FAR Proposed Rule: Senior Executive Compensation Benchmark applicable to all contractor employees effective January 1, 2012 (certain agencies)

In this proposed rule, DoD, GSA, and NASA are proposing to amend FAR 31.205-6(p) to require that the compensation costs incurred after January 1, 2012, for all contractor employees on all DoD, NASA, and Coast Guard contracts awarded before December 31, 2011, be subject to the senior executive benchmark compensation amount. The reference to 31.205-6(p) in FAR 52.216-7 was updated in the interim rule to reflect the revision in 31.205-6(p). This proposed rule uses the interim rule as its baseline.

Effective June 26, 2013, the interim rule amended FAR 31.205-6(p) to require that the incurred compensation costs for all contractor employees on all DoD, NASA, and Coast Guard contracts awarded on or after December 31, 2011, be subject to the senior executive compensation amount. The reference to 31.205-6(p) in FAR 52.216-7 is also updated to reflect this revision in 31.205-6(p).

With the amendment, companies could potentially have to go back and reclassify 2012 compensation in excess of the benchmark if charged as allowable costs on contracts awarded prior to December 31, 2011.  The rule is not effective for non-DoD, non-NASA, and non-Coast Guard contracts, but that to is not etched in stone.

Comments are due by August 26, 2013. www.regulations.gov, Search FAR-2012-0017-0001.