White House Makes Few Friends in Raising Contractor Pay Cap

bikeriderlondon/Shutterstock.com

In a memo quietly published in Wednesday’s Federal Register, the White House procurement chief instructed defense and civilian agency heads to raise the cap on taxpayer funds that can be used to reimburse contracting companies for the pay packages of top executives.

Beginning with contracts let in fiscal 2012, the maximum reimbursement level is $905,308, an increase of $190,000. The cap is based on a formula mandated by law, according to the memo from Joe Jordan, administrator of the Office of Federal Procurement Policy.

“Under current law, the administration has no flexibility to depart from the statutory requirement that the cap be adjusted annually based on the application of the statutorily-mandated formula,” Jordan’s memo said. “The administration has strongly reiterated the need for reforms to the current statutory framework and Congress has considered several proposals to reform the compensation cap. To date, however, Congress has not revised the cap amount or the formula for adjusting the cap,” other than enacting a small change in 2011 expanding the pay cap on defense contracts to cover all employees, rather than the five highest-paid.

The Office of Management and Budget under President Obama has proposed capping the reimbursement rate at $400,000, or the level of the president’s salary, while an even lower cap of $230,700, the vice president’s salary, has been proposed by lawmakers such as Sens. Barbara Boxer, D-Calif., and Chuck Grassley, R-Iowa, and Rep. Paul Tonko, D-N.Y. The American Federation of Government Employees has also backed the lower cap. The defense bill passed by the House in July would revise the formula and keep the cap at $763,029.

Though required under current law, the Obama administration’s move to raise the reimbursement limit, which comes as Congress is considering a defense authorization bill expected to be a vehicle for disputes over policy on contractor pay caps, drew criticism from contractors and an employee union for different reasons.

On Wednesday, AFGE blasted the administration’s latest move for coming at a time when House and Senate budget negotiators are considering new cuts in federal pay and pensions. “How can the president have allowed this to happen on the same day he spoke against income inequality in the nation’s heartland?” asked J. David Cox, the union’s national president. “Why is the administration enriching the top 1 percent of the nation’s contractors but calling for cuts in compensation to the working- and middle-class Americans who make up the federal workforce? Administration officials could have demanded a much lower cap on contractor compensation in the budget, but they didn’t.”

The timing was also questioned by Stan Soloway, president and CEO of the Professional Services Council, the contractors group that has long warned that lowering reimbursement rates would damage contractors’ ability to compete with other private-sector firms for executive talent.

“Even as OFPP releases this action, the House-passed and pending Senate defense authorization bills contain provisions to alter the traditional method of calculating the benchmark compensation,” he said in a statement. “It is regrettable that OFPP has refused PSC’s long-standing request to discuss options for updating the formula and the benchmark levels to better account for current comparisons between the government contractor sector and the commercial sector.”

(Image via bikeriderlondon/Shutterstock.com)

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

    View
  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

    View
  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

    View
  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

    View
  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

    View
  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

    View
  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.

    View

When you download a report, your information may be shared with the underwriters of that document.