Tuesday, April 16, 2013

Compensation Caps in the President's 2014 Budget

It seems like the issue of compensation caps just will not go away. The President's 2014 budget includes caps on compensation for all employees, both for defense and civilian contracts that match the Vice President's salary, currently set at $230,700. It is uncertain whether this provision will get very far in the deliberative process but there it is, something to be considered.

Whereas the Senate last year capped salaries for defense contractors (the Senate's provision didn't survive the conference committee), the President's budget affects all contracts, defense, energy, NASA, commerce, education, etc.

The specific wording included in the budget follows:

Under current law, contractors that are paid based on their incurred costs may demand reimbursement for executive and employee salaries up to the level of the Nation's top private sector CEOs and other senior executives. These salaries and benefits have increased by more than 300 percent since the law was enacted in the mid 1990s. In 2011, when the cap reached $763,000, the President called on the Congress to establish a new, sensible limit that is on par with what the Government pays its own executives and employees. The Administration was encouraged by the proposal in the 2013 Senate's National Defense Authorization bill to cap reimbursement for defense contractors at the level of the Vice President's salary, which is currently $230,700. The Budget urges the Congress to expand the Senate's proposal to cover all contractor employees - both defense and civilian - and pass a law that allows agencies to pay above this cap on an exception basis only, when it is necessary to ensure the agency has continued access to the skills and capabilities of specialists to achieve mission outcomes.

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