By: Scott H. Amey, J.D.
A bipartisan amendment (SA 2253, p. 163) by Senators Joe Manchin (D-WV), Barbara Boxer (D-CA), and Charles Grassley (R-IA) would set the contractor compensation cap at $230,700 per year, adjusted annually.
The cap, with some exemptions, is the limit on the amount taxpayers must pay for a contractor employee’s salary and benefits. The cap does not limit how much contractors can pay their executives or employees—only how much the federal government will repay them. Private firms are free to compensate employees whatever they deem appropriate from private revenue streams.
The Senate and House are at odds over the cap on federal contractor compensation. Earlier this year, the House inserted in the National Defense Authorization Act (Sect. 813, H.R. 1960) language that would keep the compensation cap of $763,029, adjusted annually for inflation. The Senate’s version of the bill (Sect. 841, S. 1197) caps compensation at $487,000 per year, adjusted annually.
POGO supports the Senate amendment setting the cap at $230,700. If Congress can’t agree on a new cap, the cap will soon exceed $950,000. Despite a Government Accountability Office report conservatively finding between $180 million and $440 million in savings if the cap is reduced to the President’s or Vice-President’s salary level, respectively, Congress has been slow to realize that this is an easy cost-saving move.
The House recognizes that compensation formula is flawed (the House Armed Services Committee report noted that the cap could increase to $1.6 million by FY 2020). However, the House only moved to keep the current cap and limit future increases to keep pace with inflation—a move that will benefit contractors at the expense of taxpayers.
The Senate, on the other hand, has taken a more fiscally responsible approach stating that “the growth of the cap by almost $300,000 more than the rate of inflation cannot be justified.” The Senate Committee report further stated that at “a time when most Americans are seeing little or no increase in their paychecks and budget constraints require the Department of Defense to find efficiencies in all areas, the committee concludes that increases of this magnitude are unsupportable.” Senators Manchin, Boxer, and Grassley recognize that Congress must get serious about cutting federal spending and that contractor compensation cap should part of the plan.
We’ll be watching to see how this plays out in the Senate. This seems like low-hanging fruit that will save billions of dollars.