Should Contractor Pay Be Capped?

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This topic contains 4 replies, has 2 voices, and was last updated by  Jaime Gracia 6 years, 10 months ago.

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  • #178109

    David B. Grinberg

    A recent article in examines the issue of capping pay for gov contractors as part of the FY 2014 Budget of the U.S. Government. According to the article:

    “Deep inside President Obama’s fiscal 2014 budget is language to set in motion another effort to clamp down on the amounts taxpayers reimburse contractors for the compensation of their top executives as well as their workforce writ large…”

    “Currently, contracting firms are permitted to write off pay and benefits of up to $763,000 for each of their top five executives. Lawmakers have joined with unions such as the American Federation of Government Employees to lower the reimbursement cap to help curb the federal deficit. They argue that executive pay and benefits have risen by 300 percent since the cap was introduced in the mid-1990s.”


    1) Should contractor pay be capped?

    2) If so, at what amount?

    3) If not, why?

  • #178117

    Jaime Gracia

    David – Since no one has jumped, let me respond. First, let me say I am not anti-anything, other than nonsensical policy and rhetoric for political purposes that leads to bad policy. I believe that to be the case in this instance.

    I believe this argument is from a lens of “reducing waste,” as government proponents of this policy are under the assumption that government contracting personnel are overpaid, and the taxpayers are footing the bill. Not only has this not been proven, but many studies seem to be intentionally misleading, especially those whose politically-motivated methodologies do not take into account long-term costs of benefits and pensions for government employees. Further, these studies also do not take into account simple market realities, especially as they relate to the government contracting environment.

    This wrong-headed policy wants to cap pay for ALL contracting employees, which may hinder attracting top-talent for critical and complex missions, especially those with specialized IT, intel, and cyber skills that the government lacks. It is a supply and demand issue, as salaries go up with experience, skill-set, and value.

    That is not to say I am in favor of exorbitant salaries for any contractor, or federal employee for that matter. However, The Government Accountability Office, at the direction of Congress, has already started working on its assessment of impacts on salary caps.

    Why not wait for the report to be completed before moving forward on policy? This could be creating more regulation and policy that do not make sense for political point-scoring, cause more harm than good, and exacerbate the continuing anit-contractor attitudes fomented by this Administration which frankly has always been pervasive in government.

  • #178115

    David B. Grinberg

    Actually, Jaime, I was hoping you would weigh in because your are a leading expert on this issue for GovLoop. Whether one agrees or disagrees with you personally, the points you make always enhance open dialogue and stimulate intellectual debate.

    Thus, kudos to you, sir, for sharing your wisdom on this obviously important issue for everyone inside government and/or otherwise affiliated with Uncle Sam — which is pretty much everyone.

    Getting folks to speak up and positively contribute on this site sometimes appears harder than pulling teeth without painkillers!


  • #178113

    Jaime Gracia

    Thanks for the feedback David. You are right, in that feedback can be difficult here on GovLoop, which is certainly one reason I wanted to contribute!

  • #178111

    David B. Grinberg

    Federal Times reports:

    As federal belt tightens, contractor CEOs enjoy million-dollar raises

    • “On the same day in March that Lockheed Martin warned that the sequester could lead to thousands of employee furloughs and layoffs, the nation’s largest federal contractor disclosed that it had just boosted the compensation of its former CEO by more than $2 million.”
    • “The disclosure shows how even with a looming sequester, budget standoffs and defense cutbacks, federal belt-tightening hasn’t yet hit the wallets of top executives for some of the nation’s biggest federal contractors.”

    • “Likewise, at Boeing, the second biggest federal contractor in 2012, CEO James McNerney Jr. saw his base salary remain flat at $1.9 million. But with stock and option awards and boosts in pension and incentive earnings, his overall compensation rose from $22.9 million in 2011 to $27.5 million in 2012.”

    • “…an investigator for the Project On Government Oversight, said the numbers aren’t surprising. Last year, he found CEO compensation for the top five federal contractors averaged $21.5 million during 2011.”

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