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Oct 30, 2011


Scott Amey

Senators Lieberman and Collins urge the Supercommittee to save money on the contractor compensation cap:

Capping federal reimbursement of the pay of federal contractor executives

We support capping the federal reimbursement for the pay of all federal contractor executives, not just senior management as under the current cap, because federal government contractors should also share the efforts at cost?savings measures during these tough fiscal times. Under cost?reimbursement contracts, the government pays the contractor for costs incurred in performing the work, and federal auditors review the reasonableness of those costs. Contractors are allowed to bill part of their executives' salaries as an indirect cost, subject to a cap. The cap is based on a formula that is tied to compensation levels of executives of large private firms, and due to the dramatic escalation of executive pay in recent years, the cap has risen significantly. We believe that taxpayers should not be required to reimburse contractors for "unreasonable or excessive compensation paid to company executives." That is why we voted to expand the application of the executive compensation cap, not only to senior management but to all executives and managers, in this year's National Defense Authorization Act, which applies to defense contractors. We suggest that the cap be applied more broadly to government?wide contractors as well. We also suggest that Congress direct the Office of Federal Procurement Policy to revisit the formula for the cap to address the escalation of recent years.


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