Are Government Contracts Executives Overpaid?

This post was written by Leslie A. Monahan.

Last week, the Office of Management and Budget (“OMB”) announced that President Obama is working to breathe life back into a proposal to end federal contractor executive overpayment. According to the OMB’s blog post, the Obama administration will be asking Congress to reform the current reimbursement formula for contractor executives. The proposal will not limit how much contractors can pay their top five executives. Rather, it aims to limit the amount the government can reimburse contractors for executive salaries. Specifically, the proposal seeks to cap the government’s reimbursement at the same level as what it pays its own executives – $200,000 per.

Back in the 1990s, Congress tied the levels of pay given to contractor executives to the salaries of the nation’s top private executives, as opposed to government executives. As private sector salaries soared, so did those of contractor executives, something that did not go unnoticed. Receiving support from senators on both sides of the political spectrum, an amendment to the 2012 Defense Authorization Bill capped the reimbursement of salaries for some contracts with the Department of Defense. The Obama administration now seeks to extend the provisions across all government agencies as part of its Campaign to Cut Waste.

While the Obama administration believes that ending executive overpayment will benefit all taxpayers, certain taxpayers disagree. On the same day OMB made its announcement, the Professional Services Council (“PSC”) publicly opposed the measure. PSC stated that the proposal would negatively impact small businesses and inhibit the ability of the government and industry to attract top talent to work on federal contracts.
 

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