, June 26, 2013 / Proposed Rules
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Part 31 and 52
[FAR Case 2012–025; Docket 2012–0025;
Sequence 1]
RIN 9000–AM39
Federal Acquisition Regulation;
Applicability of the Senior Executive
Compensation Benchmark
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Proposed rule.
AGENCY:
DoD, GSA, and NASA are
proposing to amend the Federal
Acquisition Regulation (FAR) to
continue the implementation of the
requirements of section 803 of the
National Defense Authorization Act for
Fiscal Year 2012. The proposed rule
seeks public comments on applying
section 803 with respect to that
provision’s expansion with respect to
contracts that had been awarded by
DoD, NASA, and the Coast Guard before
the date of enactment of section 803
(which was December 31, 2011) of the
application of the senior executive
compensation benchmark amount.
Section 803 expands to a broader group
of contractor employees the limitation
on reimbursing compensation costs. As
section 803 provides, this proposed rule
would apply section 803 retroactively to
contracts awarded before December 31,
2011, with respect to the contractor
compensation costs incurred after
January 1, 2012. In addition, also as part
of the implementation in the FAR of
section 803, DoD, GSA and NASA are
separately issuing an interim rule (FAR
Case 2012–017) that addresses the
prospective application of section 803 to
contracts awarded on or after December
31, 2011.
DATES: Interested parties should submit
written comments to the Regulatory
Secretariat at one of the addressees
shown below on or before August 26,
2013 to be considered in the formation
of the final rule.
ADDRESSES: Submit comments in
response to FAR Case 2012–025 by any
of the following methods:
• Regulations.gov: http://
www.regulations.gov. Submit comments
via the Federal eRulemaking portal by
searching for ‘‘FAR Case 2012–025.’’
TKELLEY on DSK3SPTVN1PROD with PROPOSALS3
SUMMARY:
VerDate Mar<15>2010
20:31 Jun 25, 2013
Jkt 229001
Select the link ‘‘Submit a Comment’’
that corresponds with ‘‘FAR Case 2012–
025.’’ Follow the instructions provided
at the ‘‘Submit a Comment’’ screen.
Please include your name, company
name (if any), and ‘‘FAR Case 2012–
025’’ on your attached document.
• Fax: 202–501–4067.
• Mail: General Services
Administration, Regulatory Secretariat
(MVCB), ATTN: Hada Flowers, 1800 F
Street NW., 2nd Floor, Washington, DC
20405.
Instructions: Please submit comments
only and cite FAR Case 2012–025, in all
correspondence related to this case. All
comments received will be posted
without change to http://
www.regulations.gov, including any
personal and/or business confidential
information provided.
FOR FURTHER INFORMATION CONTACT: Mr.
Edward N. Chambers, Procurement
Analyst, at 202–501–3221, for
clarification of content. For information
pertaining to status or publication
schedules, contact the Regulatory
Secretariat at 202–501–4755. Please cite
FAR Case 2012–025.
SUPPLEMENTARY INFORMATION:
I. Background
The National Defense Authorization
Act for Fiscal Year 2012 (Pub. L. 112–
81) was signed into law and effective on
December 31, 2011. Section 803 of the
law amended the standards for
determining the individuals affected by
the senior executive compensation
benchmark amount. Specifically,
section 803 expanded the applicability
(reach) of the existing executive
compensation cap, so that in the case of
DoD, NASA, and Coast Guard contracts,
the compensation cap would apply to
all employees of a contractor (instead of
just the ‘‘five most highly compensated’’
employees in management positions at
each home office and each segment of
the contractor). In section 803(c)(2),
Congress stated that the expanded reach
of the compensation cap ‘‘shall apply
with respect to costs of compensation
incurred after January 1, 2012, under
contracts entered into before, on, or after
the date of the enactment of this Act’’
(which was December 31, 2011). In
addition, Congress in section 803(c)(1)
stated that the amendments in section
803 shall be implemented in the FAR.
In accordance with section 803(c)(1),
DoD, GSA, and NASA are implementing
section 803 in the FAR through the
issuance of this proposed rule and a
separate interim rule.
