Executive compensation is a hot topic and has been widely discussed in industry blogs, presentations, webinars, etc. Our discussion of executive compensation applies to all Government contractors, whether the compensation of their executives reaches the Government compensation cap or not. Previously, we have discussed the current compensation cap of $763,029 and the attempts by the Senate and the President (blog post coming soon) to reduce the cap. Below is a discussion of the factors used to determine what the reasonable executive compensation for contractors should be.
The compensation cap noted above applies when the amount of allowable reasonable compensation exceeds the cap; however, for many small and mid-size contractors reasonable executive compensation will not approach that amount. FAR 31.205-6(b)(2) states that compensation “must be reasonable for the work performed.” Comparison of compensation to other firms should take into account companies: Continue reading »
The FAR Council has issued the final rule entitled “Reporting Executive Compensation and First Tier Subcontract Awards.” The rule applies to contracts valued over $25,000 and requires the contractor to report the total compensation of its five most highly compensated executives if the contractor had $25 million or more in federal revenue in their last fiscal year, and 80% of their total revenue was derived from government work, and the salaries are not otherwise publicly available. The prime must obtain and submit the same salary information for any first tier subcontractors that meet the $25 million, 80%, not otherwise available criteria. In addition, the prime contractor must report a variety of other non-salary information about its first tier subcontract awards.
The final rule, issued on July 26, 2012 only slightly revised the interim rule issued over two years ago. The three changes of note were: Continue reading »
On January 18, 2012 the Armed Services Board of Contract Appeals (ASBCA) ruled the Defense Contract Audit Agency (DCAA) sampling methodology for audits of contractor executive compensation is “fatally flawed statistically and therefore unreasonable.”
This decision is related to Continue reading »
Contractor executive compensation has been in the news lately for all the wrong reasons. Politicians on both sides of the aisle have used executive compensation as a political football. The ceiling governing the allowability of executive compensation was not increased this year and the ceiling now applies to all contractor employees, not just the top five executives.
However, a recent ruling by the Armed Services Board of Contract Appeals (ASBCA) has bucked this trend and would seem to substantially increase the future allowability of executive compensation for small to mid-tier companies. The ceiling on executive compensation is sufficiently high that it usually only affects large contractors. For smaller contractors, the Defense Contract Audit Agency (DCAA) determines the allowability of executive compensation based on salary survey data for similar firms. A contractor appealed the disallowance of a substantial portion of its executive compensation on the grounds that DCAA’s use of the surveys was statistically flawed. Continue reading »
Currently certain federal government contracts permit government contracting firms to bill executive compensation federal agencies up to $693,951 annually for incurred costs, including employee salaries.
In December, lawmakers voted to expand the cap at most agencies to cover all government contractors, including highly-skilled engineers and scientists that also earn top pay.
Government contracting rules and requirements are constantly changing, but Aronson’s experts want to help you stay on top! The new FAR Clause 52.204-10: “Reporting Executive Compensation and First-Tier Subcontractor Award” represents a significant change in the type of information that is publicly available and how it should be collected. Join Aronson for a webinar on February 9th that will help you understand and comply with the new reporting requirements. Our government contracting specialists will address:
Whether you like it or not reporting accurate and timely subcontractor and executive compensation information will be critical to your firm’s success in 2011. Most contracts issued after July 2010 contain the new FAR Clause 52.204-10 “Reporting Executive Compensation and First-Tier Subcontract Awards”. This clause requires all but the very smallest prime contractors to report a lengthy list of information about their first-tier subcontractors. That information includes the total compensation of the subcontractor’s five most highly compensated executives if the subcontractor receives at least 80% of its revenue from government sources and the total government revenue exceeds $25 million. Continue reading »
For better or worse, the age of transparency has arrived. FAR 52.204-10 “Reporting Executive Compensation and First-Tier Subcontract Awards” was promulgated in July, 2010. The clause has been included in most Government contracts awarded since then and is being added to existing GSA schedule contracts. The clause requires prime contractors to report a variety of information regarding their first tier subcontractors and in many cases the compensation of the top 5 executives of the prime and subcontractor.
Controversial FAR Clause 52.204-10, Reporting Executive Compensation and First-Tier Subcontract Awards (JUL 2010) has officially been incorporated into the GSA Schedule 84 (Law Enforcement) solicitation as of Refresh #15, issued November 10, 2010. Expect all GSA Schedules to begin incorporating this contract clause over the next few months as solicitation refreshes trickle out. All GSA Schedule holders should review and ensure they fully understand the requirements of this clause, especially if you are a private company with 80%+ annual gross revenues from Federal contracting (or subcontracting) and/or do significant work with subcontractors.
Aronson & Company presented a webinar last week entitled Hot Topics in GSA Contract Administration. During the course of the webinar, attendees raised a number of excellent questions of value to the GSA Schedule Contracting community. Covering issues from executive compensation disclosures to elements of a good GSA compliance program, we are pleased to present the questions and our responses Continue reading »
What We Are Writing
- A Marriage of Inconvenience: GSA Schedule Contracts & The Contractor Code of Business Ethics & Conduct Clause
- Emerging Small Businesses: To Grow Your Business, You Must Plan For Growth
- Government Contracting: Look Before You Leap!
- GSA Schedules – Strategies for Success
- New Employee vs. Independent Contractor Considerations
- Pay on Display – Understanding the Executive Compensation and Subcontractor Data Reporting Requirements & Ramifications
- The GSA Schedule: Your Ticket to the Federal Market (May 2010)
- The New FAR Codes of Conduct and Compliance Program Provisions
- The Seven Deadly Sins (of contract compliance)