Nearly four years after the passage of legislation that mandated the disclosure of all federal contracting awards, the Obama administration is requiring agencies to report data on its subcontracts.

Beginning immediately, agencies must post information on their first-tier subcontracts, according to an interim rule published on Thursday in the Federal Register. The long-awaited rule, which would amend the Federal Acquisition Regulation, also would require contractors to report the names and salaries of their five highest paid executives.

“The objective of the rule is to empower the American taxpayer with information that may be used to demand greater fiscal discipline from both executive and legislative branches of government,” the notice stated.

The subcontracting provision will be phased in slowly to minimize the burden on agencies and contractors, the administration said.

Until Sept. 30, newly awarded subcontracts must be reported only if the prime contract amount was $20 million or more. From Oct. 1, 2010 to Feb. 28, 2011, the threshold for reporting new subcontract awards will be lowered to $550,000 or more. Beginning on March 1, 2011, all subcontracts for prime contracts of $25,000 or more must be publicly reported.

The rule will be required for all commercial item contracts and actions below the $100,000 simplified acquisition threshold that meet the $25,000 threshold. The clause, however, is not required in classified solicitations and contracts with individuals. Companies with less than $300,000 in annual revenue also would be exempt.

The rule has been a long time in the making. In September 2006, President George W. Bush signed the Federal Funding Accountability and Transparency Act, which created USASpending.gov, a public database on all prime contract awards of more than $25,000. The bill was co-sponsored by then-Sen. Barack Obama, D-Ill.

The Transparency Act required federal agencies begin posting subcontracting awards by the start of 2009. The Bush administration conducted a brief pilot program to test the collection of some high-dollar subcontracting awards. But the government terminated the pilot on Jan. 1, 2009, and it was never revived.

The impetus for the law’s revival appears to be the vast breadth of reporting the 2009 American Recovery and Reinvestment Act mandates. The stimulus requires contractors to provide detailed information on their subcontracts, including many of the same data elements that are called for under the Transparency Act. Similar to the Recovery Act, the new rule will apply only to first-tier subcontracts.

Contractors will provide their subcontract reports to the Federal Funding Accountability and Transparency Act Sub-Award Reporting System. The data will be posted later on USASpending.gov.

The salary provision, meanwhile, stems from the 2008 Government Funding Transparency Act, which requires contractors and subcontractors to annually disclose the names and total compensation — including bonuses and stock options — of their five highest paid officers from the preceding fiscal year, the notice said.

The executive compensation rule, which is required for Recovery Act contractors, applies to awards of at least $25,000. Companies must report the salary data to the Central Contractor Registration.

The 2008 law applies to companies earning at least 80 percent of their revenue from federal contracts, grants and loans and that have received in excess of $25 million in total federal funding during the previous year. Companies would be exempt if they already report the salary data through Securities and Exchange Commission reports, or if they earned less than $300,000 in gross income the year before.

The administration is accepting public comments on the interim rule through Sept. 7.

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— By Robert Brodsky- GovExec.com – July 9, 2010