In this proposed rule, DoD, GSA, and
NASA are proposing to amend FAR
31.205–6(p) to require that the
PO 00000
Frm 00001
Fmt 4701
Sfmt 4702
38539
compensation costs incurred after
January 1, 2012, for all contractor
employees on all DoD, NASA, and Coast
Guard contracts awarded before
December 31, 2011, be subject to the
senior executive benchmark
compensation amount. The reference to
31.205–6(p) in FAR 52.216–7 was
updated in the interim rule to reflect the
revision in 31.205–6(p). This proposed
rule uses the interim rule as its baseline.
DoD will separately handle the
implementation of authority provided
by 10 U.S.C. 2324(e)(1)(P), as amended
by section 803(a), in which Congress has
authorized the Secretary of Defense to
establish ‘‘one or more narrowly
targeted exceptions for scientists and
engineers upon a determination that
such exceptions are needed to ensure
that the Department of Defense has
continued access to needed skills and
capabilities.’’
As noted above, section 803(c)(2)
states that the amendments made by
section 803 ‘‘shall apply with respect to
costs of compensation incurred after
January 1, 2012, under contracts entered
into before, on, or after the date of the
enactment of this Act,’’ which was
December 31, 2011. There are
challenges with respect to the
retroactive application of section 803
(i.e., to the application of section 803 to
contracts awarded before the enactment
of section 803). The implementation of
section 803 is similar to the
implementation of section 808 of the
National Defense Authorization Act for
Fiscal Year 1998 (Pub. L. 105–85,
November 18, 1997) which imposed a
cap on Government contractor’s
allowable costs of ‘‘senior executive’’
compensation. Section 808, like section
803, retroactively applied to contracts
that already existed on the date of its
enactment; both statutes contain text
which applied the statute to contracts
awarded before, on, or after the date of
enactment of the underlying act. In
litigation on the application of section
808 to contracts awarded before the date
of the enactment of the statute, the
courts held that section 808 breached
contracts awarded before the statutory
date of enactment (General Dynamics
Corp. v. U.S., 47 Fed. Cl. 514 (2000);
and ATK Launch Systems, Inc., ASBCA
55395, 2009–1 BCA ¶ 34118 (2009)).
For these reasons, DoD, GSA, and
NASA are implementing section 803
with both an interim rule and a
proposed rule. The separate interim rule
(FAR Case 2012–017) addresses the
prospective application of section 803,
i.e., to contracts awarded on or after its
enactment (December 31, 2011). This
proposed rule addresses the retroactive
application of section 803 to contracts
E:\FR\FM\26JNP3.SGM
26JNP3
38540
Federal Register / Vol. 78, No. 123 / Wednesday, June 26, 2013 / Proposed Rules
that had been awarded before its
enactment. In other words, under this
bifurcated approach, DoD, GSA, and
NASA are implementing section 803
through the interim rule for contracts
awarded on or after the date of
enactment (December 31, 2011) and, at
the same time, DoD, GSA, and NASA
are addressing in this proposed rule the
retroactive application of section 803.
DoD, GSA, and NASA seek public
comments on both the interim and
proposed rules (and, on this proposed
rule, especially with respect to the
potential complexities associated with
applying section 803 to contracts that
had been awarded before the date of its
enactment).
II. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and
13563 direct agencies to assess all costs
and benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). E.O. 13563 emphasizes the
importance of quantifying both costs
and benefits, of reducing costs, of
harmonizing rules, and of promoting
flexibility. The Office of Information
and Regulatory Affairs (OIRA) has
deemed that this is a significant
regulatory action and, therefore, was
subject to review under section 6(b) of
E.O. 12866, Regulatory Planning and
Review, dated September 30, 1993, and
that this rule is not a major rule under
5 U.S.C. 804.
III. Regulatory Flexibility Act
TKELLEY on DSK3SPTVN1PROD with PROPOSALS3
DoD, GSA, and NASA do not expect
this proposed rule 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. However, an
initial regulatory flexibility analysis
(IRFA) has been prepared consistent
with 5 U.S.C. 603, and is summarized as
follows:
VerDate Mar<15>2010
20:31 Jun 25, 2013
Jkt 229001
An analysis of data in the Federal
Procurement Data System (FPDS) revealed
that 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. Furthermore,
it is not expected that a substantial number
of small entities will have any employees,
other than possibly among the ‘‘five most
highly compensated’’ management
employees at each home office and each
segment of the contractor, whose
compensation costs exceed the executive
compensation benchmark. The current
benchmark amount is $763,029, for costs
incurred after January 1, 2011 (77 FR 24226,
April 23, 2012). However, at this time an
estimate of the number of small entities
whose reimbursement for the compensation
costs of their contractor employees will be
limited by this rule is not available.
