The plan would only affect payments that are made through so-called cost-reimbursement contracts. Under such agreements, which are often used when final costs are hard to predict, the government promises to pay whatever costs a company incurs as it completes a project — like a blank check with certain limits.
The administration proposal would not affect fixed-price contracts, meaning the salary cap would have no direct bearing on executive compensation in those cases.
Congress established a formula in 1995 for limiting compensation with cost-reimbursement contracts. The government currently works with a cap that is based on the nation’s top private-sector CEOs and other senior executives.
The White House budget office said the reimbursement level has “skyrocketed” by more than 300 percent since Congress established the existing formula during the Clinton administration.
Under current law, the cap had to be raised to $763,000 for fiscal year 2011. Officials said the level will soon have to be raised once again to nearly $1 million per year for each executive.