Wednesday, April 18, 2012

Subcontract Reporting Requirements

This is a reporting requirement reminder that for those of you with the FAR 52.204-10 clause in your contract or subcontract (which should be everyone with contracts greater than $25 thousand). This clause, Reporting Executive Compensation and First-Tier Subcontract Awards, requires prime contractors to report first-tier subcontract award data (e.g., name, amount, address, etc.) for subcontract awards over $25 thousand.  It also requires contractors and first-tier subcontractors with more than $25 million in Federal sales to report certain executive compensation information.

The Government is known to use this data when planning audits and performing other oversight reviews. Discrepancies between the information contained in the reporting databases and what the Government expects to find in those sources are noncompliance with contract terms and conditions and is met with varying degrees of gruffness.

 When this requirement first became a regulation in 2010, the FAR councils estimated the cost of compliance to be around $21 million. This estimate was laughably low according to many public commentators. As a result of these comments the Government this week revised its estimate of compliance. The Government's new estimate is set at $31 million per year. For most contractors, this reporting requirement is onerous, meaning that it takes a lot of time to compile the data, ensure its accuracy, and populate the Government databases. Larger contractors have developed systems to help make the process efficient but smaller contractors do not have the volume of subcontract awards to enjoy a learning curve or to justify the costs of specialized systems. The Government's estimate of 2 hours per subcontract reported is not even close to accurate for contractors that report only a few subcontract awards per year.

Information collected so far is publicly available at

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