Contractor compensation still under fire

C.J. Burton/© C.J. BURTON/CORBIS

As contractors brace for government spending reductions, they’re also keeping close tabs on campaigns to reduce the amount of a contractor’s compensation that can be covered by government contracts.

Thus far, contractors have been able to fend off congressional efforts to reduce the cap, which is set at $763,029 per person. But three senators sent a letter to the Senate Appropriations Committee earlier this month, arguing that number is far too high.

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“The current compensation rate limit has more than doubled since 2000 and has grown more than 55 percent faster than the rate of inflation,” wrote senators Barbara Boxer (D-Calif.), Charles E. Grassley (R-Iowa) and Joe Manchin III (D-W.Va.) in a March 6 letter to the committee leadership. The limit “is now nearly double the salary earned by the President of the United States.”

Industry group the Professional Services Council is pushing back, arguing that the Government Accountability Office is already doing a study on the matter, as directed by recent defense authorization legislation.

Arbitrary compensation caps “would simultaneously upend sensible, long-standing public policy and decrease the ability of federal agencies to access the kind of high-end skills and talent they need to execute their increasingly complex missions,” Stan Soloway, president and chief executive of the PSC, wrote in response.

While the compensation cap limits the amount of a salary that can be billed to the government, contractors are allowed to pay someone more out of their own treasuries.

In fiscal 2012 legislation, Congress expanded the cap within the Pentagon to include not just a contractor’s top five executives but all Defense Department contractors — although it allows for some exceptions for scientists and engineers.

More recently, an amended compensation cap of $230,700 — equal to the vice president’s salary and the maximum level of compensation for federal employees — made it through the Senate version of defense authorization legislation.

“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,” the Senate report read.

However, the revision ultimately was not included in the final legislation.

Instead, Congress directed the Government Accountability Office to conduct a report studying reducing the cap to that of the president or vice president’s salary. The report is set to include the number of contractors whose pay exceeded that of the president and that of the vice president in recent years.

Alan Chvotkin, executive vice president and counsel at the Professional Services Council, said those who are advocating to reduce the cap are unfairly comparing contractor pay to federal government salaries — when they should instead be comparing contractor pay to that of the commercial sector.

The cap “was designed to match government contractors with the commercial marketplace [because] that’s the competition for talent,” said Chvotkin. “The premise for the last couple of years ... is just a false analogy.”

Still, Scott H. Amey, general counsel at the Project on Government Oversight, said that companies can pay their employees above and beyond any cap.

“It really boils down to how much they’re allowed to be reimbursed by the federal government,” he said. “They’re going to have to take that money from company revenues [rather] than being able to directly bill the federal government.”

69.8%

Reduction in the reimbursable salary for contractors sought by lawmakers.

 
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