Federal Acquisition Regulation: Limitation on Allowable Government Contractor Employee Compensation Costs, 67778-67780 [2016-23204]
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Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Rules and Regulations
Full cooperation—
(1) Means disclosure to the Government of
the information sufficient to identify the
nature and extent of the incident and the
individuals responsible for the conduct. It
includes providing timely and complete
responses to Government auditors’ and
investigators’ requests for documents and
access to employees with information;
(2) Does not foreclose any Contractor rights
arising in law, the FAR, or the terms of the
contract. It does not require—
(i) The Contractor to waive its attorneyclient privilege or the protections afforded by
the attorney work product doctrine; or
(ii) Any officer, director, owner, or
employee of the Contractor, including a sole
proprietor, to waive his or her attorney-client
privilege or Fifth Amendment rights; and
(3) Does not restrict the Contractor from—
(i) Conducting an internal investigation; or
(ii) Defending a proceeding or dispute
arising under the contract or related to a
potential or disclosed violation.
Other significant military operations means
activities, other than combat operations, as
part of a contingency operation outside the
United States that is carried out by United
States Armed Forces in an uncontrolled or
unpredictable high-threat environment where
personnel performing security functions may
be called upon to use deadly force.
Authorization Act for Fiscal Year 2008; 10
U.S.C. 2302 Note).
*
SUMMARY:
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*
(b) Applicability. If this contract is
performed both in a designated area and in
an area that is not designated, the clause only
applies to performance in the following
designated areas—
(1) Combat operations, as designated by the
Secretary of Defense; or
(2) Other significant military operations, as
designated by the Secretary of Defense, and
only upon agreement of the Secretary of
Defense and the Secretary of State.
*
*
*
*
*
(f) Subcontracts. The Contractor shall
include the substance of this clause,
including this paragraph (f), in all
subcontracts that will be performed outside
the United States in areas of—
(1) Combat operations, as designated by the
Secretary of Defense; or
(2) Other significant military operations,
upon agreement of the Secretaries of Defense
and State that the clause applies in that area.
*
*
*
*
*
9. Amend section 52.244–6 by
revising the date of the clause and
paragraph (c)(1)(xv) to read as follows:
■
52.244–6
Items.
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*
*
Subcontracts for Commercial
*
*
*
Subcontracts for Commercial Items (Oct
2016)
*
*
*
*
*
(c) * * *
(1) * * *
(xv) 52.225–26, Contractors Performing
Private Security Functions Outside the
United States (Oct 2016) (Section 862, as
amended, of the National Defense
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[FR Doc. 2016–23203 Filed 9–29–16; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Part 31
[FAC 2005–91; FAR Case 2014–012; Item
X; Docket No. 2014–0012; Sequence No. 1]
RIN 9000–AM75
Federal Acquisition Regulation:
Limitation on Allowable Government
Contractor Employee Compensation
Costs
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
AGENCY:
DoD, GSA and NASA are
adopting as final, with changes, an
interim rule amending the Federal
Acquisition Regulation (FAR) to
implement a section of the Bipartisan
Budget Act of 2013. The final rule
revises the allowable cost limit relative
to the compensation of contractor and
subcontractor employees. Also, this
final rule implements the narrowly
targeted exception to this allowable cost
limit for scientists, engineers, or other
specialists upon an agency
determination that such exceptions are
needed to ensure that the executive
agency has continued access to needed
skills and capabilities.
DATES: Effective: September 30, 2016.
FOR FURTHER INFORMATION CONTACT: Ms.
Kathlyn J. Hopkins, Procurement
Analyst, at 202–969–7226, for
clarification of content. For information
pertaining to status or publication
schedules, contact the Regulatory
Secretariat Division at 202–501–4755.
Please cite FAC 2005–91, FAR Case
2014–012.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published an
interim rule in the Federal Register at
79 FR 35865 on June 24, 2014, to
implement section 702 of The
Bipartisan Budget Act of 2013 (Pub. L.
113–67), which amended the allowable
cost limits of contractor and
subcontractor employee compensation.
