Federal contractors that perform work funded, in whole or in part, by the American Recovery and Reinvestment Act of 2009 must report on certain aspects of that work under an interim rule issued by the FAR Councils on March 31, 2009. As currently written, the interim rule provides that recipients of Recovery Act funds must report information including, but not limited to—
a) The dollar amount of contractor invoices;
b) The supplies delivered and services performed;
c) An assessment of the completion status of the work;
d) An estimate of the number of jobs created and the number of jobs retained as a result of the Recovery Act funds;
e) Names and total compensation of each of the five most highly compensated officers for the calendar year in which the contract is awarded if in its preceding fiscal year the contractor received 80 percent or more of its annual gross revenues and $25 million or more in annual gross revenue from federal funds, and such information is not publicly available through SEC filings; and
f) Information on first-tier subcontractors, including the same executive compensation information required from prime contractors.
The foregoing requirements raise several issues of interpretation and administration. For example, to determine the number of “jobs created” and “jobs retained” under the interim regulatory scheme, a contractor must convert part-time or temporary jobs into “full-time equivalent” (FTE) jobs. To accomplish such a conversion, these part-time hours must be divided by the number of hours in a full-time schedule. However, the interim rule leaves the definition of full-time schedule to each contractor’s discretion based on its existing practices. With respect to the methodology described in the interim rule for estimating jobs created or retained, the FAR Councils seek public comment to answer the following questions:
1) Is the interim rule’s use and description of FTE consistent with existing business practices?
2) Is a standardized methodology based on FTE necessary or do contractors have existing practices that adequately address other than full-time jobs so as to avoid inflating estimated numbers for jobs created and retained?
3) Should the Government allow a contractor to use any method consistent with its existing practice as long as the contractor provides an explanation of the methodology?
4) If the Government were to standardize the number of hours in a “full-time schedule,” would this increase the burden of reporting on jobs created or retained?
The interim rule’s use of the term “total compensation” with respect to the disclosure of officer compensation may also require clarification. As written, the interim rule defines “total compensation” as the cash and non-cash dollar value earned by the executive during the contractor’s past fiscal year of (1) salary and 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. The FAR Councils have asked interested parties to comment specifically on whether this definition provides sufficient clarity, and if not, to identify the aspect of the definition that requires clarification.
On a related issue, the FAR Councils have asked whether obtaining executive compensation and other required information from first-tier subcontractors presents challenges for prime contractors. If so, interested parties are asked to specify how the rule might be changed to make the submission of this information less burdensome for both prime contractors and subcontractors.
The FAR Councils seek public comment on the following specific additional issues, as well as on the overall rule itself:
1. Whether the Government should, to assist the contractor in describing the work completed, provide a list of broad categories of work under the Recovery Act from which the contractor would select, and, if so, the categories that should be provided.
2. The potential challenges and/or benefits that would arise if the Government required companies to separately invoice for all supplies or services funded by the Recovery Act.
3. Whether there is information not customarily provided that would make it easier for companies to segregate their invoices in order to identify separately items funded by the Recovery Act.
4. Whether it would be useful to provide an Alternate clause allowing agencies to identify distinct “projects” within the contract so that a contractor could report Recovery Act work by project rather than by the contract as a whole.
5. Whether a contractor could separately track the receipt of Recovery Act funds and identify the payment to a particular deliverable rather than merely tracking and reporting on the invoiced amount of Recovery Act work.
In its current form, the interim rule applies to solicitations issued and contracts awarded on or after March 31, 2009 that use Recovery Act funds. Recovery Act-funded work for which an invoice is submitted prior to June 30, 2009 must be reported no later than July 10, 2009. Thereafter, reports must be submitted no later than the 10th day after the end of each calendar quarter.
The FAR case (2009-009) adds a new FAR subpart 4.15, and a new clause, 52.204-11. Commercial item contracts and Commercially Available Off-The-Shelf item contracts are covered, as are actions under the simplified acquisition threshold.
Interested parties should submit written comments on the interim rule to the FAR Secretariat on or before June 1, 2009.
Jesse J. Williams