DOD to scale back workers' comp for contractors overseas

Congress has instructed the Defense Department to trim workers' compensation costs for contractors supporting overseas operations, reports Federal Times.

Those costs ? payments to contract workers injured or killed on the job ? have ballooned since the start of the Iraq war in 2003. Governmentwide, workers' comp costs for contractor employees supporting overseas operations shot up from $7.6 million on 430 claims in 2002 to $170 million on 11,887 claims in 2007, according to the Congressional Research Service (CRS). The Defense Department accounts for 90 percent of those costs, while other agencies, such as the State Department and the Agency for International Development, account for the remainder.

The 2009 Defense Authorization Act, which the president signed last week, directs the Pentagon to revamp its workers' compensation insurance program within nine months to lower costs and risks. In the law, Congress recommended ? but did not require ? that Defense choose a single, mandatory source of workers' comp insurance for its contractors as a possible remedy.

Contractors are required to provide compensation for workers injured or killed on the job supporting the government abroad under the 1941 Defense Base Act. Although contractors pay for the insurance out of pocket, the costs are passed on to the government through contracts.

Requiring Defense Department contractors to buy workers' compensation insurance from a single provider could save the government $360 million over the next decade, the Congressional Budget Office estimates. Currently, Defense allows contractors to choose their own insurers. Other departments require contractors to use a particular insurer and, as a result, they pay lower premiums than Defense does, according to CRS.