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Specifically, section 702 revised the
application of the compensation cap,
the amount of the cap, and the
associated formula for annually
adjusting it. The existing formula for
determining the limit on the
allowability of contractor and
subcontractor employee compensation
costs under 41 U.S.C. 1127 was repealed
for contracts awarded on or after June
24, 2014. Section 702 of the law set the
initial limitation on allowable
contractor and subcontractor employee
compensation costs at $487,000 per
year, which will be adjusted annually to
reflect the change in the Employment
Cost Index for all workers as calculated
by the Bureau of Labor Statistics. This
final rule also implements the authority
provided by 10 U.S.C. 2324(e)(1)(P) and
41 U.S.C. 4304(a)(16), as amended by
section 702(a), in which Congress has
authorized the heads of Executive
agencies to establish ‘‘one or more
narrowly targeted exceptions for
scientists, engineers, or other specialists
upon a determination that such
exceptions are needed to ensure that the
executive agency has continued access
to needed skills and capabilities.’’
II. Discussion and Analysis
The Civilian Agency Acquisition
Council and the Defense Acquisition
Regulations Council (the Councils)
reviewed the public comments in the
development of the final rule. A
discussion of the comments is provided
as follows:
A. Summary of Significant Changes
This final rule adopts the interim rule
with four changes for clarification.
• The first clarification entails the
addition of a table to FAR 31.205–6(p)
that summarizes the applicability dates
contained in this FAR section.
• The second clarification concerns
the reorganization of the FAR text.
Existing FAR paragraph 31.205–6(p)(4)
has become new paragraph (p)(1), with
existing paragraph (p)(1) becoming new
paragraph (p)(2). Existing FAR
paragraphs 31.205–6(p)(2) and (p)(3)
have become new paragraphs (p)(3) and
(p)(4), respectively.
• The third clarification entails the
removal of the following redundant FAR
31.205–6 text:
Æ Paragraph (p)(2)(ii) text ‘‘Costs
incurred after January 1, 1998.’’
Æ Paragraph (p)(3)(ii) text ‘‘Costs
incurred after January 1, 2012.’’
Æ Paragraph (p)(4)(ii) text ‘‘Costs
incurred on or after June 24, 2014.’’
• The fourth clarification entails
reference links in paragraphs (p)(2) and
(p)(3) (see https://www.whitehouse.gov/
omb/procurement_index_exec_comp/)
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and another reference link in paragraph
(p)(4) (see https://www.whitehouse.gov/
omb/procurement/cecp). Additionally,
some statutory references and
explanatory text were added in FAR
paragraphs 31.205–6(p)(3) and (p)(4).
B. Analysis of Public Comments
The Regulatory Secretariat Division
received responses from three
respondents to the interim rule, which
are discussed below:
1. Support for the Rule
Comment: One respondent strongly
supported the interim rule and
applauded the FAR issuing agencies for
meeting the statutory deadline for
issuance of this rule.
Response: The Government notes the
public support for this rule.
2. Application of Rule to Nonprofit
Organizations
Comment: One respondent stated that
the rule only referenced FAR 31.205–6.
Respondent questioned whether this
means that the new compensation cap
will only apply to contractors or
subcontractors that follow this FAR
section; would a nonprofit organization
that complies with FAR subpart 31.7 be
exempt from the compensation cap; or
will FAR subpart 31.7 be amended as
well.
Response: A nonprofit organization
that complies with FAR subpart 31.7 is
not exempt from the compensation cap
in this rule. Previously, FAR 31.702
referenced the Office of Management
and Budget (OMB) Circular Number A–
122, Cost Principles for Non-Profit
Organizations. The recent FAR case
2014–023 updated the reference from
OMB Circular A–122 to the revised
OMB Uniform Guidance at 2 CFR 200,
subpart E, and applicable appendices, as
in effect on the date of the contract,
which references the statutory
compensation ceilings. These cost
principles reference the compensation
cap contained in this FAR rule.
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3. Retroactive Application of Rule Not
Appropriate
Comment: The interim rule stated that
the revised compensation cap ‘‘will
apply to the costs of compensation for
all contractor and subcontractor
employees for contracts awarded, and
cost incurred, on or after June 24, 2014.’’
One respondent stated that reading this
sentence literally, the interim rule
provides that all executive
compensation costs are subject to the
revised cap no matter when the
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contracts to which such costs are
allocated were awarded which makes
application of the rule retroactive which
is inappropriate.
