New Regulation Requires Federal Contractors To Disclose Subcontracts And Compensation Of Executives
July 21, 2010
A new regulation issued jointly by several federal agencies requires many federal contractors to disclose first-tier subcontract awards of $25,000 or more and to disclose the compensation paid to their top five executives. The new regulation was published in the Federal Register on July 8, 2010 and became effective on that date. The regulation was issued by the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration and implements the Federal Funding Accountability and Transparency Act (“FFATA”). The FFATA’s provisions state that it was enacted to reduce “wasteful and unnecessary spending” by requiring the federal government to “establish a free, public, on-line database containing full disclosure of all federal contract award information.”
The new regulation requires prime contractors to report first-tier subcontract awards of $25,000 or more at http://www.fsrs.gov. The regulation also requires contractors to report, at http://www.ccr.gov, the name 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 http://www.fsrs.gov. The required information reported by federal contractors will be made available to the public.
Contractors and subcontractors are exempt from the reporting requirements contained in the regulation if their gross income is less than $300,000. The disclosure of compensation paid to the top five executives will be required only if the contractor or subcontractor receives at least 80 percent of its annual gross revenue and $25 million from federal awards, and if senior executives do not already publicly report compensation information.
The preamble to the new regulation acknowledges that it “may have a significant economic impact on a substantial number of small entities.” To address this burden, the reporting obligation will be phased in. Until September 30, 2010, new subcontracts must be reported only on prime contracts worth more than $20 million. From October 1, 2010 to February 28, 2011, reporting will be required for prime contracts worth more than $550,000. As of March 1, 2011, reporting will be required for all subcontracts at the $25,000 or greater threshold.
