On March 31, 2009, the Civilian Agency Acquisition and Defense Acquisition Regulations Councils ("the FAR Councils") issued an interim rule in FAR Case 2009-009 to implement the reporting obligations set forth in Section 1512 of the American Recovery and Reinvestment Act of 2009 ("Recovery Act"), Pub. L. No. 111-5. See 74 Fed. Reg. 14639 (Mar. 31, 2009). Of particular note, these new reporting obligations require the submission of reports regarding the total compensation paid to the contractor's or subcontractor's five highest paid officers - a requirement that was not mandated by the Recovery Act itself. Also of note, the rule states that these reports "will be made available to the public," and unlike other reports required under the Act includes no explicit provisions for the protection of confidential information regarding employee compensation or other proprietary information. Contractors should also note that the rule went into effect on the date of publication of the interim rule (March 31), and that the accompanying clause must be included in all new contracts awarded using Recovery Act funds (including contracts for commercial items) or inserted into existing contracts funded in part by the Recovery Act.
Background. Section 1512 of the Recovery Act, which is referred to as the "Jobs Accountability Act," requires that recipients of Recovery Act funds submit quarterly reports regarding the use of those funds, as well as the contract's impacts on the Recovery Act's goal of creating or preserving jobs. To implement these reporting requirements, the FAR Councils have issued a new FAR clause 52.204-11 ("American Recovery and Reinvestment Act-Reporting Requirements"), which details the specific information to be reported on a quarterly basis, beginning in July 2009.
Applicability. According to the background and the implementing rules at FAR 4.15, this new clause is to be included in any contract, new or existing, that uses Recovery Act funds, with the single exception of classified solicitations and contracts. According to the implementing regulations, this includes GWACS, multi-agency contracts, GSA Schedule contracts, and IDIQ contracts that will be funded with Recovery Act funds. Contracts for commercial items, COTS items and contracts under the simplified acquisition threshold are also subject to these new reporting obligations. These new rules also warn that "Contracting officers may not use Recovery Act funds on existing contracts and orders if the clause at 52.204-11 is not incorporated."
Prime Contractor Reporting Obligations. The clause at FAR 52.204-11 obligates contractors to provide quarterly reports that include the following information:
- Government contract and number;
- The amount of Recovery Act funds invoiced during reporting period;
- A list of all significant services performed or supplies delivered;
- The program or project title;
- A description of the overall purpose and expected outcomes or results, including significant deliverables;
- An assessment of progress toward completion of the overall purpose of contract;
- A narrative description of the "employment impact" of work funded by the Recovery Act, including number and types of "jobs created" or "jobs retained" by the prime contractor;
- The names and "total compensation" (as defined in the rule) for the five highest compensated officers of the contractor for the calendar year in which the contract is awarded, if the annual gross revenue received from federal contracts, subcontracts, loans, grants, subgrants or cooperative agreements totals $25 million or more, and accounts for 80% or more of the contractor's annual gross revenues (and if the public does not already have access to the information by virtue of SEC or IRS reporting requirements); and
- Information on first-tier subcontractors (discussed below).
Subcontractor Reporting Obligations. The new clause at FAR 52.204-11 also requires prime contractors who receive Recovery Act funds to provide the following information regarding "first tier subcontracts" over $25,000:
- Subcontractor name, DUNS Number, physical address, and primary performance location;
- Subcontract amount, date of award, NAICS code and funding agency;
- A description of the products or services being provided under the subcontract, including the overall purpose and expected outcomes; and
- The names and "total compensation" (as defined in the rule) for the five highest compensated officers of the subcontractor for the calendar year in which the subcontract is awarded, similar to that required of prime contractors.
Conclusion. The new reporting obligations in FAR 52.204-11 are a further example of the increased emphasis on oversight, transparency, and accountability in the Recovery Act and other recent statutes and regulations affecting the procurement community. Contractors should review these new rules and reporting requirements carefully when analyzing the obligations and risks that accompany receipt of Recovery Act funds.