More on the New Executive Compensation Cap

Yesterday we reported that the Office of Management and Budget (OMB) had just bumped the Executive Compensation cap for 2011 by 10 percent from $694 thousand per year to $763 thousand per year. The OMB announcement is about a year later than usual. In every other year since it began publishing executive compensation caps, OMB has published the cap in April or May of the year in which the cap applies. This time around, OMB published the cap for 2011 in 2012. It probably would have preferred to delay the announcement even longer except contractors need this information to prepare their annual incurred cost proposals, which for calendar year contractors, are coming due June 30th. (by the way, if you need help completing your annual incurred cost claim, give us a call).

In past years, OMB's executive compensation cap announcements have been rather perfunctory - a simple statement of the new cap. This year was quite different. . OMB was amped up on Red Bull and a mega-dose of B-complex vitamins. It made sure that everyone knows that the current Administration was not behind or responsible for this increase. It proclaimed that the executive compensation cap was based on a formula that was statutorily required and that they were only filling in the numbers. The OMB heralded the President's proposal last fall that would limit executive compensation to $200 thousand (or so)  and bitterly complained that Congress wouldn't go along with the proposal

"...to date, Congress has not adopted the Administration's proposal to replace the existing statutory formula for determining the reimbursement cap."

The OMB further claimed that the underlying considerations behind the statutory formula have no relationship to the type of work that contractors are actually performing under Federal contracts. It is the formula, and not any comparable improvement in contractor performance that resulted in the $70 thousand increase.

This issue is far from dead. Last March, a bipartisan group of senators introduced a bill that would cap the reimbursement rate at the president's salary, currently $400 thousand, and apply it to all contractor employees. A similar bill introduced i the House would lower the cap to $200 thousand and also apply it to all contractors. Although most Government contractors are not affected by the current cap, these lower caps would impact many contractors.