Procurement

Administration pushing Congress to reduce contractor compensation

capitol dome and bills

The White House is set to send a proposal to Congress that would cap federal contractor executives' salary reimbursements at President Obama's pay grade.

The new proposal builds on previous administration proposals, as well as on language included in President Obama's latest budget, said Joe Jordan, Administrator of the Office of Federal Procurement Policy in the Office of Management and Budget.

Under current law, Jordan explained in a May 31 post on OMB's blog, contractors paid based on their incurred costs can demand reimbursement for executive salaries, bonuses and other compensation up to the level of top U.S. private- sector chief executives. That cap is currently $763,029 per executive.

Jordan warned that in the coming weeks, the current law requires the cap to be raised to more than $950,000. According to Jordan, the taxpayer reimbursement level has skyrocketed by more than 300 percent since the original law was enacted in the mid-1990s. Taxpayers have had to foot the expense, despite the fact that the rapidly increasing cost has had little bearing on the value agencies receive under their government contracts.

Congress has been trying to reform the law this spring, but several Senate and House measures have stalled. The White House's proposal calls on Congress to abolish the current formula and tie the reimbursement cap to the president's salary and apply it across-the-board to all defense and civilian cost-reimbursement contracts. That level "provides a reasonable compensation" for federal contractors, said Jordan.

About the Author

Mark Rockwell is a staff writer covering acquisition, procurement and homeland security. Contact him at mrockwell@fcw.com or follow him on Twitter at @MRockwell4.

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Reader comments

Mon, Jun 3, 2013

Cap the salary at the President's salary but give me his travel and entertainment budget...

Mon, Jun 3, 2013

RTFA; Currently, " contractors that are paid based on their incurred costs (which represents about one-third of current contract spending) may demand reimbursement for executive salaries, bonuses and other compensation up to the level of the Nation’s top private sector CEOs and other senior executives. "

Mon, Jun 3, 2013 Do the math

I'm still not sure what business is it of the Government's what a contracting firm pays its executives. What should matter is the cost of the contract itself. Suppose for example that the Government is looking for a contractor to provide IT support for an agency. Company A caps its executives at $500K and bids $100 million for the contract. Company B pays one of its executives $2 million, yet bids $80 million for the contract. Is it really in the taxpayers best interest to exclude company B?

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