Response: The rule applies to costs
incurred on contracts awarded on or
after June 24, 2014, and does not apply
retroactively to contracts awarded
before June 24, 2014. For further
clarification, Table 31.1 has been added
as a summary of the applicability of the
three compensation caps.
4. Application of Rule to Fixed-Price
Contracts
Comment: One respondent requested
that specific preamble language be
included in the final rule that reinforces
the existing FAR part 31 language which
specifies the application of the cost
principles to fixed-price contracts
whenever cost analysis is performed.
Respondent also stated that by allowing
fixed-price contracts that are subject to
cost analysis to evade this compensation
cap defeats Congressional intent and
costs taxpayers significantly.
Response: The reinforcement of this
existing FAR part 31 language is
unnecessary. This FAR rule revises FAR
31.205–6 specifically regarding the
allowability of executive compensation.
Other FAR cost principle sections such
as 31.102 remain unchanged in their
application and use, including when the
cost principles are applicable to fixedprice contracts.
III. 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. 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. This
rule is not a major rule under 5 U.S.C.
804.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared
a Final Regulatory Flexibility Analysis
(FRFA) consistent with the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The
FRFA is summarized as follows:
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DoD, GSA, and NASA do not expect this
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. because, an analysis of
data in the Federal Procurement Data System
(FPDS) revealed that most contracts awarded
to small entities are awarded on a fixed-price
basis, and do not require application of the
cost principle contained in this rule.
The 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.
Interested parties may obtain a copy
of the FRFA from the Regulatory
Secretariat. The Regulatory Secretariat
has submitted a copy of the FRFA to the
Chief Counsel for Advocacy of the Small
Business Administration.
V. Paperwork Reduction Act
The rule does not contain any
information collection requirements that
require the approval of the Office of
Management and Budget under the
Paperwork Act (44 U.S.C. chapter 35).
List of Subject in 48 CFR Part 31
Government procurement.
Dated: September 19, 2016.
William F. Clark,
Director, Office of Government-wide
Acquisition Policy, Office of Acquisition
Policy, Office of Government-wide Policy.
Interim Rule Adopted As Final With
Changes
Accordingly, the interim rule
amending 48 CFR part 31 which was
published in the Federal Register at 79
FR 35865 on June 24, 2014, is adopted
as a final rule with the following
changes:
■
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. 121(c); 10 U.S.C.
chapter 137; and 51 U.S.C. 20113.
2. Amend section 31.205–6 by
revising paragraph (p) to read as
follows:
■
31.205–6 Compensation for personal
services.
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(p) Limitation on allowability of
compensation.
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TABLE 31–1—EMPLOYEE COMPENSATION LIMITS
Contract award date
Applicable agencies
Covered employees
Before June 24, 2014 ...............................................
Executive Agencies Other than DoD, NASA and
Coast Guard.
DoD, NASA and Coast Guard ...............................
DoD, NASA, and Coast Guard ..............................
Senior Executive ............
(p)(2).
Senior Executive ............
All Employees ................
(p)(2).
(p)(3).
All Executive Agencies ...........................................
All Employees ................
(p)(4).
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Before December 31, 2011 ......................................
On/after December 31, 2011, and before June 24,
2014.
On/after June 24, 2014 ............................................
(1) Definitions. As used in this
paragraph (p)—
(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)(4) and
(q) 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) Prior to January 2, 1999—
(1) The Chief Executive Officer (CEO)
or any individual acting in a similar
capacity at the contractor’s
headquarters;
(2) The four most highly compensated
employees in management positions at
the contractor’s headquarters, other than
the CEO; and
(3) If the contractor has intermediate
home offices or segments that report
directly to the contractor’s headquarters,
the five most highly compensated
employees in management positions at
each such intermediate home office or
segment.
(B) Effective January 2, 1999, the five
most highly compensated employees in
management positions at each home
office and each segment of the
contractor, whether or not the home
office or segment reports directly to the
contractor’s headquarters.
(iii) Fiscal year means the fiscal year
established by the contractor for
accounting purposes.
