DoD Seal DoD 50 Year Seal

OFFICE OF THE SECRETARY OF DEFENSE

1000 DEFENSE PENTAGON
WASHINGTON, DC 20301-1000
November 15, 1996

 
ACQUISITION AND
 TECHNOLOGY

DP(DAR)

                                                          In reply refer to
                                                          DFARS Case: 96-D332
                                                          D. L. 96-020



MEMORANDUM FOR	DIRECTORS OF DEFENSE AGENCIES
                    DEPUTY FOR ACQUISITION AND BUSINESS MANAGEMENT,
                      ASN(RD&A)/ABM
                    DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE
                      (CONTRACTING), SAF/AQC
                    DIRECTOR, PROCUREMENT POLICY, ASA(RD&A)/SARD-PP
                    DEPUTY DIRECTOR (ACQUISITION), DEFENSE LOGISTICS
                      AGENCY



SUBJECT:    Restructuring Costs/Bonuses



     We have amended Part 231 of the Defense Federal Acquisition Regulation
Supplement (DFARS) to implement Section 8095 of the FY 1997 Defense Appropriations
Act (Pub. L. 104-208).  Section 8095 prohibits the use of FY 1997 appropriated funds
to reimburse a contractor for costs paid by the contractor to an employee when such
costs are for a bonus or other payment in excess of the normal salary paid by the
contractor to the employee, and such bonus is part of restructuring costs associated
with a business combination.  This prohibition does not apply to severance or early
retirement incentive payments.

     This interim DFARS rule is effective immediately and will be published in a
future Defense Acquisition Circular.







                                                    /s/

                                             Eleanor R. Spector
                                             Director, Defense Procurement

Attachment

cc: DSMC, Ft. Belvoir


RESTRUCTURING COSTS/BONUSES
DFARS CASE 96-D332

SUBPART 231.2 -- CONTRACTS WITH COMMERCIAL ORGANIZATIONS

231.205-6 Compensation for personal services.

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(f) (1) Costs for bonuses or other payments in excess of the normal salary paid by the contractor to an employee, that are part of restructuring costs associated with a business combination, are unallowable under DoD contracts funded by fiscal year 1996 appropriations (Section 8122 of Pub. L. 104-61) [or fiscal year 1997 appropriations (Section 8095 of Pub. L. 104-208)]. This limitation does not apply to severance payments or early retirement incentive payments. (See 231.205-70(b) for the definitions of "business combination" and "restructuring costs.")

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