Executive Compensation Reporting is a federal transparency requirement that can require certain federal contractors and first-tier subcontractors to disclose the names and total compensation of their five most highly compensated executives. The requirement implements the Federal Funding Accountability and Transparency Act of 2006 (FFATA), as amended, and is reflected in FAR Subpart 4.14 and FAR 52.204-10, Reporting Executive Compensation and First-Tier Subcontract Awards.
The requirement is conditional. A company does not have to disclose executive compensation merely because it holds a federal contract, has a GSA Multiple Award Schedule, or receives federal revenue. Specific revenue tests and public-availability conditions determine whether executive compensation reporting applies. When those conditions are met, the disclosure uses compensation from the organization’s preceding completed fiscal year and covers five executives rather than the entire management team.
Which Contractors Must Report Executive Compensation
FAR 52.204-10 establishes a two-part financial test for prime contractor executive compensation reporting. Both financial conditions must be satisfied before the public-availability test is considered.
For the contractor’s preceding fiscal year:
- The contractor must have received 80% or more of its annual gross revenues from federal contracts and subcontracts, loans, grants and subgrants, cooperative agreements, and other forms of federal financial assistance.
- The contractor must have received $25 million or more in annual gross revenues from those federal sources.
These tests operate together. Meeting only one does not trigger executive compensation reporting under this provision.
For example, a company with $40 million in total annual revenue and $30 million from covered federal sources receives 75% of its revenue from those sources. Although the federal amount exceeds $25 million, the company does not satisfy the 80% test.
A different company might receive 90% of its annual revenue from federal sources but have only $18 million in federal revenue. It satisfies the percentage test but not the $25 million test. Again, the executive compensation disclosure requirement would not be triggered on those facts.
The structure can be summarized as follows:
| Contractor Situation | 80% Federal Revenue Test | $25 Million Federal Revenue Test | Potential Compensation Reporting |
|---|---|---|---|
| $30M federal revenue out of $35M total | Yes | Yes | Yes, subject to public-availability test |
| $30M federal revenue out of $50M total | No | Yes | No under this requirement |
| $20M federal revenue out of $22M total | Yes | No | No under this requirement |
| $10M federal revenue out of $50M total | No | No | No under this requirement |
The calculation is broader than revenue from a single prime contract. The FAR language includes federal contracts and subcontracts as well as specified forms of federal financial assistance. A company evaluating the threshold should therefore not look only at the value of the contract containing FAR 52.204-10.
The relevant period is also important. The clause looks to the contractor’s preceding fiscal year. The question is not whether the company expects to cross the thresholds during the current year or whether the value of its federal contract portfolio could eventually exceed $25 million.
FAR Subpart 4.14 currently applies to contracts valued at $40,000 or more, subject to the regulatory exceptions, and FAR 4.1403 prescribes FAR 52.204-10 for covered solicitations and contracts at or above that amount. That contract threshold should not be confused with the separate $25 million federal revenue condition used to determine whether executive compensation information must actually be disclosed.
A $100,000 federal contract, for example, can contain FAR 52.204-10. That does not mean the contractor automatically has to disclose executive compensation. The company still must satisfy the financial and public-availability conditions established by the clause.
When Compensation Does Not Have to Be Reported
Even when a contractor satisfies both financial thresholds, FAR 52.204-10 contains another important condition. Executive compensation reporting is required only when the public does not already have access to the compensation information through specified public filings.
The clause refers to periodic reports filed under sections 13(a) or 15(d) of the Securities Exchange Act of 1934 or section 6104 of the Internal Revenue Code. If the relevant executive compensation information is already publicly accessible through those mechanisms, the contractor does not have to duplicate the disclosure under this requirement.
This provision is one reason a large publicly traded federal contractor can be treated differently from a privately held company that receives a similarly high proportion of its revenue from federal sources. The issue is not simply company size. The regulation asks whether the required executive compensation information is already available to the public through the specified reporting channels.
A practical applicability analysis therefore involves three questions:
- Did at least 80% of the company’s annual gross revenue in the preceding fiscal year come from the federal sources identified in the clause?
- Did those sources account for at least $25 million in annual gross revenue?
- Is the required executive compensation information unavailable to the public through the filings identified in FAR 52.204-10?
Only after these conditions are evaluated can the company determine whether this particular disclosure obligation applies.
The rule also contains a broader reporting exception associated with very small entities. FAR Subpart 4.14 provides a reporting exception for contractors and subcontractors whose gross income from all sources in the previous tax year was below $300,000. In practice, an entity at that revenue level could not independently satisfy the $25 million federal revenue test for executive compensation reporting, but the exception remains part of the overall reporting framework.
Classified information is also outside the disclosure requirement. FAR Subpart 4.14 expressly states that nothing in the subpart requires disclosure of classified information.
These limitations are important because the presence of FAR 52.204-10 is sometimes interpreted too broadly. The clause combines several federal transparency requirements, but each part has its own applicability conditions. Clause inclusion and actual disclosure obligation are not the same question.
What “Total Compensation” Includes
Executive Compensation Reporting does not ask contractors to disclose only annual salary. FAR 52.204-10 defines total compensation broadly and identifies several categories that can contribute to the reported figure.
The definition is based on compensation for the executive’s preceding completed fiscal year. Depending on the executive’s compensation package, the reported total can include substantially more than cash received as regular salary.
The components identified by the clause include:
- salary and bonus;
- awards of stock and stock options;
- earnings for services under non-equity incentive plans;
- changes in pension value;
- above-market earnings on certain deferred compensation;
- other compensation when the aggregate amount in the applicable category exceeds the threshold specified by the clause.