The proposed rule imposes no reporting,
recordkeeping, or other information
collection requirements. The rule does not
duplicate, overlap, or conflict with any other
Federal rules, and there are no known
significant alternatives to the rule.
The Regulatory Secretariat has
submitted a copy of the IRFA to the
Chief Counsel for Advocacy of the Small
Business Administration. A copy of the
IRFA may be obtained from the
Regulatory Secretariat. DoD, GSA, and
NASA invite comments from small
business concerns and other interested
parties on the expected impact.
DoD, GSA, and NASA will also
consider comments from small entities
concerning the existing regulations in
subparts affected by this proposed rule
in accordance with 5 U.S.C. 610.
Interested parties must submit such
comments separately and should cite 5
U.S.C. 610 (FAR case 2012–025) in
correspondence.
IV. Paperwork Reduction Act
The proposed rule does not contain
any information collection requirements
that require the approval of the Office of
Management and Budget under the
Paperwork Reduction Act (44 U.S.C.
chapter 35).
PO 00000
Frm 00002
Fmt 4701
Sfmt 9990
List of Subjects in 48 CFR Parts 31 and
52
Government procurement.
Dated: June 10, 2013.
Laura Auletta,
Director, Office of Governmentwide
Acquisition Policy, Office of Acquisition
Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA
propose amending 48 CFR parts 31 and
52 as set forth below:
■ 1. The authority citation for 48 CFR
parts 31 and 52 are revised to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 51 U.S.C. 20115.
PART 31—CONTRACT COST
PRINCIPLES AND PROCEDURES
2. Amend section 31.205–6 by—
a. Removing from paragraph
(p)(1)(i)(B), ‘‘December 31, 2011’’ and
adding ‘‘December 31, 2011, for costs
incurred until January 1, 2012’’ in its
place; and
■ b. Revising paragraphs (p)(2)(i) and
(ii).
The revisions read as follows:
■
■
31.205–6 Compensation for personal
services.
*
*
*
*
*
(p) * * *
(2) * * *
(i) Applicability. This paragraph (p)(2)
applies to DOD, NASA, and the Coast
Guard for contracts awarded before, on
or after December 31, 2011.
(ii) Costs incurred after January 1,
2012, for compensation of any
contractor employee in excess of the
benchmark compensation amount,
determined applicable for the contractor
fiscal year by the Administrator, Office
of Federal Procurement Policy (OFPP)
under 41 U.S.C. 1127 are unallowable
(10 U.S.C. 2324(e)(1)(P)). This limitation
applies whether or not the affected
contracts were previously subject to a
statutory limitation on such costs.
[FR Doc. 2013–15214 Filed 6–25–13; 8:45 am]
BILLING CODE 6820–EP–P
E:\FR\FM\26JNP3.SGM
26JNP3
Agencies
[Federal Register Volume 78, Number 123 (Wednesday, June 26, 2013)]
[Proposed Rules]
[Pages 38539-38540]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15214]
Federal Register / Vol. 78, No. 123 / Wednesday, June 26, 2013 /
Proposed Rules
[[Page 38539]]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31 and 52
[FAR Case 2012-025; Docket 2012-0025; Sequence 1]
RIN 9000-AM39
Federal Acquisition Regulation; Applicability of the Senior
Executive Compensation Benchmark
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to continue the implementation of the
requirements of section 803 of the National Defense Authorization Act
for Fiscal Year 2012. The proposed rule seeks public comments on
applying section 803 with respect to that provision's expansion with
respect to contracts that had been awarded by DoD, NASA, and the Coast
Guard before the date of enactment of section 803 (which was December
31, 2011) of the application of the senior executive compensation
benchmark amount. Section 803 expands to a broader group of contractor
employees the limitation on reimbursing compensation costs. As section
803 provides, this proposed rule would apply section 803 retroactively
to contracts awarded before December 31, 2011, with respect to the
contractor compensation costs incurred after January 1, 2012. In
addition, also as part of the implementation in the FAR of section 803,
DoD, GSA and NASA are separately issuing an interim rule (FAR Case
2012-017) that addresses the prospective application of section 803 to
contracts awarded on or after December 31, 2011.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat at one of the addressees shown below on or
before August 26, 2013 to be considered in the formation of the final
rule.
