OFPP again calls on Congress to cap vendor salary reimbursements

Tuesday - 1/31/2012, 11:30am EST

The White House is once again asking Congress to reduce the amount of money the government will pay to reimburse contractors for executive pay.

Lawmakers passed changes to the $694,000 cap, but it "failed to take the critical step of repealing the existing statutory formula for reimbursing executive pay — despite the efforts of a few strong Congressional advocates," according to a blog post by Leslie Field, the acting Office of Federal Procurement Policy administrator.

"Under the law, the Office of Management and Budget will soon be forced to publish a notice in the Federal Register that raises the cap even higher — tens of thousands of dollars above what it was in 2010 — and taxpayers will continue to have their hard-earned resources spent reimbursing contractor executives far in excess of what can be justified," Field wrote.

The Obama administration would like to reduce the total reimbursement of contractor executive pay to $200,000.

"The President believes that asking the American people to pay a 250 percent-plus raise for contracting executives just doesn't make sense - especially in the current fiscal environment," Field wrote. "Just as the government must be prudent in paying its employees, it must also not overpay contractors. To be clear, the proposal does not limit how much contractors may pay their executives — only how much the government will reimburse them."

President Barack Obama in September first brought up the issue of federal reimbursement of executive contractor pay.

There seems to be some support in Congress for capping executive pay reimbursements. A bipartisan group of lawmakers wrote a letter in October to the Joint Select Committee on Deficit Reduction asking them to cap salary reimbursement for contractors.

But the administration didn't get much support from the committee or the Congress as a whole for the changes.

Industry groups also do not support the changes.

"The formula-based approach ensures that government contractor reimbursement rates are fair and reasonable when compared with the commercial marketplace," said Alan Chvotkin, vice president and general counsel of the Professional Services Council. "To discard that formula and institute an arbitrary cap is bad policy and bad business. At a time when the government needs to access technology and other capabilities that are essential to driving innovation and efficiency, particularly those offered by small businesses, this recommendation simply makes no sense."

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