(iv) Contractor’s headquarters means
the highest organizational level from
which executive compensation costs are
allocated to Government contracts.
(2) Senior executive compensation
limit for contracts awarded before June
24, 2014—(i) Applicability. This
paragraph (p)(2) applies to the
following:
(A) To all executive agencies, other
than DoD, NASA and the Coast Guard,
for contracts awarded before June 24,
2014;
(B) To DoD, NASA, and the Coast
Guard for contracts awarded before
December 31, 2011;
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(ii) Costs incurred after January 1,
1998, for the 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 41
U.S.C. 1127 as in effect prior to June 24,
2014, are unallowable (10 U.S.C.
2324(e)(1)(P) and 41 U.S.C. 4304(a)(16),
as in effect prior to June 24, 2014). This
limitation is the sole statutory limitation
on allowable senior executive
compensation costs incurred after
January 1, 1998, under contracts
awarded before June 24, 2014, and
applies whether or not the affected
contracts were previously subject to a
statutory limitation on such costs. (Note
that pursuant to section 804 of Pub. L.
105–261, the definition of ‘‘senior
executive’’ in paragraph (p)(1) of this
section has been changed for
compensation costs incurred after
January 1, 1999.) See https://
www.whitehouse.gov/omb/
procurement_index_exec_comp/.
(3) All employee compensation limit
for contracts awarded before June 24,
2014.
(i) Applicability. This paragraph (p)(3)
applies to DOD, NASA, and the Coast
Guard for contracts awarded on or after
December 31, 2011, and before June 24,
2014.
(ii) Costs incurred after January 1,
2012, for the 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 as in effect prior
to June 24, 2014 are unallowable (10
U.S.C. 2324(e)(1)(P) as in effect prior to
June 24, 2014.) This limitation is the
sole statutory limitation on allowable
employee compensation costs incurred
after January 1, 2012, under contracts
awarded on or after December 31, 2011
and before June 24, 2014. (Note that
pursuant to section 803 of Pub. L. 112–
81, 10 U.S.C. 2324, Allowable costs
under defense contracts, was amended
by striking ‘‘senior executives’’ and
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31.205–6
inserting ‘‘any contractor employee’’,
making unallowable the excess
compensation costs incurred after
January 1, 2012, under affected
contracts.) See https://
www.whitehouse.gov/omb/
procurement_index_exec_comp/.
(4) All employee compensation limit
for contracts awarded on or after June
24, 2014.
(i) Applicability. This paragraph (p)(4)
applies to all executive agency contracts
awarded on or after June 24, 2014, and
any subcontracts thereunder.
(ii) Costs incurred on or after June 24,
2014, for the compensation of all
employees in excess of the benchmark
compensation amount determined
applicable for the contractor fiscal year
by the Administrator, Office of Federal
Procurement Policy (OFPP) are
unallowable under 10 U.S.C.
2324(e)(1)(P) and 41 U.S.C. 4304(a)(16),
as in effect on or after June 24, 2014,
pursuant to section 702 of Public Law
113–67. This limitation is the sole
statutory limitation on allowable
employee compensation costs incurred
on or after June 24, 2014, under
contracts awarded on or after June 24,
2014. See https://www.whitehouse.gov/
omb/procurement/cecp.
(iii) Exceptions. An agency head may
establish one or more narrowly targeted
exceptions for scientists, engineers, or
other specialists upon a determination
that such exceptions are needed to
ensure that the executive agency has
continued access to needed skills and
capabilities. In making such a
determination, the agency shall
consider, at a minimum, for each
contractor employee in a narrowly
targeted excepted position—
(A) The amount of taxpayer funded
compensation to be received by each
employee; and
(B) The duties and services performed
by each employee.
[FR Doc. 2016–23204 Filed 9–29–16; 8:45 am]
BILLING CODE 6820–EP–P
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]]>Agencies
[Federal Register Volume 81, Number 190 (Friday, September 30, 2016)]
[Rules and Regulations]
[Pages 67778-67780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23204]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 2005-91; FAR Case 2014-012; Item X; Docket No. 2014-0012; Sequence
No. 1]
RIN 9000-AM75
Federal Acquisition Regulation: Limitation on Allowable
Government Contractor Employee Compensation Costs
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD, GSA and NASA are adopting as final, with changes, an
interim rule amending the Federal Acquisition Regulation (FAR) to
implement a section of the Bipartisan Budget Act of 2013. The final
rule revises the allowable cost limit relative to the compensation of
contractor and subcontractor employees. Also, this final rule
implements the narrowly targeted exception to this allowable cost limit
for scientists, engineers, or other specialists upon an agency
determination that such exceptions are needed to ensure that the
executive agency has continued access to needed skills and
capabilities.
