Contracting

Push to reduce contractor compensation continues

mentor and student

Agencies can pay up to $763,000 to contractors to cover pay and bonuses for company executives, but three senators are looking to change that. (Stock image)

A Senate effort to reduce the amount the government compensates contractor employees is continuing, and several senators are trying to get a provision regarding it into the fiscal 2013 continuing resolution and appropriations bill.

"Most Americans would be shocked to know that under current law, government contractor employees can charge taxpayers $763,029 per year for salary reimbursements," three senators pointed out to the Appropriations Committee chairwoman Sen. Barbara Mikulski (D-Md.) and its ranking member Sen. Richard Shelby (R-Ala.) in a letter dated March 6.

Sens. Barbara Boxer (D-Calif.), Chuck Grassley (R-Iowa), and Joe Manchin (D-W.Va.) wrote the letter to convince the committee leaders that the Executive Compensation Benchmark is too high, and they should decrease the amount in their version of the fiscal 2013 Department of Defense, Military Construction and Veterans Affairs, and Full-Year Continuing Appropriations Act (H.R. 933).

The House passed the legislation March 6, and sent their bill to the Senate for consideration.

The compensation benchmark is the limit at which the government will contribute to compensating a contractor’s senior executives for a fiscal year. The compensation includes the total amount of wages, salaries, bonuses, restricted stock and deferred and performance incentives. Companies can pay their executives as much as they choose, but the government currently will cover it only up to $763,029.

After an increase in fiscal 2011, that cap "is now nearly double the salary earned by the President of the United States," they wrote.

The three senators have worked over the last several years to lower the dollar amount. Some attempts were successful, others not. In the fiscal 2012 National Defense Authorization Act (NDAA), Congress expanded the measure to include all defense contractors under the compensation limit. Before then, the benchmark only applied to the top five executives at each firm. The expansion does not apply to civilian agencies’ contractors.

In October 2012, when the debate for the fiscal 2013 NDAA was underway, good government groups urged both the House and Senate Armed Services Committees to set the benchmark at the vice president’s annual salary of $230,700. The provision was in the Senate Armed Services Committee's version of the fiscal 2013 NDAA, but failed to reach the final version. Congress told the Government Accountability Office to report on the issue.

Stan Soloway, president and CEO of the Professional Services Council, came out in strong opposition to the senators’ proposal, calling it "an attempt to end-run around the will of Congress."

"Sixty days ago, Congress decided that it was better to first study the effects of such an arbitrary cap before determining whether to make any changes," he said. "Much of the rhetoric on contractor compensation is intentionally misleading and reflects a stark misunderstanding of the rules and realities of today’s government contracting environment."

The senators would lessen agencies’ ability to access high-end skills and talent to achieve their complex missions, Soloway said.

The fiscal 2013 Financial Services and General Government Appropriations Act would have lowered the civilian agency compensation amount to $400,000, but the provision is not included in the House’s continuing resolution.

Despite the efforts, nothing has passed both chambers to lower the benchmark, however.

Reader comments

Mon, Mar 11, 2013

Executive "compensation includes the total amount of wages, salaries, bonuses, restricted stock and deferred and performance incentives. Companies can pay their executives as much as they choose, but the government currently will cover it only up to $763,029".

Restricting it to the President's $400,000 or the VP's annual salary of $230,700 is an interesting proposition. What I think Americans would be shocked to see is the budget the President and VP has for travel and entertainment. How about that being part of the compensation discussion...

Mon, Mar 11, 2013

It's about time. Government contractor executives have been "stealing" from the government for years. Finally, someone took notice.

Fri, Mar 8, 2013

Using salaries of Potus or VP as benchmarks is silly. It's not as if Obama is making mortgage payments on 1600 Penn and Biden is reaching for his credit card when the dinner bill comes. Their salaries are a simple token gesture to the governed and are completely independent of economic realities the rest of us face in private sector (labor supply/demand, cost of living, job qualifications, salary negotiations etc.). A healthy debate about contractor salary reimbursements seems like a good idea. But, let's instead focus on what it costs to hire and retain top talent vis a vis the private sector alternatives (K Street, Wall Street, and Silicon Valley). The VP/Potus salaries and other rhetoric only distract from a more constructive dialogue.

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