Certain federal government contracts permit government contracting firms to bill federal agencies up to $693,951 annually for incurred costs, including employee salaries, meaning many contractor executives and some highly-skilled contractors earn more than top-earning federal employees and President Obama. Since 1995, Congress has tied the contractor pay cap to compensation levels for the nation’s top-earning business executives — a figure that has ballooned in the last two decades.
In December, lawmakers voted to expand the cap at most agencies to cover all government contractors, including highly-skilled engineers and scientists that also earn top pay.
But the changes don’t go far enough for Obama, who proposed last fall that the fiscal “supercommittee” cap the amount of money agencies pay to government contracting executives at $200,000, on par with the amount earned by top career federal employees.
The proposal was ignored, and the White House is trying again.
“Taxpayers are being forced to reimburse contractors at a rate which has outpaced the growth of inflation and the wages of most of America’s working families — as well as the growth of federal salaries,” Lesley Field, the acting White House official for government contracting, said in a White House statement and blog post set for publication Tuesday.
“Just as the Government must be prudent in paying its employees, it must also not overpay contractors,” Field added, noting that Obama’s proposal does not limit how much contractors pay their top earners — only how much agencies would reimburse them.
White House officials said their renewed push on the cap comes as the Office of Management and Budget prepares to raise it to nearly $750,000 in the coming weeks, in line with the congressional mandate to maintain parity with the private sector. Raising the cap would not be necessary if lawmakers vote to cap executive compensation in the next few weeks, the officials said.
Officials stressed the push is not tied to Republican plans to vote Wednesday on a bill capping federal salaries. Ahead of the vote, House Republicans released a new Congressional Budget Office report Monday that concluded that the federal government pays slightly more in average wages and significantly more in benefits than the private sector.
Obama — who earns $400,000 annually as president — ordered a freeze on federal cost-of-living pay raises in late 2010, but is expected to propose a 0.5 percent cost-of-living pay increase for federal workers as part of his 2013 budget.
Though most Republicans oppose Obama’s proposed raise, some support his effort to cap contractor pay.
Sen. Charles E. Grassley (R-Iowa) joined with Sen. Barbara Boxer (D-Calif.) and other Democrats last fall in an effort to cut the cap to at least to the presidential salary level, if not lower.
“Government contractors should be compensated fairly for their work but they shouldn’t be allowed to featherbed the contracts at taxpayer expense,” Grassley said at the time.
But Alan Chvotkin, executive vice president and counsel for the Professional Services Council, a contracting industry group, said the push failed last fall and urged the White House to “take on other more important issues in the contracting process than compensation.”
Obama’s effort “fails to take into account the competition for talent that government or contractors — in this case, contractors — face in trying to provide the talent to help support government’s missions,” Chvotkin said.
“Contracts ... are getting far more complex, requiring a greater level of skill,” he added. “As we compete in the marketplace, not only for our work, but against the commercial sector — the banking sector, the energy sector, other sectors — an arbitrary cap on salaries has the effect of an arbitrary cap on capability.”
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Editor’s Note: An earlier version of this report incorrectly stated that Obama is pushing to cap the pay of all contractors. Instead, the White House is just asking Congress to cap the amount agencies pay towards a contracting executive’s compensation.
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