OMB announces new cap on executive compensation costs in federal contracts

The ceiling on executive compensation costs under government contracts is $14,284 higher in fiscal 2008 than in fiscal 2007, according to an administration memo released Tuesday.

The Office of Management and Budget's Office of Federal Procurement Policy announced that $612,196 is the maximum amount a company can charge the government under cost reimbursement contracts to compensate an executive. Last year's amount was $597,912.

According to the memo, the compensation limit is the median amount of compensation accrued over a recent 12-month period for the top five highest paid executives of publicly traded companies with annual sales over $50 million. The $612,196 figure limits only the executive compensation that companies can claim as a cost in government contracts; it does not limit total compensation.

OFPP has calculated a benchmark compensation amount annually since 1997 in consultation with the Securities and Exchange Commission and the Defense Contract Audit Agency.

Alan Chvotkin, vice president and general counsel for the Professional Services Council, says that while the industry association is generally wary of arbitrary compensation caps, this is a long-standing policy they have come to accept. "The amount is probably fair and reflects a benchmark," said Chvotkin.

The compensation of executives at companies doing business with the government has been a hot topic recently. Blackwater Worldwide chief executive Erik Prince refused to disclose his personal compensation during a House hearing in October 2007. Soon after, Rep. Christopher Murphy, D-Conn., introduced the 2007 Government Contractor Accountability Act (H.R.3928), which would require contractors to disclose the names and salaries of their most highly compensated officers if more than 80 percent of the company's annual revenue comes from federal contracts and it holds contracts worth more than $5 million in any fiscal year.

Chvotkin has testified against Murphy's legislation and said Tuesday that the compensation limit for contracts is partly why he believes the law is unnecessary.

"His [Murphy's] view is that the federal government ought to know what private companies pay their executives; my answer is why? The government is not paying unlimited amounts; [privately held contracting companies] are subject to the same cap … so the government knows they are not paying more than $612,196 toward salary," Chvotkin said.

Murphy has said taxpayers have a right to know more about what kind of profits private companies are making from government contracts. H.R. 3928 is currently in committee.

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:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download

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