The Office of Management and Budget wants Congress to reconsider a proposal to reduce how much contractors can charge the government for their executives’ compensation, an amount that is currently “unjustified and unnecessary,” the federal procurement chief said in a blog post this morning.
Under federal cost reimbursement contracts, agencies pay contractors for incurred costs, including salaries for executives and other employees. These costs usually show up in the overhead rates that contractors set. OMB caps how much contractors can charge the government for executive compensation based on what top private sector executives earn.
Contractors can currently ask the government to reimburse up to $693,951 for each of its top five executives. OMB will soon have to update that figure and the cap is expected to increase to $750,000.
The administration 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.
“Unfortunately, Congress failed to reform the current reimbursement formula for contractor executives and, until it does, taxpayers will continue to foot a bill that is both unjustified and unnecessary,” Lesley Field, acting administrator of OMB’s Office of Federal Procurement Policy, said in the post.
The administration has asked Congress to take another look at the formula and lower the compensation cap this year.