Trying to Put a Cap on It - Yet Again: Another Attempt to Limit Government Reimbursement of Contractor Executive Compensation
Back in February 2012, the Obama Administration asked Congress to reform the current reimbursement formula for federal government contractor executives. Specifically, President Obama sought to cap the executive reimbursement at the same level as what the government pays its own executives – $200,000 per executive. Although last year’s request may have fallen on deaf ears, more than a year later, debate over reimbursement for executive compensation remains a hot topic.
The White House is once again pushing for lower contractor compensation caps. According to the Office of Management and Budget's newest blog post, the Obama Administration will ask Congress to tie the federal government contractor executive reimbursement limit to the president's annual salary, which is currently $400,000. OMB stated that this proposal “provides a reasonable level compensation for high value Federal contractors while ensuring taxpayers are not saddled with paying excessive compensation costs."
The Obama Administration understands that while the proposed limit saves taxpayers’ money, all contractor skills are not created equal and there may be appropriate reasons for exceeding the limit. Accordingly, the proposed new plan provides an exemption for allowing additional reimbursement when specialized skills must be utilized to support missions. Further, there would be no cap on what federal contractors could pay their own executives. Rather, the only restriction would be on what the government could reimburse federal government contractor executives.
Although the prior proposal failed to be made into law, there is still support for this issue in Congress – especially given the government’s current financial constraints. However, critics of the proposal remain on both sides. On one hand, organizations like the American Federation of Government Employees argue that this proposed cap does not do enough. Others, like the Professional Services Council, argue that if implemented, federal contractors will lose their ability to attract top talent and the government will ultimately suffer as a result. Only time will tell if the White House can claim success on this issue or if it will need to try yet again to put a cap on this reimbursement issue.