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Compensation cap could cost contractors

Jun. 3, 2014 - 06:00AM   |  
By ANDY MEDICI   |   Comments
Roger Waldron, the president of the Coalition for Government Procurement, is disappointed in aspects of a rule regarding contractor compensation.
Roger Waldron, the president of the Coalition for Government Procurement, is disappointed in aspects of a rule regarding contractor compensation. (File)

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A cap on contractor executive salary reimbursement rates will be expanded to include almost all contractor employees under Defense Department and NASA contracts, according to a final rule published in the Federal Register May 30.

The Federal Acquisition Regulatory Council also made the cap retroactive, leaving contractors on the hook for employee costs incurred and reimbursed over the last 18 months for all contracts awarded on or after Dec. 31, 2011. The cap was set at at $763,029 during that time.

The cap used in the rule was set before the 2013 Bipartisan Budget Act passed in December set a new contractor executive salary reimbursement cap at $487,000 for new contracts. The FAR council is working on an interim rule to apply the contractor cap across the government.

Alan Chvotkin, executive vice president and counsel of the Professional Services Council, said the organization is “dismayed” that the council included the retroactive clause in the final rule after waiting so long to craft a rule for the legislation.

“As a result of the interim and final rules, covered contractors will have to unscramble their accounting to make this change in allowable compensation rates that were validly incurred during the 18 months it took the FAR Council to act,” Chvotkin said. “That is simply unacceptable.”

In the final rule the council wrote that DoD can still consider exceptions to the rule for high-paid employees such as scientists and engineers, and that the rule would not have a significant impact on the contractor community.

Roger Waldron, the president of the Coalition for Government Procurement, said he was very disappointed that the final rule did not remove the retroactive requirement. Contractors will now have to work through the last 18 months to see what can no longer be reimbursed and in some cases make adjustments.

“It also hurts contractor efforts to recruit the best and the brightest and places contractors at a competitive disadvantage,” Waldron said.

He also said while the Defense Department has the authority to grant exemptions from the cap, it has not done so.

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