Determination of Executive Compensation Benchmark Amount Pursuant to Section 39 of the Office of Federal Procurement Policy (OFPP) Act (41 U.S.C. 435), as Amended

AGENCY:

Office of Federal Procurement Policy, OMB.

ACTION:

Notice.

SUMMARY:

The Office of Management and Budget (OMB) is hereby publishing the attached memorandum to the heads of executive departments and agencies concerning the determination of the maximum “benchmark” compensation amount that will be allowable under government contracts during contractors' FY 2005—$473,318. This determination is required under Section 39 of the Office of Federal Procurement Policy (OFPP) Act (41 U.S.C. 435), as amended. The benchmark compensation amount applies equally to both defense and civilian procurement agencies.

FOR FURTHER INFORMATION CONTACT:

Rein Abel, Office of Federal Procurement Policy, (202) 395-3254.

David H. Safavian,

Administrator.

Memorandum for the Heads of Executive Departments and Agencies

Subject: Determination of Executive Compensation Benchmark Amount Pursuant to Section 39 of the Office of Federal Procurement Policy (OFPP) Act (41 U.S.C. 435), as amended.

This memorandum sets forth the “benchmark compensation amount” as required by Section 39 of the Office of Federal Procurement Policy (OFPP) Act (41 U.S.C. 435), as amended. Under Section 39, the benchmark compensation amount is “the median amount of the compensation provided for all senior executives of benchmark corporations for the most recent year for which data is available.” The benchmark compensation amount established by Section 39 limits the allowability of compensation costs under government contracts. The benchmark compensation amount does not limit the compensation that an executive may otherwise receive. This amount is based on data from commercially available surveys of executive compensation that analyze the relevant data made available by the Securities and Exchange Commission. More specifically, as required by Section 39 of the OFPP Act, the data used is the median (50th percentile) amount of compensation accrued over a recent 12 month period for the top five highest paid executives of public-traded companies with annual sales over $50 million. After consultation with the Director of the Defense Contract Audit Agency, we have determined pursuant to the requirements of Section 39 that the benchmark compensation amount for contractors' Fiscal Year 2005 is $473,318. This amount is for Fiscal Year 2005 and subsequent contractor fiscal years, unless and until revised by OMB. The benchmark compensation amount applies to contract costs incurred after January 1, 2005, under covered contracts of both the defense and civilian procurement agencies as specified in Section 39 of the OFPP Act (41 U.S.C. 435), as amended.

Questions concerning this memorandum may be addressed to Rein Abel, Office of Federal Procurement Policy, on (202) 395-3254.