OMB raises salary cap for contractor executives because it has to

The ongoing fight over how much to reimburse contractors for their executive compensation took a new turn on Monday after the White House published a Federal Register notice raising the statutory limit on reimbursable contractor pay to $763,029.

The new cap, a 10 percent hike over the previous limit of $693,951 for the top five employees, was required under a formula set in 1997. “It is this formula, and not any comparable improvement in contractor performance (and the benefits that the taxpayers receive from these contracts), that has resulted in the one-year increase of $70,000,” wrote Lesley Field, acting administrator of the Office of Federal Procurement Policy. Field repeated an earlier controversial proposal from the Obama administration for a much lower reimbursement cap of $200,000, the highest Cabinet salary level.

“By proposing to replace the existing statutory formula with a reimbursement cap that is tied to the salary of a Cabinet official (such as the Secretary of Defense), the president's plan would bring parity between the amount that the American public pays for the senior executives of the federal government and for the senior executives of those contractors who perform work for the federal government on a cost-reimbursable or other cost-based arrangement,” she wrote.

In response to the higher ceiling, Sens. Barbara Boxer, D-Calif., and Chuck Grassley, R-Iowa, issued a statement reiterating their call for passage of their bill introduced in March to lower the maximum amount taxpayers reimburse all government contractors for their salaries. They would restrict the taxpayer reimbursement for government contractor salaries to the amount of the president’s salary -- $400,000 -- and extend the cap to all government contractor employees. Their bill would expand on a provision in the National Defense Authorization Act passed in December that extended the federal salary cap to all defense contractor employees, not just the top five.

“At a time when middle-class families are struggling, there’s no justification for a private contractor to receive a taxpayer-funded salary that’s nearly four times what Cabinet secretaries earn,” Boxer said.

A key contractors trade group also weighed in on Monday’s action. The Professional Services Council has long opposed reducing the reimbursement cap for fear of harming the government’s and industry’s ability to access critical skills.

PSC President and Chief Executive Officer Stan Soloway said in a statement, “While we appreciate that OMB has followed the long-standing statutory requirement to set the salary cap based on a formula that assesses average, fair and reasonable compensation for similar positions in the commercial world, it is most disheartening to see the administration continue to advocate for the elimination of the formula in favor of an arbitrary cap tied to federal employee salaries. Under the administration’s proposal, ‘fair and reasonable’ would be replaced by ‘arbitrary’ and the competitive realities of the marketplace for talent will be rendered moot.”

Soloway added the federal pay scale is “one of the most significant barriers to the government’s ability to recruit and retain highly skilled professionals, particularly in the technology-related fields. And since pay parity is unlikely to be dealt with in the near future, all this proposal would do is saddle the government’s contractors -- currently its most reliable conduit to such talent -- with the same competitive limitations that impede the government.”