Analysis: Obama plan's pay cap for contractor execs is 'illogical'

Monday - 9/19/2011, 7:55pm EDT

Stan Soloway, President, Professional Services Council

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By Jolie Lee
Federal News Radio

The President said in a speech today that federal contractor executives are getting paid too much from the government. As part of his report to the supercommittee, the President has placed a cap on how much contractors can pay their executives.

According to the report:

Each year, the government is required to establish a dollar cap on the amount that the government will reimburse federal contractors for the compensation they pay to their senior-most executives under cost-based contracts, which account for roughly $160 billion each year. The cap does not limit how much contractors pay their executives only how much the government will reimburse them.

A statutory formula sets the cap, which was $250,000 in 1995 but rose to nearly $700,000 last year, the report said. The administration proposes setting the cap at $200,000.

"Setting the cap at this level will bring greater parity between federal and contractor executives' compensation," the report said.

But one industry representative called the proposal "illogical."

Stan Soloway, CEO of Professional Services Council, said this requirement "completely reverses policy and approach" for determining executive salary that has been in place for decades.

One problem, Soloway said, is federal employees' salaries have lagged behind the private sector.

"At the end of the day ... what you're doing is you're saying to these companies, 'We're not going to let you compete in the marketplace and we're not going to reimburse you for fair and reasonable compensation levels based on what the market demands," Soloway said.