Compensation Cap Approaching $1 Million Annually

The Office of Management and Budget (OMB) announced Wednesday that the new executive compensation benchmark for 2012 is $952,208. That's a mouth-dropping 25 percent increase over the 2011 benchmark of $763,029. Makes one wonder what the 2013 benchmark will be, or the 2014 for that matter.

This is the cap on total annual compensation amount the Federal Government will reimburse a contractor for the compensation the contractor provides to each of its employees for work performed on Government contracts. This doesn't limit what the contractor can pay, it only limits what the Government will reimburse.

In publishing the new compensation, OMB reiterated the Administration's proposal to replace the current formula for determining reasonable compensation with a cap that is tied to the President salary - currently $400 thousand and apply that cap to all military and civilian agencies.

Not everyone was pleased about the timing of OMB's announcement. The Professional Services Council (PSC), a trade group for service contractors, said in a statement it is an attempt to influence congressional debate over reimbursement for contractor executive compensation. PSC does not like the current proposals under consideration (see our blog post from November 6, 2013), thing they'll jeopardize the ability of agencies to recruit top talent, and would harm small and mid-size businesses.

The American Federation of Government Employees (AFGE) was unhappy with the announcement for a different reason. AFGE's President said "Christmas has come early for federal contractor employees, yet the government's own employees are looking at stockings full of coal." He went on to ask retorically "How can the President have allowed this to happen on the same day he spoke against income inequality in the nation's heartland? Why is the Administration enriching the top 1% of the nation's contractors but calling for cuts in compensation to the working and middle class Americans who make up the federal workforce?

Congress is working on passing the 2014 National Defense Authorization Act (NDAA). When that passes, we'll see who comes out on top, the contractor's or the taxpayers.