Defense Contractor Salary Cap Included in Defense Authorization Bill Awaiting President Obama’s Signature
Washington, D.C. – U.S. Senators Barbara Boxer (D-CA) and Chuck Grassley (R-IA) and Congressman Paul Tonko (D-NY) today called on the Office of Management and Budget (OMB) to immediately implement a new benchmark for taxpayer-funded salaries for defense contractors, especially in light of the National Defense Authorization Act’s new provision that will ensure that all defense contractor employees are subject to the same limit on taxpayer-funded salaries.
Currently government contractors can charge taxpayers $693,951 for the salaries of their top five employees, based on an executive compensation benchmark last amended in 1998. Employees of government contractors outside of the top five can and do earn taxpayer-funded amounts in excess of the current benchmark.
The Administration has already told lawmakers that it considers the current cap on taxpayer-funded salaries for contractors to be “unreasonably high.” But the Administration has not yet released its salary benchmark for 2011, even as 2012 quickly approaches.
In their letter, the legislators urged OMB to implement the National Defense Authorization Act’s new rules quickly and provide lawmakers with regular updates on its progress in addressing this important issue. The National Defense Authorization Act was enacted earlier this month.
The text of the letter follows:
December 19, 2011
The Honorable Jacob J. Lew
Office of Management and Budget
725 17th Street, NW
Washington, DC 20503
Dear Director Lew:
We write to follow up on a letter we sent in September 2011 regarding the executive compensation benchmark for government contractors. As we are now only days away from the start of 2012, we note that you have still not announced the new benchmark for 2011.
The National Defense Authorization Act of 2011 (NDAA) includes an important provision that extends the benchmark to all employees of defense contractors, with narrowly targeted exceptions for scientists and engineers. While we were disappointed that the final conference language did not include the exact language of the Boxer-Grassley amendment to align the benchmark with the salary of the President of the United States, we are encouraged that real savings will result from applying the benchmark to all defense contractor employees.
As you noted in your response to our previous letter, increases in the compensation benchmark are “forcing our taxpayers to cover levels of compensation that we in the Administration view as unreasonably high.” We could not agree more with your statement - which is why we are requesting that OMB implement this law as soon as possible.
Section 803 of the NDAA requires that regulations to enforce this provision be implemented within 180 days of enactment of the law. To ensure that new regulations are published in the Federal Acquisition Regulation (FAR) no later than July 2012, we request that you provide us, in writing, with regular updates on the FAR Council’s progress in complying with the law.
We believe that taxpayers should not be on the hook for exorbitant contractor salaries, and we look forward to your prompt response.
United States Senator
United States Senator
Paul D. Tonko
United States Representative