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Congress broadens DoD contractor compensation caps

Dec. 15, 2011 - 06:00AM   |  
By SARAH CHACKO   |   Comments
The compensation caps for contractors are part of the 2012 National Defense Authorization Act, which was passed by the Senate on Thursday and is expected to be signed into law by President Obama.
The compensation caps for contractors are part of the 2012 National Defense Authorization Act, which was passed by the Senate on Thursday and is expected to be signed into law by President Obama. (Navy)

Legislation to cap all Defense Department contractor pay and protect contractors' political contribution information is now headed to President Obama's desk.

The changes are included in the Defense authorization bill, which passed the House late Wednesday, 283-136, and passed the Senate Thursday, 86-13. Obama is expected to sign the bill.

The House and Senate each passed their own version of the bill earlier this month. A conference committee of leaders from both chambers worked out details and submitted its report this week.

Under current federal acquisition rules, contractors can seek limited reimbursement for the compensation including wages, salary, bonuses and deferred compensation of each of the company's top five executives. But for all other employees or executives, there are no limits to the compensation the government will reimburse, meaning the government covers all their compensation as it applies to a contract. The 2012 National Defense Authorization Act would extend that cap, which is now at $693,951, to all employees who work on a contract or are included in the overhead costs of a contract.

The bill also allows Defense to create an exemption for scientists and engineers if it determines that the additional compensation is necessary to attract skilled workers in those areas.

The NDAA would also prohibit the President from issuing an executive order he had been considering earlier this year to require contractors to disclose their political contributions before being awarded a federal contract.

The draft executive order on political contributions was leaked in April. White House officials said they were considering the policy as a way to add more transparency to the contracting process.

Republicans, backed by contractor groups, argued the order would only inject more politics into the process. They criticized the order as an attempt to override the Supreme Court's decision last year in Citizens United v. Federal Election Commission, which protected corporate donations to political organizations and drove millions of dollars into the 2010 elections.

In addition, the NDAA would:

Require the director of the Defense Contract Audit Agency to report annually on significant problems, abuses and deficiencies encountered while performing contractor audits and an assessment of audits pending for a longer time period than allowed;

Require large DoD contractors to establish a system to detect counterfeit parts. It would also clarify acquisition rules so a contractor using suspected counterfeit parts must bear the cost of replacing and otherwise reworking those parts; and

Require DoD to improve the quality and timeliness of contractor performance reports used in source selection decisions.

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