The treatment of stock and option awards is based on the dollar amount recognized for financial statement reporting purposes for the fiscal year under the referenced accounting standard. This prevents the disclosure from being reduced to a simple count of shares or options.
The non-equity incentive category also has boundaries. The definition does not include generally available group life, health, hospitalization, or medical reimbursement plans that do not discriminate in favor of executives. Ordinary employee benefits therefore should not automatically be treated as executive incentive compensation simply because an executive participates in them.
Other compensation can include items such as severance payments, termination payments, the value of life insurance paid on behalf of the employee, perquisites, or property when the aggregate value meets the condition stated in the clause.
The word “executive” also has a defined meaning for this reporting requirement. FAR 52.204-10 describes executives as officers, managing partners, or other employees in management positions. The disclosure then focuses on the five most highly compensated executives within that defined population.
This creates an important distinction between title and compensation. The five people reported are not necessarily the five individuals with the most senior-sounding job titles. The requirement concerns the five most highly compensated executives under the clause’s definition.
Companies subject to the requirement should therefore calculate total compensation consistently rather than simply extracting base salaries from payroll records. Compensation data may need to be assembled from payroll, equity compensation, incentive, pension, and other financial records before the five highest-compensated executives can be identified accurately.
Prime Contractor and First-Tier Subcontractor Reporting Are Different
FAR 52.204-10 addresses executive compensation for both prime contractors and certain first-tier subcontractors, but the reporting mechanisms and timing are not identical. Keeping them separate is important, especially for companies that operate as both federal primes and subcontractors.
For the prime contractor, executive compensation information is reported as part of the contractor’s annual registration requirement in the System for Award Management (SAM). When the financial and public-availability conditions apply, the contractor reports the names and total compensation of its five most highly compensated executives for the preceding completed fiscal year.
First-tier subcontractor executive compensation enters the process through the prime contractor. A first-tier subcontract is one awarded directly by the federal prime contractor for supplies or services, including construction, needed for performance of the prime contract.
For a qualifying first-tier subcontract, the prime contractor may have to report the names and total compensation of the subcontractor’s five most highly compensated executives if the subcontractor independently satisfies the same basic financial tests. In other words, the subcontractor’s eligibility for executive compensation disclosure is based on the subcontractor’s own preceding fiscal year, not the prime contractor’s revenue profile.
The first-tier subcontractor must therefore satisfy the relevant conditions, including:
- At least 80% of its annual gross revenues must have come from the federal sources identified by the clause.
- Those federal sources must have produced at least $25 million in annual gross revenues.
- The executive compensation information must not already be publicly available through the specified filings.
- The first-tier subcontract must meet the applicable reporting conditions under FAR 52.204-10.
Unless otherwise directed by the contracting officer, the prime reports applicable first-tier subcontractor executive compensation by the end of the month following the month of the qualifying subcontract award and annually thereafter according to the timing established in the clause.
The reporting responsibility under the federal prime contract remains with the prime contractor. A first-tier subcontractor may need to provide the prime with information needed for the disclosure, but it does not replace the prime as the party responsible for satisfying FAR 52.204-10 under the prime contract.
This is why primes that issue potentially reportable subcontracts should address the required data in their subcontract administration procedures. Waiting until the reporting deadline to determine whether the subcontractor satisfies the 80% and $25 million tests can create unnecessary compliance problems.
Lower-tier subcontractors are outside this particular first-tier reporting structure. The clause is designed to extend transparency one level below the federal prime rather than require the prime contractor to collect executive compensation data throughout the entire downstream supply chain.
Why Executive Compensation Data Is Collected
Executive Compensation Reporting is fundamentally a federal spending transparency measure. It does not establish a compensation ceiling, determine whether an executive’s pay is reasonable for contract cost purposes, or prohibit a contractor from paying an executive above a particular amount.
This distinction separates FAR 52.204-10 from other acquisition rules that may address compensation as a contract cost. The reporting rule asks whether specified compensation information must be disclosed to the government and ultimately made available as part of federal spending transparency. It does not, by itself, decide whether compensation is allowable, allocable, or reasonable under cost principles applicable to a particular contract.
The requirement comes from FFATA, which expanded public visibility into organizations receiving federal funds. FAR Subpart 4.14 implements that policy for procurement contracts by covering both first-tier subcontract award information and, when the statutory conditions are met, compensation of highly paid executives.
Agencies are required to oversee contractor compliance with the reporting requirements. Under FAR 4.1402, agencies review contractor reports quarterly for consistency with contract information available to the government. Agencies are not expected to independently verify compensation information for which they would not normally possess supporting data, but they can require correction or an explanation when reported information conflicts with government contract data.
Failure to comply can also have contract administration consequences. FAR 4.1402 directs contracting officers to use appropriate contractual remedies for noncompliance and to include a contractor’s failure to satisfy the reporting requirements in contractor performance information.
For GSA Schedule contractors, holding a MAS contract does not independently create an executive compensation disclosure requirement. The same applicability analysis remains necessary: the relevant contract and clause must be considered, followed by the contractor’s federal revenue percentage, federal revenue amount, and whether the compensation information is already publicly available through the specified channels.
The most useful distinction is between being covered by a transparency clause and actually meeting the conditions for compensation disclosure. FAR 52.204-10 can appear in a contractor’s federal contract while no executive compensation report is required because the contractor receives less than 80% of its revenue from federal sources, receives less than $25 million from those sources, or already makes the relevant compensation information publicly available through the filings recognized by the clause.
