Senate panel backs tighter caps on contractor pay

The amendment was offered by Sen. Joe Manchin, D-W.Va. The amendment was offered by Sen. Joe Manchin, D-W.Va. J. Scott Applewhite/AP

The Senate Armed Services Committee on Tuesday approved a plan to cap the federal reimbursement to defense contractors for all salaries at $230,700 per employee.

Under current law and regulations that the Obama administration updated in April, contractors are reimbursed for salaries as high as $763,029. The new $230,700 cap matches the annual salary for the vice president.

The amendment to the fiscal 2013 National Defense Authorization Act offered by Sen. Joe Manchin, D-W.Va., follows an earlier proposal from Sens. Barbara Boxer, D-Calif., and Chuck Grassley, R-Iowa. It has won union approval, but is opposed by contractor groups.

“This important reform will help rein in the exorbitant taxpayer-funded salaries paid to top defense contractor employees,” Boxer said in a statement.

“Slowly, but surely, progress is being made on this issue,” added Grassley. “Private companies can pay their employees whatever they want, but federal contractors should not be able to pass on salary costs to taxpayers that are more than three times what a member of the president’s Cabinet makes.”

A House version of the plan, introduced by Rep. Paul Tonko, D-N.Y., would have capped the reimbursement at $400,000, the president’s salary. It was rejected by House leaders, and the issue is not addressed in the version of the Defense authorization bill that cleared the House Armed Services Committee in early May. The final outcome is likely to fall to a House-Senate conference committee.

The Office of Management and Budget has proposed a different approach -- a reimbursement cap of $200,000, the highest Cabinet salary level, but only for the top five contractor employees. The Senate committee approval was welcomed by John Threlkeld, legislative representative for the American Federation of Government Employees. “The excessive compensation for contractors is a painful reminder of the cost to the American people of the federal government’s ruinous over-reliance on service contractors,” he said in an email to Government Executive. “We call on OMB, which has covertly opposed genuine reform in the past, to unambiguously endorse this provision, and we urge the House and Senate Financial Service appropriators to take similar action for non-DoD contractors.”

Threlkeld also called on the Defense Department’s inspector general to determine whether the department is appropriately invoking exceptions to the reimbursement cap.

Colleen Kelley, president of the National Treasury Employees Union, had backed the Tonko approach, saying in an earlier statement, “At a time when our economy is struggling, millions of Americans are unemployed, and our national debt and deficit continue to grow, taxpayers should not fund government salary reimbursements for private contractors that are higher than the salary of the president of the United States.”

A key contractors trade group, the Professional Services Council, has long opposed reducing the reimbursement cap for fear of harming the government’s and industry’s ability to access critical skills.

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