Proposed Rule Would Impose Substantial Reporting Requirements on Service Contractors

4.17.2013 - Posted in E&B Alerts – Government Contracts

On March 14, 2013, the FAR Council issued a notice soliciting public comments on a proposed rule that would impose new reporting requirements on most service contractors holding prime contracts with the federal government. While the rule was initially proposed in 2011, it is now being submitted for review and approval by the Office of Management and Budget. While this action provides a new opportunity for public comment, it also appears likely that the new requirements will be finalized without any further modifications.

Once promulgated, the new rules will require that prime service contractors provide the following information on an annual basis:

  1. The contract number, and as applicable, order number;
  2. The total dollar amount invoiced for services performed during the previous Government fiscal year under the contract;
  3. The number of contractor direct labor hours expended on the services performed during the previous Government fiscal year; and
  4. Data reported by first-tier subcontractors.

In addition, the data required from subcontractors includes:

  1. The subcontract number, subcontractor name and DUNS number, if available; and
  2. Direct labor hours expended on the services performed during the previous Government fiscal year.

These regulations are intended to help agencies comply with annual contract inventory reporting requirements. See Consolidated Appropriations Act of 2010 (Pub. L. 111-117), Div. C, § 743. In particular, the information to be collected is designed to enable agencies to "determine whether they have the right balance of contractor and in-house resources to accomplish their missions."

For contractors working under time and materials or labor hours contracts – where the services provided are billed at an hourly rate – it is likely that the required information is already being tracked and reported to the government. Contractors working under fixed-price service contracts, however, are not currently required to report labor hours expended on their contracts with the government. As a result, the new requirements would translate into a duplicative (and arguably unnecessary) reporting obligation for some contractors, while for others, it would require the development and implementation of new systems for the tracking and reporting of labor hours. In addition, the obligation would extend to the collection and reporting of information from first-tier subcontractors.

In a stated effort to "keep the reporting burden to the absolute minimum," the new rules would be phased in for service contractors under fixed-price contracts over the course of at least four years, with contracts of at least $5 million being bilaterally modified in FY 2013; $2.5 million in FY 2014; $1 million in FY 2015; and $500,000 in FY 2016 and beyond.

The proposed rule can be found at this link to the Federal Register. Comments regarding the proposed rule may be submitted through http://www.regulations.gov/ by searching for "OMB Control No. 9000-0179." The deadline for submitting comments is April 15, 2013. For further information regarding the proposed rule, please contact Mark Blando at (612) 236-0160 or [email protected].