ADDRESSES: Submit comments in response to FAR Case 2012-025 by any of
the following methods:
Regulations.gov: http://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by searching for ``FAR Case
2012-025.'' Select the link ``Submit a Comment'' that corresponds with
``FAR Case 2012-025.'' Follow the instructions provided at the ``Submit
a Comment'' screen. Please include your name, company name (if any),
and ``FAR Case 2012-025'' on your attached document.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (MVCB), ATTN: Hada Flowers, 1800 F Street NW., 2nd Floor,
Washington, DC 20405.
Instructions: Please submit comments only and cite FAR Case 2012-
025, in all correspondence related to this case. All comments received
will be posted without change to http://www.regulations.gov, including
any personal and/or business confidential information provided.
FOR FURTHER INFORMATION CONTACT: Mr. Edward N. Chambers, Procurement
Analyst, at 202-501-3221, for clarification of content. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat at 202-501-4755. Please cite FAR Case 2012-025.
SUPPLEMENTARY INFORMATION:
I. Background
The National Defense Authorization Act for Fiscal Year 2012 (Pub.
L. 112-81) was signed into law and effective on December 31, 2011.
Section 803 of the law amended the standards for determining the
individuals affected by the senior executive compensation benchmark
amount. Specifically, section 803 expanded the applicability (reach) of
the existing executive compensation cap, so that in the case of DoD,
NASA, and Coast Guard contracts, the compensation cap would apply to
all employees of a contractor (instead of just the ``five most highly
compensated'' employees in management positions at each home office and
each segment of the contractor). In section 803(c)(2), Congress stated
that the expanded reach of the compensation cap ``shall apply with
respect to costs of compensation incurred after January 1, 2012, under
contracts entered into before, on, or after the date of the enactment
of this Act'' (which was December 31, 2011). In addition, Congress in
section 803(c)(1) stated that the amendments in section 803 shall be
implemented in the FAR. In accordance with section 803(c)(1), DoD, GSA,
and NASA are implementing section 803 in the FAR through the issuance
of this proposed rule and a separate interim rule.
In this proposed rule, DoD, GSA, and NASA are proposing to amend
FAR 31.205-6(p) to require that the compensation costs incurred after
January 1, 2012, for all contractor employees on all DoD, NASA, and
Coast Guard contracts awarded before December 31, 2011, be subject to
the senior executive benchmark compensation amount. The reference to
31.205-6(p) in FAR 52.216-7 was updated in the interim rule to reflect
the revision in 31.205-6(p). This proposed rule uses the interim rule
as its baseline.
DoD will separately handle the implementation of authority provided
by 10 U.S.C. 2324(e)(1)(P), as amended by section 803(a), in which
Congress has authorized the Secretary of Defense to establish ``one or
more narrowly targeted exceptions for scientists and engineers upon a
determination that such exceptions are needed to ensure that the
Department of Defense has continued access to needed skills and
capabilities.''
As noted above, section 803(c)(2) states that the amendments made
by section 803 ``shall apply with respect to costs of compensation
incurred after January 1, 2012, under contracts entered into before,
on, or after the date of the enactment of this Act,'' which was
December 31, 2011. There are challenges with respect to the retroactive
application of section 803 (i.e., to the application of section 803 to
contracts awarded before the enactment of section 803). The
implementation of section 803 is similar to the implementation of
section 808 of the National Defense Authorization Act for Fiscal Year
1998 (Pub. L. 105-85, November 18, 1997) which imposed a cap on
Government contractor's allowable costs of ``senior executive''
compensation. Section 808, like section 803, retroactively applied to
contracts that already existed on the date of its enactment; both
statutes contain text which applied the statute to contracts awarded
before, on, or after the date of enactment of the underlying act. In
litigation on the application of section 808 to contracts awarded
before the date of the enactment of the statute, the courts held that
section 808 breached contracts awarded before the statutory date of
enactment (General Dynamics Corp. v. U.S., 47 Fed. Cl. 514 (2000); and
ATK Launch Systems, Inc., ASBCA 55395, 2009-1 BCA ] 34118 (2009)).
