For a brief moment, the pay of contractors, not feds, was the focus of ax-wielding lawmakers.
For one brief moment this fall, federal employees enjoyed watching their private-sector counterparts squirm for a while on the congressional hot seat.
In an Oct. 12 letter, Sen. Barbara Boxer (D-Calif.), Sen. Chuck Grassley (R-Iowa) and Rep. Paul Tonko (D-N.Y.) urged members of the Joint Select Committee on Deficit Reduction — the so-called supercommittee — to rein in the amount of money that contractors can charge the government to cover salaries.
Good idea or not? Please discuss. (Comments have been edited for length, style and clarity.)
Here’s the deal
As long as the contracts are based on competitive bids, the federal government has no business dictating the top salaries in the companies they hire. It is irrelevant to the contract and also overreaching in its power to have government dictate high salaries set by a private company. However, the government does have the right to set how much it pays for the contract — and companies can refuse to take the contract.
This is foolish wage control. Let the market determine salaries in the private sector. Feds have tools to deal with excessive wages — most importantly, competitive bidding.
— dp dc
Wait a minute!
If feds are overpaid, as we are constantly hearing these days, then private industry should be happy to accept government contracts that provide federal pay levels for their employees.
The real story
There are two different issues here that everyone sees as one. The salaries of the five top executives in a company are used to compute overhead rates that companies use to load contract costs. Reducing the allowable from the $600,000-plus level to the proposed $200,000 would only have a marginal impact on the overhead rates. All these discussions lead one to believe that every contract gets the $600,000-plus salaries added to them. Not so. The second issue of limiting all salaries to a ceiling of $200,000 may very well impact the quality of the contractor staff that the government sees. If the cap is set at $200,000 and the employee is making more than that, where would the difference go? Probably into the overhead rates.
— Tim H.
Not such a biggie
This rule would have limited impact. It would only apply to cost-reimbursement and cost-plus contracts using labor rates that are built with a noncommercial price basis. They don't apply to fixed-price contracts. And current rules only apply to publicly traded contractors with annual government revenue of more than $50 million.
Fair is fair
Federal agencies pay contractors by flat hourly rates, with no additional contributions to retirement, medical insurance, paid time off, etc. So if contractor salaries are going to be capped to the same level as federal employees, will the contractors be provided with the same federal benefits?