I.  Background

On September 26, 2006, the Federal Funding Accountability and Transparency Act (hereafter referred to as the Transparency Act) (Pub. L. 109-282, 31 U.S.C. 6101 note), was enacted to reduce "wasteful and unnecessary spending," by requiring that OMB establish a free, public Web site containing full disclosure of all Federal award information, for awards of $25,000 or more. The Transparency Act required, by January 1, 2009, reporting on subcontract awards by Federal Government contractors and subcontractors. The Transparency Act's initial phase was conducted as a Pilot Program (Pilot), to test the collection and accessibility of the subcontract data. In order to implement the Pilot, a proposed rule was published in the Federal Register at 72 FR 13234, on March 21, 2007, under FAR Case 2006-029.

A final rule implementing the Pilot was published in the Federal Register at 72 FR 51306, on September 6, 2007. Exempted from the Pilot were solicitations and contracts for commercial items issued under FAR part 12 and classified solicitations and contracts. To minimize the burden on Federal prime contractors and small businesses, the Pilot applied to contracts with a value greater than $500 million and required the awardees to report all subcontract awards exceeding $1 million to the Transparency Act database at www.esrs.gov. The Pilot terminated January 1, 2009.

On June 30, 2008, section 6202 of Public Law 110-252 amended the Transparency Act to require the Director of OMB to include an additional reporting element requiring contractors and subcontractors to disclose information on the names and total compensation of their five most highly compensated executives.

DoD, GSA, and NASA published in the Federal Register at 74 FR 14639, on March 31, 2009, FAR case 2009-009, American Recovery and Reinvestment Act of 2009 (the Recovery Act)--Reporting Requirements, which required contractors receiving a Recovery Act funded contract award to provide detailed information on subcontracts, including the data elements required to comply with the Transparency Act. Although the Transparency Act reporting requirements flow down to all subcontracts, regardless of tier, the Recovery Act limited the reporting on subcontract awards to the contractor's first-tier subcontractors.

DoD, GSA, and NASA published an interim rule for public comment in the Federal Register at 75 FR 39414, on July 8, 2010, under FAR Case 2008-039 with the following criteria:

Subcontract reporting would apply only to first-tier subcontracts.

The rule would phase-in the reporting of subcontracts of $25,000 or more--

[cir] Until September 30, 2010, any newly awarded subcontract must be reported if the prime contract award amount was $20 million or more;

[cir] From October 1, 2010, until February 28, 2011, any newly awarded subcontract must be reported if the prime contract award amount was $550,000 or more; and

[cir] Starting March 1, 2011, any newly awarded subcontract must be reported if the prime contract award amount was $25,000 or more.

By the end of the month following the month of award of a contract, and annually thereafter, the contractor shall report the names and total compensation of each of the five most highly compensated executives for the contractor's preceding completed fiscal year.

Unless otherwise directed by the contracting officer, by the end of the month following the month of award of a first-tier subcontract, and annually thereafter, the contractor shall report the names and total compensation of each of the five most highly compensated executives for the first-tier subcontractor's preceding completed fiscal year.

There would be a $300,000 gross income exception for prime contractors and subcontractors.

Data quality requirements would apply to agencies and contractors.

The interim rule required contractors to report subcontracts of $25,000 or more, and any modifications made to those subcontracts which changed previously reported data. The reporting requirements of the Transparency Act are sweeping in their breadth, and are intended to empower the American taxpayer with information that may be used to demand greater fiscal discipline from both executive and legislative branches of Government. The Transparency Act reporting requirements apply to all businesses, regardless of business size or ownership.

Contractors provide these subcontract reports to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) at http://www.fsrs.gov. FSRS is a module of the Electronic Subcontracting Reporting System (eSRS) designed specifically to collect the Transparency Act required data.

Contracting officers will be required to modify existing contracts to cover future orders--see the Applicability section above.