By: Edward T. DeLisle & Maria L. Panichelli
Our last blog article focused on the ability of an SDVOSB to control his company remotely thanks to the advancements of technology. Well, technology can be both a blessing and a curse. It can allow you to work from pretty much anywhere, but, as we all know, there are certain places where you should simply avoid using the technology available to you, such as when you are behind the wheel. The hazards of texting while driving has become a major problem and, as a result, it's been rendered illegal in many states. Based upon recent changes to the FAR, now the federal government is getting into the act.
Pursuant to FAR Subpart 23.11 (incorporated into every government contract through clause 52.223-18) a government contractor should adopt and enforce a policy banning employees from texting whenever an employee is: (1) driving a vehicle owned or rented by the company; (2) driving a vehicle owned by the government; or (3) driving a privately owned vehicle when performing any work on behalf of the government. Moreover, contractors are required to “flow down” this anti-texting clause to all of its subcontractors, if the value of the subcontract exceeds the “micro-purchase threshold” (currently $3,000).
More importantly, 52.223-18 requires federal contractors to “conduct initiatives” to educate employees about the dangers of texting while driving; these initiatives should be “commensurate with the size of the business.” If you are a large government contractor, this likely means that the government will expect some sort of training in addition to a written policy or employee handout covering this topic. If you are conducting periodic ethics training (and you should be), you can likely incorporate any necessary training on anti-texting as part of those sessions. If you do not conduct periodic ethics, and other government contracting, training to refresh yourself regarding what the government requires of its contractors, you should certainly consider doing so. If you have any questions, please feel free to contact us.
Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.
By: Edward T. DeLisle & Maria L. Panichelli
FAR Council Implements Final Rule; Contractors Now Required to Report Subcontractor Awards and Executive Compensation
By: Edward T. DeLisle & Maria L. Panichelli
On August 27, 2012, FAR council issued a final rule entitled Reporting Executive Compensation and First-Tier Subcontract Awards (“the Rule”). Although this Final Rule was implemented just last month, it has been a topic of discussion on Capitol Hill for over six years.
In 2006, the Federal Funding Accountability & Transparency Act of 2006 (Pub. L. 109-282, 31 U.S.C. § 6101 note) (“FFATA”) was enacted, with a two fold purpose: (1) to reduce “wasteful and unnecessary spending;” and (2) to ensure that the public can access financial information on entities and organizations receiving federal funds, which included federal government contractors and their subcontractors. FFATA required all federal contractors to divulge, through the use of a website set up by the Office of Management and Budget (“OMB”), contract and subcontract award information for all contracts over $25,000. Contractors’ reporting responsibilities were further expanded by the Government Funding Transparency Act of 2008 (“GFTA”). GFTA amended the FFATA to provide that contractors report, in addition to contract and subcontract award information, the names and total compensation of the five most highly compensated officers of those entitities. On July 8, 2010 an interim rule was put in place, requiring Federal contractors to comply with the new reporting requirements.
It was this interim rule (with a few minor modifications) that was ultimately implemented on August 27, 2012. Under the Final Rule, prime contractors must report contract and first-tier subcontract awards, and the names and executive compensation of the five most highly compensated officers of both the prime contractor, and its first-tier subcontractors. The information must be reported by the end of the month following the month of a contract award, and annually thereafter, in the Central Contactor Registration system (“CCR”)(now the “System of Award Management” or “SAM”). All of the information is to be made accessible to the public through www.usaspending.gov.
Compliance with the rule requires that contractors fully understand the reporting requirements, which can be rather complicated. Accordingly, some guidance concerning the reporting requirements is set forth below.
Subcontract Award Reporting
This requirement is applicable to all Contracts with value of $25,000 or more, but there is no requirement to disclose classified information. This represents a change from the interim rule, which included language stating that it did not apply to classified contracts; the Final Rule expands this provision to state that nothing in the statute requires disclosure of “classified information.” The Final Rule deleted an additional exception that had been contained in the interim rule, namely that the rule did not apply to contracts with individuals. There is no such exemption in the Final Rule. There is also no exemption for COTS or commercial items.
