2014 Defense Authorization Bill May Permit Pay Deductions for Key Engineers, Scientists

May 30, 2013

As debate surrounding the 2014 National Defense Authorization Act (NDAA) begins, GOP aides are floating the idea of excluding executives from the federal contractor salary reimbursement equation thereby allowing companies to continue receiving salary deductions for other key personnel like engineers and scientists.  "[Executives] shouldn't be in the pool influencing [contract] pricing" the GOP aide said highlighting how the new direction would result in taxpayer savings.  For those not considered executives, aides are developing a new statutory formula for salary reimbursement amounts, which will adjust annually for inflation, out of concern that the current formula which is set to encroach $1 million is getting too high.  For defense contractors, the approach would allow them to maintain deductions for key engineers and scientists, addressing a major concern caused by capping salary reimbursements for all employees.  

The shift by the GOP introduces a real alternative to Democratic proposals to impose a hard-cap on contractor pay deductions like the one included in the President's 2013 budget proposal which would have set a cap on defense contractor salary reimbursements at $230,700 - the same figure which was included in the Senate version of the 2013 NDAA but failed to make it into the final bill.  It is anticipated that such a proposal would be well received by industry.  The Center will continue to report on any developments as the House works the NDAA through the Armed Services Committee towards final passage.