Government Contracts Law Update: New Subcontract Reporting Requirements for Federal Contracts

As part of the continuing effort to increase transparency in federal government contracting, the government is now requiring agencies and prime contractors to provide information regarding subcontractors.  The interim rule, published July 8, 2010 in the Federal Register, is effective immediately but will be implemented in stages to ease the burden on agencies and contractors.  Until September 30, newly awarded subcontracts must only be reported if the prime contract amount exceeds $20 million.  Between Oct. 1, 2010 and Feb. 28, 2011, subcontracts must be awarded if the prime contract amount is $550,000 or more.  On March 1, 2011, all subcontracts for prime contracts of $25,000 must be reported to the government.  Contractors will submit the subcontracting information to the Federal Funding Accountability and Transparency Act Sub-Award Reporting System.  The reported information will eventually be publically available on www.usaspending.gov

Companies with less than $300,000 in annual revenue would be exempt from the reporting requirements.  Also, classified solicitations and contracts with individuals would not be subject to the rule.  However, the rule would apply to commercial item contracts and actions below the $100,000 simplified acquisition threshold, provided the contracts are above the $25,000 threshold.

In addition to the information on subcontracts, the interim rule requires contractors and subcontractors to annually disclose the names and total compensations (including bonuses and stock options) of their five highest paid officers.  Contractors who are awarded contracts of $25,000 would be required to report salary data to the Central Contractor Registration.

The Obama administration is accepting public comments on the interim rule through Sept. 7.  Once the rule is finalized it will become part of the Federal Acquisition Regulation.