A “First-Tier Subcontract” is defined as a subcontract “entered into by the [Prime] Contractor to furnish supplies or services for performance... It includes, but is not limited to, purchase orders and changes and modifications to purchase orders, but does not include contracts that provide supplies or services benefiting two or more contracts.” FAR 52.204-10(a). This too represents a change from the interim rule. The interim rule’s definition of “first-tier subcontracts” has been modified slightly, to clarify that the definition does not include long-term contracts for supplies and materials that are not solely related to a single, applicable contract. According to the preamble of the Final Rule, this change is meant to give contractors “greater flexibility” in determining what type of company qualifies as a “first-tier subcontractor.”
An extensive list of the information contractors must report regarding first-tier subcontract awards can be found at FAR 52.204-10(a).
Executive Compensation Reporting
Contractors and applicable Subcontractors must comply with this requirement only if that contractor or subcontractor, in the preceding fiscal year, received eighty percent (80%) or more of its annual gross revenues and twenty-five million or more in annual gross revenues from federal contract awards, AND if the public did not otherwise have access to this executive compensation information from other publically available sources (for example, through SEC or IRS filings).
The category of subcontractors required to report executive compensation is limited to “First-Tier Subcontractors,” which is defined in the same manner as set forth above. The Subcontractor is required to report to the prime contractor names and total compensation of each of the five most highly compensated executives for that subcontractor’s preceding completed fiscal year. The Prime Contractor, in turn, is required to report this information, along with its own executive compensation information to the extent that it falls within the parameters of the Rule.
For purposes of disclosure under the final Rule, both “executive” and “compensation” are defined broadly. Compensation includes not only salary, but also:
– (1) bonus;
– (2) awards of stock, stock options, and stock appreciation rights;
– (3) earnings for services under non-equity incentive plans;
– (4) change in pension value;
– (5) above-market earnings on deferred compensation which is not tax-qualified; and
– (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.
“Executive” is defined as any officer, managing partner, or any employee in a management position.
The prime contractor must report executive compensation information in two different locations. For subcontractors, the information is entered into the FFATA Sub-award Reporting System (“FSRS”). For contractor information, primes must use the Federal Procurement Data System (“FPDS”), where certain required information will be pre-populated by the government. Prime Contractors must note two things here: First, as to first-tier subcontractors, the prime is responsible for notifying its subcontractors that the required information will be made public. Second, regarding its own information, under the Final Rule it is the prime’s responsibility to check and correct any inaccurate information pre-populated in FPDS.
This Rule places prime contractors in the precarious position of collecting and reporting not simply their own information, but information from others. How can a prime assure itself that it is collecting and reporting the full extent of the subcontractor information required? How can it ensure that the information it receives from its subcontractors is accurate? These are troubling issues and prime contractors will have to develop risk management systems to assist with compliance. Specifically, prime contractors should establish a mechanism, through their subcontracts, for example, to notify subcontractors of the reporting requirements and what information must be provided. However, since the reporting obligation applies to the prime contractor and not subcontractors, it will not be sufficient to merely “flow down” the actual reporting responsibilities. Having subcontractors certify the information provided may also assist prime contractors in protecting themselves from the risks associated with the Rule. And primes must not forget about reporting their own information. Systems for collecting, reporting and updating this information must be established to remain compliant. Oh, the joy of dealing with the federal government…
Edward T. DeLisle & Maria L. Panichelli has been closely following the development of this Rule since its inception, and has advised many contractors with regards to compliance. For further information, or for a short slide presentation concerning the Rule, please contact Mr. DeLisle at email@example.com.
Join the Federal Construction Group of Cohen, Seglias as it presents, "Unraveling the Mysteries of Federal Construction Contracting," at two different locations.
March 29, 2011 - Hyatt Regency Savannah, GA
March 31, 2011 - Hyatt Regency Grand Cypress Orlando, FL
$195.00 per person and $95 for each additional person from the same company.
Attendees will learn about the following topics:
- Understanding the FAR and how a Federal construction contract works
- The RFP procurement process
- Preparing winning proposals on “best value” solicitations
- Understanding the IDIQ/MATOC process
- How to successfully team on Federal projects
- Knowing when, and whether, to file a bid protest
- Negotiating contract modifications
- Maintaining proper project documentation
- Obtaining prompt payment
- Preparing and submitting Requests for Equitable Adjustment and Claims
- Protecting your rights through the dispute resolution process
Regardless of your experience level, this seminar will help you understand these key concepts and develop strategies for both obtaining federal contracts and profiting from them.
Please click here for complete seminar details and registration form. For questions, please contact Rachel McNally at (215) 564-1700 or firstname.lastname@example.org.