Lawmakers urged to adopt tighter caps on contractor pay

Limiting annual reimbursements to $230,700 per employee would save billions, advocacy groups argue.

Federal employee unions and government accountability and public interest groups urged lawmakers Thursday to adopt Senate language that would cap the federal government’s reimbursements for defense contractor compensation at $230,700 per employee.

The Senate Armed Services Committee approved that cap in June, as an amendment to the fiscal 2013 National Defense Authorization Act. The House has not adopted the provision, however, and House-Senate negotiators will have to work out the difference. The bill has not yet gone to conference.

Leaders of advocacy groups, including the National Treasury Employees Union, the American Federation of Government Employees, OMB Watch and the Project on Government Oversight, signed an Oct. 18 letter to the chairmen and ranking members of the House and Senate Armed Services committees, arguing the current reimbursement cap of $763,029 is too high.

“Due to concerns about both fiscal responsibility and fairness, we believe it is important to reduce the compensation priced and/or reimbursed under U.S. government prime and subcontracts to defense contractor employees,” the leaders wrote. “With budget cuts and sequestration looming, it is fiscally irresponsible to allow private contractors to charge escalating and exorbitant rates to the government.”

The letter cited “estimates obtained from senior [Defense Department] personnel” indicating lowering the cap on allowable reimbursement of compensation would result in savings of about $5 billion annually. The groups noted that since 1998, the compensation cap has more than doubled.

The most recent adjustment to the ceiling, authorized in April, “represented a 10 percent increase in allowable compensation for contractors while military personnel -- the brave men and women actually risking their lives in defense of the nation -- saw an increase of less than 2 percent and the pay of other federal employees was frozen,” the letter said.

“It is unconscionable that taxpayers may pay more than $700,000 to some contract employees,” NTEU President Colleen Kelley said in a statement Thursday. “It is time to rein these costs in and this legislation does just that. I hope that Congress will adopt this measure and bring some fiscal sanity to the contracting process.”

Although labor unions have long supported caps on reimbursements, the contractor group the Professional Services Council has opposed reducing the caps, citing concerns the move would harm both government and industry’s ability to access critical skills.

The advocacy groups’ letter noted that contract firms can still offer salaries that exceed the cap, if they are willing to make up the difference out of their own pockets rather than charging the government.