G. Impact on Small Businesses

Comment: Several respondents were concerned that the rule puts small businesses and private companies at a competitive disadvantage. A respondent believed that this rule requires that small and private businesses divulge competitive and proprietary information to customers and competitors alike. According to the respondent, these mandatory disclosures and additional new administrative burdens will have a particularly adverse impact on small businesses. A respondent believed that the increased general, administrative, and overhead costs could make it difficult for smaller businesses to vie for Government contracts by reducing the overall competition pool in Government contracting. Another respondent questioned the purpose of the directive. Several respondents thought that the requirements are burdensome because small businesses, including first-tier subcontractors, are unaccustomed to such requirements and do not have infrastructure in place to comply.

Response: The requirements may have some potential impact on small privately held businesses; however, the public disclosure of executive compensation information implemented under this rule is statutory. There are exceptions which will eliminate some companies which would otherwise be covered, such as the 80 percent/$25 million exception, the $300,000 gross income exception, and the definition of "first-tier subcontract." Additionally, changes to the rule summarized at section III. of this preamble may lessen the burden on small businesses.

Comment: Given the unintended yet far-reaching effect the requirements may have upon similarly situated small businesses, a respondent encouraged the Councils to work closely with the Small Business Administration (SBA) in addressing such concerns, or consider the impact the executive compensation reporting requirements rule may have on small business and small business supply chains.

Response: During the FAR rulemaking process, the SBA and the Chief Counsel for Advocacy of the SBA (see Regulatory Flexibility Act, 5 U.S.C. 601, et seq.) are afforded an opportunity to review and comment on each FAR rule prior to publication, with the focus of limiting burden on small businesses as much as possible. The Councils consider the comments by SBA and the Chief Counsel for Advocacy of the SBA in the formulation of a FAR rule.