Lawmakers Ask Supercommittee to Cap Federal Contractor Pay Reimbursement at $200K

Executive Pay Plan Design

In a sign of the times, this week Senators Barbara Boxer (D-CA) and Chuck Grassley (R-IA) urged the Joint Select Committee on Deficit Reduction to consider lowering the salary reimbursement limit for federal contractors and extending the limit to all federal contractor employees, rather than the top five executives covered under current law.  A letter from the Senators and Representative Paul Tonko (D-NY) noted that in just over a decade since the contractor compensation limit was enacted, it has more than doubled and “government contractors can charge taxpayers $693,951 for their top employees’ salaries . . . [which is] three times higher than the pay earned by Cabinet Secretaries."  It also noted: "When salaries are paid on the taxpayer’s dime, a $700,000 price tag for an executive is simply unaffordable.”  The current cap is set by reference to several pay surveys of private sector employers in similar industries designed to reflect the market for talent.  The lawmakers request that the Committee consider adopting the President’s proposed cap of $200,000 per year, which reflects the top pay level for federal executives, and also apply the cap to all employees of contractors.  Since the President’s proposal is estimated to save at least $3 billion over 10 years, the three noted that expanding the limits will “achieve billions more in savings and also provide greater parity between compensation for federal personnel and government contractors.”  Though the proposal would not limit compensation earned from non-federal contracts, this proposal could have a serious impact on the ability of contractors’ to recruit and retain talent.  Meanwhile, proposals pending in the annual House and Senate bills authorizing defense spending would merely expand the current cap to all employees.