White House Seeks to Cut Contractor Pay Reimbursement Cap

The White House is calling on Congress to eliminate the current formula used for reimbursing contractor salaries and tie the reimbursement cap to the president’s $400,000-per-year salary.

All defense and civilian cost-reimbursement contracts would be covered under that cap but agencies could gain exemptions for specialized skilled positions such as scientists or engineers, Federal Procurement Policy Administrator Joe Jordan said in a May 30 blog post.

One-third of current contract spending comes from incurred costs and defense contractors can have salaries, bonuses and other compensation reimbursed for senior executives, according to Jordan.

Jordan wrote the White House raised the cap to $693,000 in fiscal year 2010, then Congress extended the cap from senior executives to all defense contractor employees.

The cap went up to $763,000 for fiscal 2011 and Jordan says the White House will have to raise the cap again for $950,000 for fiscal 2012 soon.

“Nothing in the proposal limits the amount contractors pay their executives,” Jordan wrote.

“The cap only limits how much the government will reimburse the contractors for the services of those executives,” he added

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