The Army issued an interim rule in March requiring service contractors to provide certain labor hour and indirect rate data along with requests for billing.  For all new Army contracts or contract modifications of older contracts exceeding $100,000 contractors are being asked to submit data that identifies, itemizes and reports their direct labor hours of support as well as a composite indirect labor rate for the Army to estimate indirect hours.  Congress has mandated the data as a means for DOD to track head count of contractor employees to determine if the government is merely replacing federal employees with contractor employees.

The Army will secure a Web site.  The Army insists the reporting requirements does not violate performance based contracting since reported labor hours are not being provided as a basis to getting paid.  (Editor’s Note.  Many of our clients have expressed the concern that this data can be used to negotiate lower prices on future contracts.  We have not been able to obtain an assurance this data will not be used for procurement purposes.)  The reporting requirements will not apply to (1) contracts awarded under the simplified acquisition procedures of FAR Part 12 or (2) if the contractor does not have an internal system for aggregating billable hours in the direct and indirect pools and does not otherwise provide this information to the government.   

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