For these reasons, DoD, GSA, and NASA are implementing section 803
with both an interim rule and a proposed rule. The separate interim
rule (FAR Case 2012-017) addresses the prospective application of
section 803, i.e., to contracts awarded on or after its enactment
(December 31, 2011). This proposed rule addresses the retroactive
application of section 803 to contracts
[[Page 38540]]
that had been awarded before its enactment. In other words, under this
bifurcated approach, DoD, GSA, and NASA are implementing section 803
through the interim rule for contracts awarded on or after the date of
enactment (December 31, 2011) and, at the same time, DoD, GSA, and NASA
are addressing in this proposed rule the retroactive application of
section 803. DoD, GSA, and NASA seek public comments on both the
interim and proposed rules (and, on this proposed rule, especially with
respect to the potential complexities associated with applying section
803 to contracts that had been awarded before the date of its
enactment).
II. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
The Office of Information and Regulatory Affairs (OIRA) has deemed that
this is a significant regulatory action and, therefore, was subject to
review under section 6(b) of E.O. 12866, Regulatory Planning and
Review, dated September 30, 1993, and that this rule is not a major
rule under 5 U.S.C. 804.
III. Regulatory Flexibility Act
DoD, GSA, and NASA do not expect this proposed rule 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. However, an initial regulatory flexibility analysis (IRFA) has
been prepared consistent with 5 U.S.C. 603, and is summarized as
follows:
An analysis of data in the Federal Procurement Data System
(FPDS) revealed that 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. Furthermore, it is not expected
that a substantial number of small entities will have any employees,
other than possibly among the ``five most highly compensated''
management employees at each home office and each segment of the
contractor, whose compensation costs exceed the executive
compensation benchmark. The current benchmark amount is $763,029,
for costs incurred after January 1, 2011 (77 FR 24226, April 23,
2012). However, at this time an estimate of the number of small
entities whose reimbursement for the compensation costs of their
contractor employees will be limited by this rule is not available.
The proposed rule imposes no reporting, recordkeeping, or other
information collection requirements. The rule does not duplicate,
overlap, or conflict with any other Federal rules, and there are no
known significant alternatives to the rule.
The Regulatory Secretariat has submitted a copy of the IRFA to the
Chief Counsel for Advocacy of the Small Business Administration. A copy
of the IRFA may be obtained from the Regulatory Secretariat. DoD, GSA,
and NASA invite comments from small business concerns and other
interested parties on the expected impact.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by this
proposed rule in accordance with 5 U.S.C. 610. Interested parties must
submit such comments separately and should cite 5 U.S.C. 610 (FAR case
2012-025) in correspondence.
IV. Paperwork Reduction Act
The proposed rule does not contain any information collection
requirements that require the approval of the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 31 and 52
Government procurement.
Dated: June 10, 2013.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 31 and
52 as set forth below:
0
1. The authority citation for 48 CFR parts 31 and 52 are revised to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20115.
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
0
2. Amend section 31.205-6 by--
0
a. Removing from paragraph (p)(1)(i)(B), ``December 31, 2011'' and
adding ``December 31, 2011, for costs incurred until January 1, 2012''
in its place; and
0
b. Revising paragraphs (p)(2)(i) and (ii).
The revisions read as follows:
31.205-6 Compensation for personal services.
* * * * *
(p) * * *
(2) * * *
(i) Applicability. This paragraph (p)(2) applies to DOD, NASA, and
the Coast Guard for contracts awarded before, on or after December 31,
2011.
(ii) Costs incurred after January 1, 2012, for compensation of any
contractor employee in excess of the benchmark compensation amount,
determined applicable for the contractor fiscal year by the
Administrator, Office of Federal Procurement Policy (OFPP) under 41
U.S.C. 1127 are unallowable (10 U.S.C. 2324(e)(1)(P)). This limitation
applies whether or not the affected contracts were previously subject
to a statutory limitation on such costs.
[FR Doc. 2013-15214 Filed 6-25-13; 8:45 am]
BILLING CODE 6820-EP-P