Survival Tactic #3 Be Prepared to Report Subcontractor Data & Executive Compensation

Whether you like it or not reporting accurate and timely subcontractor and executive compensation information will be critical to your firm’s success in 2011.  Most contracts issued after July 2010 contain the new FAR Clause 52.204-10 “Reporting Executive Compensation and First-Tier Subcontract Awards.” This clause requires all but the very smallest prime contractors to report a long list of information about their first-tier subcontractors.  That information includes the total compensation of the subcontractor’s five most highly compensated executives if the subcontractor receives at least 80% of its revenue from government sources and the total government revenue exceeds $25 million. Publicly traded companies do not need to disclose their compensation information if it is already available due to their SEC filings.  Prime contractors must also disclose their own compensation information if they meet the 80%, $25 million, not otherwise available criteria.

Do not wait until the information is due.  The calculation of total compensation, as defined by the FAR clause can be complicated.  Companies that meet the compensation reporting criteria should identify their five most highly compensated executives and carefully calculate their compensation.  All potential prime contractors should revise their standard subcontracts to ensure that the subcontractors are notified of this requirement and are contractually obligated to provide the information to the prime contractor.

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