On July 8, 2010, an interim rule was published amending the Federal Acquisition Regulation ("FAR") that requires government prime contractors to report executive compensation and first-tier subcontractor awards on contracts expected to be $25,000 or more.  The purpose of the interim rule is to implement the Federal Funding Accountability and Transparency Act, as amended in 2008, to reduce wasteful and unnecessary spending by requiring the Office of Management and Budget to establish a free, public, website containing full disclosure of all Federal contract award information.  A summary of the reporting requirements can be found below:

First-tier subcontract awards must be reported in the following phases:   

• Until September 30, 2010, any newly awarded subcontract must be reported if the prime contract award amount was $20,000,000 or more;
• 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 
• Starting March 1, 2011, any newly awarded subcontract must be reported if the prime contract award amount was $25,000 or more.
  

The rule does not apply to classified contracts, contracts with individuals or contracts with those prime contractors and subcontractors with a gross income of $300,000 or less.
 
Executive compensation must be reported on behalf of the prime contractor and first-tier subcontractor as follows:

• Prime contractors must report on behalf of themselves and their first-tier subcontractors, the names and total compensation of each of the five most highly compensated executives for the contractor's and first-tier subcontractor's preceding completed fiscal year;
• Executive compensation must be reported by the end of the month following the month of award of a contract and/or a first-tier subcontract, and annually thereafter.
• Reporting of executive compensation is not required by the interim rule, unless in the contractor or subcontractor's preceding fiscal year, the contractor or subcontractor received: 

 

• 80% or more of its annual gross revenue in Federal contracts (and subcontracts), loans, grants and cooperative agreements; and
• $25,000,000 or more in its annual gross revenue from Federal contracts (and subcontracts), loans, grants and cooperative agreements; and
• the public does not already have access to reports with information concerning compensation for senior executives.
  

The interim rule applies to all businesses, regardless of business size or ownership.

To comply with the interim rule and to obtain the required information, it will be necessary for prime contractors to flow down these requirements to their first-tier subcontractors. 

 

If you should have any questions concerning compliance with the interim rule, other FAR requirements or any other government contracting matter, please contact William D. Gilbride, Jr. or Heidi E. Warren of Abbott Nicholson, P.C. at (313) 566-2500.