DATES: Effective: September 30, 2016.
FOR FURTHER INFORMATION CONTACT: Ms. Kathlyn J. Hopkins, Procurement
Analyst, at 202-969-7226, for clarification of content. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat Division at 202-501-4755. Please cite FAC 2005-91, FAR Case
2014-012.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published an interim rule in the Federal
Register at 79 FR 35865 on June 24, 2014, to implement section 702 of
The Bipartisan Budget Act of 2013 (Pub. L. 113-67), which amended the
allowable cost limits of contractor and subcontractor employee
compensation. Specifically, section 702 revised the application of the
compensation cap, the amount of the cap, and the associated formula for
annually adjusting it. The existing formula for determining the limit
on the allowability of contractor and subcontractor employee
compensation costs under 41 U.S.C. 1127 was repealed for contracts
awarded on or after June 24, 2014. Section 702 of the law set the
initial limitation on allowable contractor and subcontractor employee
compensation costs at $487,000 per year, which will be adjusted
annually to reflect the change in the Employment Cost Index for all
workers as calculated by the Bureau of Labor Statistics. This final
rule also implements the authority provided by 10 U.S.C. 2324(e)(1)(P)
and 41 U.S.C. 4304(a)(16), as amended by section 702(a), in which
Congress has authorized the heads of Executive agencies to establish
``one or more narrowly targeted exceptions for scientists, engineers,
or other specialists upon a determination that such exceptions are
needed to ensure that the executive agency has continued access to
needed skills and capabilities.''
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) reviewed the public comments in the
development of the final rule. A discussion of the comments is provided
as follows:
A. Summary of Significant Changes
This final rule adopts the interim rule with four changes for
clarification.
The first clarification entails the addition of a table to
FAR 31.205-6(p) that summarizes the applicability dates contained in
this FAR section.
The second clarification concerns the reorganization of
the FAR text. Existing FAR paragraph 31.205-6(p)(4) has become new
paragraph (p)(1), with existing paragraph (p)(1) becoming new paragraph
(p)(2). Existing FAR paragraphs 31.205-6(p)(2) and (p)(3) have become
new paragraphs (p)(3) and (p)(4), respectively.
The third clarification entails the removal of the
following redundant FAR 31.205-6 text:
[cir] Paragraph (p)(2)(ii) text ``Costs incurred after January 1,
1998.''
[cir] Paragraph (p)(3)(ii) text ``Costs incurred after January 1,
2012.''
[cir] Paragraph (p)(4)(ii) text ``Costs incurred on or after June
24, 2014.''
The fourth clarification entails reference links in
paragraphs (p)(2) and (p)(3) (see https://www.whitehouse.gov/omb/procurement_index_exec_comp/)
[[Page 67779]]
and another reference link in paragraph (p)(4) (see https://www.whitehouse.gov/omb/procurement/cecp). Additionally, some statutory
references and explanatory text were added in FAR paragraphs 31.205-
6(p)(3) and (p)(4).
B. Analysis of Public Comments
The Regulatory Secretariat Division received responses from three
respondents to the interim rule, which are discussed below:
1. Support for the Rule
Comment: One respondent strongly supported the interim rule and
applauded the FAR issuing agencies for meeting the statutory deadline
for issuance of this rule.
Response: The Government notes the public support for this rule.
2. Application of Rule to Nonprofit Organizations
Comment: One respondent stated that the rule only referenced FAR
31.205-6. Respondent questioned whether this means that the new
compensation cap will only apply to contractors or subcontractors that
follow this FAR section; would a nonprofit organization that complies
with FAR subpart 31.7 be exempt from the compensation cap; or will FAR
subpart 31.7 be amended as well.
