Union wants to lower cap on executive pay in federal contracts

By Kellie Lunney

May 12, 2011

This story has been updated to add additional comment.

The largest federal employee union Thursday called on lawmakers to support a proposal to limit the reimbursement for contractor salaries to $200,000.

"Insisting that taxpayers should not be forced to reimburse contractors in excess of what is earned by the secretary of Defense, the secretary of State, or any of the other Cabinet secretaries, is hardly draconian. In fact, contractors should be paid less than $200,000," said Beth Moten, legislative and political director at the American Federation of Government Employees, in a letter to the leadership of the Senate Budget Committee. The union sent a similar letter on March 18 to President Obama, but has not received a response yet, according to a spokesman.

AFGE said the proposal would not cap contractors' salaries; rather it would limit the amount that a company could charge the government under cost reimbursement contracts to compensate an executive. "If contractors continue to pay such outrageously high salaries, they can -- provided they get the necessary money from someone other than Uncle Sam," the letter said. Moten emphasized the proposal would not change the compensation earned by contractors under other laws and arrangements, such as the 1965 Service Contract Act, the 1931 Davis-Bacon Act, or collective bargaining agreements.

Last year, the Office of Management and Budget set at nearly $700,000 the reimbursement ceiling for contractors. The government sets the benchmark figure by using commercially available surveys to determine the median amount of compensation provided to the top five highest paid senior executives of publicly traded companies with annual sales of more than $50 million. The figure includes the executive's total wages, salary, bonuses and deferred compensation for the year, whether paid, earned or otherwise accruing. The figure only limits the executive compensation that companies can claim as a cost in government contracts. It does not limit the compensation that an executive may otherwise earn.

"The reality is that it does have an impact [on overall compensation]," said Alan Chvotkin, executive vice president and counsel of the Professional Services Council, of lowering the reimbursement rate. For some contractors, especially smaller companies, how much they charge the government under cost reimbursement contracts could amount to the total compensation. Chvotkin said AFGE's position on contractors' salaries and the reimbursement rate as outlined in the letter included "lots of discredited mythology," adding that the current cap of about $700,000 is not the typical reimbursement rate for many contractors.

Government contractors were in the spotlight on Thursday. Two House committees held a joint hearing on a policy proposal the Obama administration is kicking around that would require would-be federal contractors to disclose their political contributions.

Moten's letter also detailed the union's opposition to various proposals circulating that would reduce federal employees' pay and benefits as well downsize the workforce. "The current political climate for all public employees, including federal employees, is harsh," Moten wrote.

Separately, the National Treasury Employees Union sent a letter on Thursday to the Senate Budget Committee urging lawmakers to reject any measures that would reduce the pay and benefits of federal employees, including any additional pay freeze beyond the current two-year freeze. "If the proposals suggested by the (deficit) commission are put in place, it will reduce the overall debt of the country by 2 percent. But it will lead to a huge exodus of experienced federal employees, roughly 40 percent of whom are eligible to retire," wrote NTEU President Colleen Kelley.


By Kellie Lunney

May 12, 2011

http://www.govexec.com/federal-news/2011/05/union-wants-to-lower-cap-on-executive-pay-in-federal-contracts/33963/