Senators revisit lowering contractor compensation costs

Two senators are making another push to lower how much the government reimburses for contractor compensation costs with a bill introduced late Thursday.

Senate bill 2198, sponsored by Sens. Barbara Boxer, D-Calif., and Chuck Grassley, R-Iowa, would limit the taxpayer reimbursement for government contractor compensation to the amount of the President’s salary — $400,000. Compensation includes wages, salary, bonuses and deferred compensation. The measure would extend the cap to all government contractor employees.

“The direct taxpayer-funded salaries of government contractors clearly need to be contained,” Sen. Grassley said in a statement. “There’s no justification for these payments to be higher than the salary of the President of the United States.”

Contractors can currently charge agencies up to $693,951 for the compensation of their top five employees, based on a federal executive compensation benchmark. Contractors outside of the top five can earn and be reimbursed for more than that. The cost of reimbursing those salaries shows up in the overhead rates companies charge on contracts.

President Obama asked Congress last year to scrap the formula that sets the reimbursement cap and instead tie it to what the government pays its own top executives, about $200,000. Boxer and Grassley attempted to lower the cap within the National Defense Authorization Act in December but were unsuccessful. The 2012 NDAA that passed extends the current $693,951 salary cap to all defense contractor employees, not just the top five.

Lesley Field, acting administrator of OMB’s Office of Federal Procurement Policy, asked Congress in January to take up the proposal again, calling the amount contractors can charge the government for their executives’ compensation “unjustified and unnecessary.”