Response: A nonprofit organization that complies with FAR subpart
31.7 is not exempt from the compensation cap in this rule. Previously,
FAR 31.702 referenced the Office of Management and Budget (OMB)
Circular Number A-122, Cost Principles for Non-Profit Organizations.
The recent FAR case 2014-023 updated the reference from OMB Circular A-
122 to the revised OMB Uniform Guidance at 2 CFR 200, subpart E, and
applicable appendices, as in effect on the date of the contract, which
references the statutory compensation ceilings. These cost principles
reference the compensation cap contained in this FAR rule.
3. Retroactive Application of Rule Not Appropriate
Comment: The interim rule stated that the revised compensation cap
``will apply to the costs of compensation for all contractor and
subcontractor employees for contracts awarded, and cost incurred, on or
after June 24, 2014.'' One respondent stated that reading this sentence
literally, the interim rule provides that all executive compensation
costs are subject to the revised cap no matter when the contracts to
which such costs are allocated were awarded which makes application of
the rule retroactive which is inappropriate.
Response: The rule applies to costs incurred on contracts awarded
on or after June 24, 2014, and does not apply retroactively to
contracts awarded before June 24, 2014. For further clarification,
Table 31.1 has been added as a summary of the applicability of the
three compensation caps.
4. Application of Rule to Fixed-Price Contracts
Comment: One respondent requested that specific preamble language
be included in the final rule that reinforces the existing FAR part 31
language which specifies the application of the cost principles to
fixed-price contracts whenever cost analysis is performed. Respondent
also stated that by allowing fixed-price contracts that are subject to
cost analysis to evade this compensation cap defeats Congressional
intent and costs taxpayers significantly.
Response: The reinforcement of this existing FAR part 31 language
is unnecessary. This FAR rule revises FAR 31.205-6 specifically
regarding the allowability of executive compensation. Other FAR cost
principle sections such as 31.102 remain unchanged in their application
and use, including when the cost principles are applicable to fixed-
price contracts.
III. 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.
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. This rule is not a major rule under 5
U.S.C. 804.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. The FRFA is summarized as follows:
DoD, GSA, and NASA do not expect this 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.
because, an analysis of data in the Federal Procurement Data System
(FPDS) revealed that most contracts awarded to small entities are
awarded on a fixed-price basis, and do not require application of
the cost principle contained in this rule.
The 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.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat. The Regulatory Secretariat has submitted a copy
of the FRFA to the Chief Counsel for Advocacy of the Small Business
Administration.
V. Paperwork Reduction Act
The rule does not contain any information collection requirements
that require the approval of the Office of Management and Budget under
the Paperwork Act (44 U.S.C. chapter 35).
List of Subject in 48 CFR Part 31
Government procurement.
Dated: September 19, 2016.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.
Interim Rule Adopted As Final With Changes
0
Accordingly, the interim rule amending 48 CFR part 31 which was
published in the Federal Register at 79 FR 35865 on June 24, 2014, is
adopted as a final rule with the following changes:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
0
1. The authority citation for 48 CFR part 31 continues to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
0
2. Amend section 31.205-6 by revising paragraph (p) to read as follows:
31.205-6 Compensation for personal services.
* * * * *
(p) Limitation on allowability of compensation.
[[Page 67780]]
Table 31-1--Employee Compensation Limits
----------------------------------------------------------------------------------------------------------------
Contract award date Applicable agencies Covered employees 31.205-6
----------------------------------------------------------------------------------------------------------------
Before June 24, 2014................ Executive Agencies Other Senior Executive...... (p)(2).
than DoD, NASA and Coast
Guard.
Before December 31, 2011............ DoD, NASA and Coast Guard... Senior Executive...... (p)(2).
On/after December 31, 2011, and DoD, NASA, and Coast Guard.. All Employees......... (p)(3).
before June 24, 2014.
On/after June 24, 2014.............. All Executive Agencies...... All Employees......... (p)(4).
----------------------------------------------------------------------------------------------------------------
(1) Definitions. As used in this paragraph (p)--
(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)(4) and (q) 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) Prior to January 2, 1999--
(1) The Chief Executive Officer (CEO) or any individual acting in a
similar capacity at the contractor's headquarters;
(2) The four most highly compensated employees in management
positions at the contractor's headquarters, other than the CEO; and
(3) If the contractor has intermediate home offices or segments
that report directly to the contractor's headquarters, the five most
highly compensated employees in management positions at each such
intermediate home office or segment.
