Contractor Compensation Caps Back on the Table

When it comes to Congress's efforts to set arbitrary compensation caps, the line from an old Gordon Lightfoot song, "I'd rather press on, I don't want to rest easy" really applies. Government contractors dodged a bullet when a $231 thousand cap (equal to the Vice President;s salary) was struck from the final 2013 NDAA (National Defense Authorization Act) and replaced with a "study" to determine the impact that such a cap would have on contractors. Not willing to wait for the study's results, three Senators (Boxer, Grassley, and Manchin) are working to get compensation caps put into current appropriations acts.

They've got a point. The current cap of $763 thousand is a lot of money and almost double the President's salary. They're also playing the sequestration card - "we're about to furlough Government workers but we're still paying big bucks to contractors".

The problem is that no one really knows how much money we're really talking about. Just because there's a cap out there, doesn't mean that contractors are paying their employees anywhere near that amount. Compensation must still meet the requirement for reasonableness (commensurate with the services performed). No one has the ability to access a database and calculate the impact to the Government if the cap were lowered to $400 thousand, or $231 thousand, or even $200 thousand.

Industry groups, such as the Professional Services Council (PSC), have come forward to argue that everyone should relax a little and let the GAO (Government Accountability Office) finish their study on the matter.

It should be noted that current and proposed compensation caps do not limit what contractors can pay to their employees. The caps only limit what contractors can seek reimbursement for under their Government contracts.