Executive Compensation
Many small-to-medium size prime contractors, and large-company divisional Subcontract Administrators, dread the public disclosure of compensation for the five most-highly-compensated employees. The threshold for reporting is $30,000 per award. The requirements to make public the salary and benefits of the President, Chief Executive Officer, or General Manager are – in almost all cases – restricted to organizations with such high income, that this information is already public.
FAR 52.204-10 implements two separate reporting requirements. First, primary recipients of awards funded by the U.S. government, that is, grantees and prime contractors only (no sub-recipients or subcontractors) report their direct award of $30,000 or more. Certain awards are exempt from public reporting:
- Any classified solicitation or contract
- Any solicitation or contract with an individual (instead of a company)
- Any awards to an organization that, for its previous fiscal year, earned less than $300,000 of gross revenues from all sources
This reporting focuses on the award document, that is, the actual award – not on the company. The prime contractor (Purchasing obtains the information.) reports each directly-supporting subcontract award of $30,000 or more. Again, this report is on the subcontract document – not on the subcontractor company.
Reporting Executive Compensation – for the grantee, prime contractor, or subcontractor – comprises the second, completely separate, requirement. In other words, the document describing a prime contract of $30,000 or more is reported as public information; plus, the document describing each first-tier subcontract of $30,000 or more is reported as public information. For each award document reported, a separate set of prerequisites trigger the (public) reporting of Executive Compensation for a grantee, prime contractor, and other (top- or) immediate-level awardees of federal government funds – plus first-tier sub-recipient grantee or subcontractor.
When all of the following criteria are met, Executive Compensation is reported.
- The company holds a reportable grant, prime contract, or next-tier award (e.g., subcontract)
- The company earned, during its previous fiscal year, $25,000,000 or more from federal government funding
- The company earned, during its previous fiscal year, 80% or more of its gross revenues from federal government funding
- The company does not already report the information to comply with the Securities Exchange Act
- The company (such as a pension plan or non-profit) does not already report the information to comply with the Internal Revenue Service code
If the recipient of the award does not meet any one of these five criteria, Executive Compensation (including salary, bonus, stock, and other compensation) for each of the five most-highly-compensated employees need not be reported. These criteria limit reporting to those executives of only (somewhat) large and not publicly traded companies – plus extraordinary, few cases.
As a Subcontract Administrator, your first-tier subcontractor(s) that must report their subcontract document might meet all criteria for reporting Executive Compensation. The requirements are flowed down via the subcontract language. To maintain your good working relationship with your subcontractor(s) – let them know (during the RFP stage) about their responsibility to make this (sometimes) sensitive information public.