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U.S. government now can pay individual contractors almost $1 million annually

President Obama walks from the White House to board Marine One in November. Officials in his administration are not thrilled that some contractors are paid nearly a million dollars a year. (J. Scott Applewhite/AP)

Being a jolly sort, and just in time for the Christmas buying season, Uncle Sam has announced that he will pay some contractors nearly a million dollars a year for doing his work.

What he calls his “benchmark compensation amount” for government contractors now is set at $952,308. Meanwhile, Sam’s regular crew, his federal employees, are scheduled to get a 1 percent bump next year, after a three-year freeze on their basic pay rates. Beats a lump of coal.

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 not that staffers have been naughty while contractors have been nice. Sam has no choice but to pay a small group of the outside workers really big bucks. He’s trapped by the requirements of the Office of Federal Procurement Policy Act that sets a formula dictating the amount.

The boss in chief doesn’t like it. President Obama’s $400,000 salary looks puny compared with what some of the hired hands now can make.

“The administration has made clear repeatedly its strong opposition to setting contractor reimbursement at such an unjustifiably high level, as it is a wasteful expenditure of taxpayer resources,” said Emily Cain, a spokeswoman for the Office of Management and Budget.

Writing in Wednesday’s Federal Register, Joseph G. Jordan, administrator of the Office of Federal Procurement Policy, said Obama has called on Congress to set “a lower, more sensible limit that is on par with what the Government pays its own executives and employees.”

Those federal executives and employees gag at the thought of contractors getting paid so much.

“With nearly 70 percent of federal career Senior Executives managing programs with budgets in excess of $50 million, contractor executives and career federal executives function in comparable roles,” said a Senior Executive Association statement. “It is high time to re-evaluate the market competitiveness of the compensation offered to government executives.”

The new figure is a one-year increase of nearly $190,000 and a four-year boost of 55 percent. The statutory formula generating increases of this magnitude “bears no relationship to . . . the type of work that contractor employees are actually performing” and the general trends in prices and wages, Jordan’s memorandum in the Federal Register said.

“It is the height of irresponsible governing and leadership to allow this ridiculous increase in taxpayer-funded compensation for contractor executives,” said American Federation of Government Employees President J. David Cox Sr.

The administration wants Congress to set a cap on contractor compensation that is tied to the president’s salary.

This would provide “a reasonable level of compensation for high value Federal contractor employees while ensuring taxpayers are not saddled with paying excessive compensation costs,” Jordan said.

Before those highly valued complain about such a drastic potential pay cut, it must be noted that their companies could continue to pay them more. The administration does not want to limit their income, only what the government would pay them.

Neither the current cap nor the one proposed by Obama limits “the amount of compensation that the contractor actually pays to its employees,” Jordan said. “Contractors can, and do, provide compensation to their employees that exceed the amount that is reimbursed by the Federal Government.”

The cap does not apply to all contractors, so some could still get more than the $952,308. The Federal Register says the cap is “applicable only to certain contractor senior executives, which is defined as the five most highly compensated employees in management positions at each home office and each segment of the contractor.”

So, at least in theory, Sam could pay contractors who are not in that group an unlimited amount.

But that theory won’t hold up in practice, said Stan Soloway, president and chief executive of the Professional Services Council, which represents contractors.

“Regardless of the cap, whatever companies allocate for executive or general employee compensation has to still be deemed to be fair and reasonable by the government,” he said. If anyone gets the top amount, “it will be a very small universe of top executives at significant companies . . . this is not an entitlement or a pay raise.”

Based on current legislative proposals, he added, “I don’t think it will actually go into effect at all.”

Legislation sponsored by Rep. Paul Tonko (D-N.Y.) would peg the compensation to the vice president’s salary, $230,700. Sen. Joe Manchin (D-W.Va.) has pushed a similar measure. Other proposals would place the cap at $487,000 and $763,000.

“At a time when House leadership aims to cut benefits for the working poor and those looking for a job,” said Tonko, “it is unconscionable that they will stand by and allow gross overpayment of taxpayer dollars to federal contractors to continue.”

Twitter: @JoeDavidsonWP

Previous columns by Joe Davidson are available at

8 Remembering Mandela

To read Joe Davidson’s column, written in June, about Nelson Mandela’s special gifts as a public servant, go to



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