Compensation Limits on Senior Executives will be Extended to All Contractor Employees

The 2012 National Defense Authorization Act (NDAA) which has passed both Houses of Congress and is expected to be signed by the President, contains a provision that will extend the applicability of the senior executive benchmark compensation amount from the top five senior executives to "any contractor employee". The compensation cap is currently set at $700 thousand. This new provision is effective on compensation incurred after January 1, 2012 for contracts entered into "before, on, or after the date of the enactment of this Act".

This new statute applies only to DoD contracts so its possible that contractors with both DoD and non-DoD contracts could have different indirect rates for different contracts.

Some contractors have argued that such limitations will impair their ability to attract and retain qualified individuals. In response to this concern, Congress added a provision that allows the Secretary of Defense to establish one or more narrowly targeted exceptions for scientists and engineers upon a determination that such exceptions are needed to ensure that the DoD has continued access to needed skills and capabilities.