Obama to Seek Much Lower Cap on Contractor Exec Pay

Plan would tie the ceiling for reimbursements to the president’s salary, currently $400,000.

This story has been updated. 

Federal contractors would see sizable cuts in government reimbursements for employee salaries under draft legislation the White House plans to send Congress next week.

In a bid to “stop excessive payments to contractors,” the plan would expand across the government a small provision in last December’s National Defense Authorization Act and cap the reimbursement rate at the president’s salary (currently $400,000), according to Joe Jordan, administrator of the Office of Federal Procurement Policy, who made the announcement Thursday in a blog and spoke to reporters on a conference call.

“The proposal builds on previous administration proposals and language included in the president’s budget, and marks another important step in our ongoing effort to buy smarter and end wasteful, fiscally imprudent contract spending,” Jordan said.

The move would expand the cap’s coverage from just the top five highest-paid contractor employees to all employees, a change long sought by employee unions and some lawmakers.

Under a law that took effect in 1997, contractor executive salaries are reimbursed according to an industry-average formula set annually by the Office of Management and Budget -- currently $763,000 for contracts let in fiscal 2011. Contractor pay has grown by 300 percent in the past 15 years, outpacing inflation, Jordan said, noting that OMB in just a few weeks will be required to raise the cap to more than $950,000.

“Taxpayers have been required, by law, to foot this unaffordable expense, despite the fact that this rapidly increasing cost has had little bearing on the value agencies receive under their government contracts,” he said.

Jordan stressed that nothing in the proposal prohibits companies from paying their executives as they please, it simply caps the amount taxpayers must cover under cost-plus contracts. Exceptions would be made if “an agency determines such additional payment is necessary to ensure it has access to the specialized skills required to support mission requirements, such as for certain key scientists or engineers,” Jordan said. Under the current system, the cost of reimbursing contractors for salaries “for agencies is just overhead, and they receive no benefit,” Jordan said.

The estimated savings -- which would apply to future contracts, not existing ones-- would be “hundreds of millions of dollars,” Jordan said, though he declined to be more specific. The plan would affect about one-third of the federal contracting pie, and the number of executives affected would be “in the thousands,” he added, particularly in contracts for “first of a kind, one of a kind purchases” which is common in the Defense Department.

Casting the draft bill as part of President Obama’s Campaign to Cut Waste, Jordan said agencies should be able to “take these savings and put them into mission-critical work.”

Legislation similar to the White House plan has been pushed by Sens. Barbara Boxer, D-Calif., and Chuck Grassley, R-Iowa, and Rep. Paul Tonko, D-N.Y. Jordan on Thursday said, “I believe Congress will heed the urgent call to restore fiscal responsibility before more money is wasted.” A Government Accountability Office report on the topic is due this summer.

Asked whether unions would be pleased with the expanded approach, Jordan said, “I sincerely hope they’ve recognized the president’s continued calling on Congress to enact a solution.”

But in a statement Thursday, the American Federation of Government Employees said the plan doesn’t go far enough, noting that the administration’s fiscal 2014 budget submission supported a cap at the level of the vice president’s salary (currently $230,700).  The union also noted that the latest proposal would not apply to fixed-price contracts, would not go into effect for 180 days and allows agencies to “ignore” the limit under the exception for recruiting contractors with specialized skills. 

“The administration’s proposal is completely inadequate,” said AFGE National President J. David Cox Sr., in the statement. “It still requires taxpayers to reimburse contractors for exorbitant sums, while federal employees are suffering pay freezes and cuts due to furloughs.” 

The Professional Services Council, a contractors group, has long opposed lowering the caps, saying the move would inhibit industry’s quest for talent.

(Image via Heymo/Shutterstock.com)

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.