Joe Jordan, administrator of the Office of Federal Procurement Policy, wrote in a blog post that the administration will send a plan to Congress next week to abolish the current formula for setting contractor compensation caps. (Thomas Brown / Staff)
The Obama administration unveiled a plan Thursday to halt what the White House’s top procurement policy official called “excessive” compensation to federal contractors.
Joe Jordan, administrator of the Office of Federal Procurement Policy, wrote in a blog post that the administration will send a plan to Congress next week to abolish the current formula for setting contractor compensation caps.
The government now compensates some contractors under a formula tied to private-sector rates, but the new proposed cap would be tied instead to the president’s salary, which is $400,000.
Under current law, contractors paid based on their incurred costs — a form of procurement representing about one-third of all federal contract spending — can seek reimbursement from the government for executive pay, Jordan wrote.
Blaming “congressional inaction,” Jordan said the administration was forced to raise the compensation cap to $763,000 in 2011, with the cap expected to increase in coming weeks to more than $950,000.
“This wasteful expenditure of taxpayer resources must stop,” Jordan wrote.
Jordan also stated the proposal would apply across the board to all defense and civilian cost-reimbursement contracts.
Agencies still could seek an exemption if they show more money is needed for “specialized skills” such as for scientists and engineers under the proposal.
The proposal doesn’t limit how much money contractors pay their executives, but it would cap how much the government contributes, Jordan said.
In an interview, Stan Soloway, president and chief executive of the Professional Services Council, called the proposedcap arbitrary. He said the proposal compares the president’s base salary with the full burden of an overall contractor pay package, which includes not only salary but bonuses, benefits and other compensation.
Soloway said the trade group is open to discussing changes to the current compensation formula. But he said the government already has the ability to object to compensation in cost-reimbursement contracts through its oversight of labor rates.
While Soloway said the proposal might not deeply affect large contractors, it could hurt midsized companies and those competing for top-level technology talent.
The plan didn’t win much support from a prominent labor union, either.
“It still requires taxpayers to reimburse contractors for exorbitant sums, while federal employees are suffering pay freezes and cuts due to furloughs,” AFGE National President J. David Cox Sr. said in a statement.