Biden to become benchmark for executive pay?

A senate committee proposes tying contractor executive pay to the vice president's salary, according to a new report.

The Senate Armed Services Committee recommends in its fiscal 2013 National Defense Authorization Act (S. 3254) that the government change the benchmark for setting the allowable compensation for defense contractor employees. Currently, the Executive Compensation Benchmark is based on the median amount provided to senior executives in large U.S. corporations. The cap stands now at $763,000. Instead, the committee’s defense bill would align the maximum amount of compensation with federal employees, which is set at the annual salary of the vice president. It’s $230,700.

Compensation for the fiscal year 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 will only cover it up to the $763,000 cap.

In April, the Office of Federal Procurement Policy increased the benchmark from $693,951 to $763,029. In 2004, the government would only compensate an employee as much as $432,851. The cap has climbed 75 percent in eight years.

The committee said it cannot support such large increases.

“At a time when most Americans are seeing little or no increase in their paychecks and budget constraints require the Department of Defense to find efficiencies in all areas, the committee concludes that increases of this magnitude are unsupportable,” according to its report.

The Obama administration has complained about the benchmark and recommended setting the cap at the Executive Schedule Level I, which currently is approximately $200,000. Members of Congress have introduced legislation to set the cap at the president’s salary of $400,000.

Meanwhile, some industry experts say companies could suffer from a tight cap.

“We believe that arbitrarily and drastically reducing the reimbursement cap will hurt the government’s ability to obtain the right skills due to the immense competition for talent with the commercial marketplace,” Alan Chvotkin, executive vice president and counsel for the council, has said.

But he said he wasn’t opposed to revisiting the formula.

The Senate still has to consider the legislation. The House passed its version of the bill in May.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Sun, Jun 10, 2012

I agree with the civil servants in this string... let's all suck it up and limit contractor pay to civil servant pay... and also for the civil servants, let's keep the equality going and limit job security to "at will" the same as the contractors. When you go to work Monday morning, confident in what comes with the 30 years of service pin, your boss can meet you with security and HR to take your laptop, badge, sign some papers, and show you the door. Good bye. Thanks for playing. Hey... suck it up... right?!

Wed, Jun 6, 2012

where are these contractors going to take their expertise, especially those in the defense industry? The Federal Government is the biggest game in town, and they know that. This "we need to pay top dollar for top performers" nonsense only seems to hold true for private sector big whigs at banks and contractors. What about federal employees? Welcome to our world contractors.......

Wed, Jun 6, 2012

The reason for paying consultants more is that they are *supposed* to be short term expertise. Once you hire that person full-time, the tax payer is on the hook for his salary and benefits for a WHOLE lot longer.

Wed, Jun 6, 2012

Then we just need to go back to the days when all executive positions were unpaid like they should be.

Wed, Jun 6, 2012

And they acuse federal employees (who will never see pay even approaching those levels) of whining. They should suck it up and deal with it like they expect Federal employees to.

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