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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: May 12, 2000

FROM: Barry McVay, CPCM

SUBJECT: Office of Federal Procurement Policy (OFPP); Determination of Executive Compensation Benchmark Amount

SOURCE: Federal Register, May 12, 2000, Vol. 65, No. 93, page 30640

AGENCIES: Office of Management and Budget, OFPP

ACTION: Notice

SYNOPSIS: OFPP Administrator Deidre Lee has established $353,010 as the "benchmark compensation amount" that will be allowable under government contracts during contractors' fiscal year 2000, and applies to contract costs incurred after January 1, 2000. This determination is required by Section 808 of the FY 1998 Defense Authorization Act (Public Law 105-85), and it applies to both defense and civilian procurement agencies.

EDITOR'S NOTE: Paragraph (p) of Federal Acquisition Regulation (FAR) 31.205-6, Compensation for Personal Services, implements Section 808 of the FY98 Defense Authorization Act.

EFFECTIVE DATE: January 1, 2000.

FOR FURTHER INFORMATION CONTACT: Richard C. Loeb, Executive Secretary, Cost Accounting Standards Board, OFPP, 202-395-3254.

SUPPLEMENTAL INFORMATION: Section 808 of the FY98 Defense Authorization Act limits the amount of executive compensation that is allowable under government contracts to the "benchmark compensation amount determined applicable for the fiscal year by the Administrator for Federal Procurement Policy..." The "benchmark compensation amount" is defined as "the median amount of the compensation provided for all senior executives of all benchmark corporations for the most recent year for which data is available," and it applies to the compensation of the "five most highly compensated employees in management positions at each home office and each segment of the contractor." The $350,010 "benchmark compensation amount" is not a limit on the compensation contractors may compensate their senior executives, but the maximum amount of compensation the government will reimburse contractors for their senior executives' compensation. (EDITOR'S NOTE: "Compensation" is defined as "the total mount of wages, salary, bonuses and deferred compensation for the year, whether paid, earned, or otherwise accruing, as recorded in the employer's cost accounting records for the year". A "benchmark corporation" is defined as "a publicly-owned United States corporation that has annual sales in excess of $50,000,000 for the fiscal year.")

The $353,010 figure is a $10,024 increase over the FY99 compensation benchmark amount of $342,986. The figure was derived "based on a review of commercially available surveys of executive compensation and after consultation with the Director of the Defense Contract Audit Agency," and it applies governmentwide to compensation incurred after January 1, 2000.

The FY98 compensation benchmark amount was $340,650.

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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