Contractors with federal contracts exceeding $25,000 in value are now subject to three new reporting requirements. Pursuant to the Federal Funding Accountability Act, the Federal Acquisition Regulation Council instituted the new rule, which is referred to as the "Reporting Executive Compensation and First Tier Subcontract Awards" FAR 52.204-10. This ruling was made on July 26, 2012.
If a prime contractor fails to comply with the reporting requirements, the federal government's contracting officer will: (1) document the prime contractor's non-compliance; and (2) employ any available contractual remedies, which are deemed appropriate. In addition, if a prime contractor "knowingly" provides false or misleading information, the prime contractor could be subject to liability under the False Claims Act.
Reporting Requirement 1
A prime contractor is required to report the names and total compensation of its five most highly compensated executives if: (1) the prime contractor had $25,000,000 or more in federal revenue during the preceding fiscal year, and (2) 80% of the prime contractor's total revenue was derived from the federal government during the preceding fiscal year; and (3) the public does not otherwise have access to such information through periodic reports filed under Section 13(a) or 15(d) of the Securities Exchange Act of 1934 or Section 6104 of the Internal Revenue Code of 1986.
Reporting Requirement 2
For a first-tier subcontractor with a contract of $25,000 or more, a prime contractor is required to report the names and total compensation of the first-tier subcontractor's five most highly compensated executives if: (1) the subcontractor had $25,000,000 or more in federal revenue during the preceding fiscal year, and (2) 80% of the subcontractor's total revenue was derived from the federal government during the preceding fiscal year; and (3) the public does not otherwise have access to such information through periodic reports filed under Section 13(a) or 15(d) of the Securities Exchange Act of 1934 or Section 6104 of the Internal Revenue Code of 1986.
Reporting Requirement 3
A prime contractor is required to report the following information for a first-tier subcontractor with a contract of $25,000 or more: (1) the unique identifier (DUNS Number); (2) the legal name; (3) the value of the contract; (4) the date the contract was awarded; (5) a description of the work and materials being provided; (6) the first-tier subcontractor's address and primary performance area; (7) the funding/awarding agency name and code; (8) the prime contract number; (9) the government contracting office code; (11) the treasury account symbol; and (12) the applicable North American Industry Classification.
Where And When To Report
A prime contractor must report the required information for itself on an annual basis through the System for Award Management, which was formerly known as the Central Contractor Registration (www.sam.gov). However, for first-tier subcontractors, the prime contractor must report the information through the Federal Funding Accountability and Transparency Act Sub-award Reporting System (www.fsrs.gov). The required information for first-tier subcontractors must be reported by the last day of the month, which follows the month after the first-tier subcontractor received the contract.
What You Should Do
Prime contractors should establish a system to collect the required information from their first-tier subcontractors. Moreover, because the prime contractors are imposed with the reporting obligations, prime contractors should not simply rely on a flow-down clause in their contracts, expecting their first-tier subcontractors to supply the required information.
For More Information
For more information please contact Chris Mohart at cmohart@polsinelli.com
