Congress OKs contractor pay benchmark

Congress is willing to compensate defense contractors’ employees more than it does the president of the United States, but, based on the new defense bill, now all of a contractor’s employees will be under the compensation cap.

Currently, only a company’s top senior executives are under the Executive Compensation Benchmark, which is a means of matching salaries, bonuses, and other benefits packages with what private-sector executives receive. The benchmark is determined by surveys, which are not conducted by the government, of executive pay. It’s currently set at $693,951 annually. The president is paid $400,000 each year.

The benchmark is often updated annually. However, the Obama administration decided to not increase the benchmark in 2011. Officials say it would be “excessive,” reaching to nearly $750,000.

Congress wants more employees to live under the compensation cap though.

The fiscal 2012 National Defense Authorization Act conference report expands the coverage, but it doesn’t go as far as the Senate’s version of the bill. The Senate wanted to cap the compensation at the president’s pay, instead of the other private-sector executives. The House version just expanded the coverage.

Sen. Barbara Boxer (D-Calif.) said leaving the benchmark in place is “outrageous,” and vowed to rein in “exorbitant” salaries for contractors. Boxer proposed capping compensation at the president’s salary.

TechAmerica, an IT industry group, said the bill instead allows contractors to attract more highly qualified employees with competitive wages.

Unlike either bill, the conference report gives some flexibility to Defense Department officials too. They can make exceptions to the benchmark for scientists and engineers if DOD can prove the exceptions will ensure it has continued access to needed skills and abilities.

The cap covering all contractor employees would start Jan. 1, if it becomes law.

Meanwhile, the House and the Senate each have to approve the final conference report. The conference report is the result of both chambers having ironed out the differences in their versions of the bill. Congress is expected to vote on the authorization bill this week.

President Barack Obama still has to sign the bill before it would become law. Sen. Carl Levin (D-Mich.), chairman of the Armed Services Committee, said on Dec. 12 that Obama is not likely to veto this bill.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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