Thursday, October 6, 2011

Executive Compensation Cap for 2011 - Not Yet

The allowability of compensation costs for the top five executives of Government contractors is capped by statute (10 USC 2324(e)(1)(p) and 41 USC 256(e)(1)(p)). The benchmark amount does not limit what contractors can pay their executives but only the amount that can be claimed under Government contracts.

The Administrator, Office of Federal Procurement Policy (OFPP) determines the benchmark amount each fiscal year and published in the Federal Register. From 2004 through 2010, these determinations were published as early as March 25th but no later than May 14th. However, the OFPP has not yet published the compensation cap for 2011.

A few senators and congressmen have taken notice of OFPP's inaction on this matter. In a letter last month, Senators Boxer and Grassley and Representative Tonko called on OFPP to issue its determination before the end of the current fiscal year (September 30th). OFPP did not comply.

In 1998, when the statute became effective, the cap was $340,650. In 2010, it was $693,951. According to the aforementioned letter, this cap has grown 53 percent faster than inflation. The letter concludes by stating "The American people deserve to know exactly how much government contractor executives will charge the taxpayer for their salaries this year".

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