(B) Effective January 2, 1999, the five most highly compensated
employees in management positions at each home office and each segment
of the contractor, whether or not the home office or segment reports
directly to the contractor's headquarters.
(iii) Fiscal year means the fiscal year established by the
contractor for accounting purposes.
(iv) Contractor's headquarters means the highest organizational
level from which executive compensation costs are allocated to
Government contracts.
(2) Senior executive compensation limit for contracts awarded
before June 24, 2014--(i) Applicability. This paragraph (p)(2) applies
to the following:
(A) To all executive agencies, other than DoD, NASA and the Coast
Guard, for contracts awarded before June 24, 2014;
(B) To DoD, NASA, and the Coast Guard for contracts awarded before
December 31, 2011;
(ii) Costs incurred after January 1, 1998, for the 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 41
U.S.C. 1127 as in effect prior to June 24, 2014, are unallowable (10
U.S.C. 2324(e)(1)(P) and 41 U.S.C. 4304(a)(16), as in effect prior to
June 24, 2014). This limitation is the sole statutory limitation on
allowable senior executive compensation costs incurred after January 1,
1998, under contracts awarded before June 24, 2014, and applies whether
or not the affected contracts were previously subject to a statutory
limitation on such costs. (Note that pursuant to section 804 of Pub. L.
105-261, the definition of ``senior executive'' in paragraph (p)(1) of
this section has been changed for compensation costs incurred after
January 1, 1999.) See https://www.whitehouse.gov/omb/procurement_index_exec_comp/.
(3) All employee compensation limit for contracts awarded before
June 24, 2014.
(i) Applicability. This paragraph (p)(3) applies to DOD, NASA, and
the Coast Guard for contracts awarded on or after December 31, 2011,
and before June 24, 2014.
(ii) Costs incurred after January 1, 2012, for the 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 as in effect prior to June 24, 2014 are unallowable (10
U.S.C. 2324(e)(1)(P) as in effect prior to June 24, 2014.) This
limitation is the sole statutory limitation on allowable employee
compensation costs incurred after January 1, 2012, under contracts
awarded on or after December 31, 2011 and before June 24, 2014. (Note
that pursuant to section 803 of Pub. L. 112-81, 10 U.S.C. 2324,
Allowable costs under defense contracts, was amended by striking
``senior executives'' and inserting ``any contractor employee'', making
unallowable the excess compensation costs incurred after January 1,
2012, under affected contracts.) See https://www.whitehouse.gov/omb/procurement_index_exec_comp/.
(4) All employee compensation limit for contracts awarded on or
after June 24, 2014.
(i) Applicability. This paragraph (p)(4) applies to all executive
agency contracts awarded on or after June 24, 2014, and any
subcontracts thereunder.
(ii) Costs incurred on or after June 24, 2014, for the compensation
of all employees in excess of the benchmark compensation amount
determined applicable for the contractor fiscal year by the
Administrator, Office of Federal Procurement Policy (OFPP) are
unallowable under 10 U.S.C. 2324(e)(1)(P) and 41 U.S.C. 4304(a)(16), as
in effect on or after June 24, 2014, pursuant to section 702 of Public
Law 113-67. This limitation is the sole statutory limitation on
allowable employee compensation costs incurred on or after June 24,
2014, under contracts awarded on or after June 24, 2014. See https://www.whitehouse.gov/omb/procurement/cecp.
(iii) Exceptions. An agency head may establish one or more narrowly
targeted exceptions for scientists, engineers, or other specialists
upon a determination that such exceptions are needed to ensure that the
executive agency has continued access to needed skills and
capabilities. In making such a determination, the agency shall
consider, at a minimum, for each contractor employee in a narrowly
targeted excepted position--
(A) The amount of taxpayer funded compensation to be received by
each employee; and
(B) The duties and services performed by each employee.
[FR Doc. 2016-23204 Filed 9-29-16; 8:45 am]
BILLING CODE 6820-EP-P
