Lowering the reimbursement cap for contractors would have
saved the Pentagon up to $440 million last year, according to a new report by
the Government Accountability Office.
The study compared Pentagon costs if the contractor
reimbursement cap was set at two different levels: $400,000, or the same salary
as the president and $230,700, the amount the vice president earns. If the cap
was set at the president’s salary, savings last year would have topped $180
million. That amount grew to $440 million a year if it was set at the
Currently, salaries are reimbursed based on an
industry-average that’s set annually by the Office of Management and Budget.
According to the GAO, the cap has increased 63 percent since 1998, outpacing
the growth of inflation and the rate of federal salaries.
In 2010, the cap was $693,000. It was raised to $763,000 for
contracts let in 2011 and is expected to rise to $950,000 in the coming weeks.
The study was required as part of the National Defense
Authorization Act. GAO examined 27 Pentagon contractors with employees who have
compensation exceeding the salaries of the president or vice president. Boeing,
Lockheed Martin and Northrop Grumman did not provide the number of employees
with compensation in excess of the president and vice president’s salaries,
according to the GAO report.
Reducing the existing cap to either the president’s or vice
president’s salary would push a large number of those employees past the
proposed limits, the report said. Using 2012 figures, 141 individual employees
exceeded the cap under the current system. That number would have been 616 if
it was based on the president’s salary and grows to 3,444 if based on the
“Most affected employees were at large tier companies; few
small tier companies had employees exceeding these caps. While employees with
compensation costs in excess of the existing cap were all identified as
executives by the contractors, reducing the cap would have increasingly
affected compensation costs for individuals below the executive level,” the
Proposals to include the cap on contractor salaries were
rejected in the recent House vote on the defense authorization bill but efforts
are continuing. Last week, Senators Barbara Boxer of California and Charles
Grassley of Iowa introduced bipartisan legislation that would cap
reimbursements for all federal contractors at $237,000. Identical legislation
was introduced in the House by Reps. Paul Tonko of New York and Jackie Speier
The legislation is being pushed by federal employee unions,
many of which have members who are facing furloughs due to sequestration
American Federation of Government Employees
National President J. David Cox Sr. said the House Rules Committee was “subservient to contractors,” in preventing change on salary caps.
don’t have that protection in the Senate, and now they face a formidable
bipartisan coalition of Senators in Boxer…and Grassley, who have the
audacity to think that the richest federal contractors should be required to
make the same sort of sacrifices American families have been making for years,” he said.