Top federal contractors get 10 percent raise

Columnist

Uncle Sam isn’t as flush as he used to be, but he still has enough money to pay individual private contractors as much as $763,029.

That’s the federal cap on reimbursement to executives of private firms doing government work. The cap was raised in April, from $693,951, by the Office of Federal Procurement Policy.

Joe Davidson writes the Federal Diary, a column about federal government and workplace issues that celebrated its 80th birthday in November 2012. Davidson previously was an assistant city editor at The Washington Post and a Washington and foreign correspondent with The Wall Street Journal, where he covered federal agencies and political campaigns. View Archive

It’s worth pointing out that this 10 percent raise comes as federal employees are in the midst of a two-year freeze on basic pay rates.

But Obama administration officials had no choice in raising the cap. The compensation formula was set by law.

“In accordance with an outdated statute, the federal government was forced to raise the cap on agency reimbursements to contractors for the pay of senior executives who contract with the government,” said Moira Mack, an Office of Management and Budget spokeswoman. “With this latest congressionally mandated increase, taxpayers will be on the hook for contractor reimbursements far in excess of what is reasonable.”

A notice to federal agency heads, from Lesley A. Field, acting administrator of the Office of Federal Procurement Policy, said, “this rate of growth in the cap . . . has far outpaced the rate of inflation, the rate of growth of private-sector salaries generally, and the rate of growth of Federal salaries — forcing our taxpayers to reimburse contractors for levels of executive compensation that cannot be justified for Federal contract work.”

In a related development, 26 senators, led by Sherrod Brown (D-Ohio) and Kirsten Gillibrand (D-N.Y.), wrote to Defense Secretary Leon Panetta about their concerns that efforts to hold down the size of the federal workforce could push “managers to use contracting firms rather than civilian employees even when the latter costs less.”

In response, Stan Soloway, president and chief executive of the Professional Services Council, pointed to cutbacks in government spending on contractors and said they “are feeling the effects of the fiscal environment directly and significantly.”

But the $763,000 top contractors can now get tells a different side of the story. If that’s not enough for the executives, their companies can pay whatever they want on top of the cap.

President Obama has proposed replacing the current formula with one that would link contractor reimbursement to the pay of Cabinet officials, which is now $199,700.

In December, Congress approved changes in the cap for the Pentagon and a few other agencies, however that measure “failed to take the critical step of repealing the existing statutory formula for reimbursing executive pay — despite the efforts of a few strong Congressional advocates,” Field wrote in a January blog post.

Sen. Claire McCaskill (D-Mo.) chaired a March hearing on contractor payments, during which she praised legislation proposed by Sens. Barbara Boxer (D-Calif.) and Charles E. Grassley (R-Iowa) that would drop the reimbursement amount to $400,000. A bill by Rep. Paul Tonko (D-N.Y.) would make it $200,000.

“Excessive reimbursements are wrong and must stop,” Mack said. “We call on Congress to follow the lead of those members who have already recognized the importance of lowering the executive compensation cap so that taxpayers are no longer liable for these wasteful and unnecessary payments.”

Postal Service bill

Senate-approved legislation designed to deal with the critical financial situation of the U.S. Postal Service doesn’t get the job done, according to its Board of Governors.

When we ask whether the legislation puts the Postal Service back on a path to financial stability, the bottom line is that the Senate bill does not provide the Postal Service with the flexibility and speed that it needs to have a sustainable business model,” board Chairman Thurgood Marshall Jr. told a governors’ meeting Friday.

The bill passed last month includes significant improvements, he added, “but it does not enable all of the cost reductions that are necessary to return to profitability.” Among other things, the Senate bill would not allow the Postal Service to close facilities as quickly as it thinks is necessary and prohibits, for at least two years, a move from six-day to five-day delivery.

Although Marshall was speaking for the board, which includes Postmaster General Patrick R. Donahoe, the postmaster general in his remarks to the meeting did not directly criticize the Senate legislation as the chairman did. That pattern was evident in the statements they issued on the day of the vote.

The Board of Governors acts like a private firm’s board of directors. Its members, except for the postmaster general and the deputy postmaster general, are appointed by the president.

The Postal Service also is overseen by the presidentially appointed Postal Regulatory Commission, an independent agency known as the Postal Rate Commission until 2006, when it was given greater oversight authority. The commission did not weigh in on the Senate’s bill.

“The Commission does not take a position on legislation unless requested to do so by a Congressional Committee with jurisdiction or the Administration,” said Ann C. Fisher, a commission spokeswoman. “The commission recognizes the absolute need for Congress to reverse or rein in the [Postal] Service’s precarious financial condition. We are very hopeful that passage of [the Senate bill] may provide the necessary impetus for House action.”

Previous columns by Joe Davidson are available at wapo.st/JoeDavidson. Follow the Federal Diary on Twitter: @JoeDavidsonWP.

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