DOE holds unique power to freeze contractor pay

Some people were confused by Energy Secretary Steven Chu’s recent announcement that he will halt salary increases and bonuses for contractors who manage day-to-day operations at certain agency sites, including national laboratories. But an industry expert explains that Chu has the authority to do that because the Energy Department has a unique arrangement with those contractors, making it possible for it to dictate employee salaries.

Alan Chvotkin, executive vice president and counsel at the Professional Services Council, described DOE’s special arrangement with management and operating contractors.

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“In these contracts, essentially DOE is the employer, so they closely manage and approve the costs that are incurred by these [management and operating] contractors to manage the personnel, facilities and the operations of these facilities,” Chvotkin said.

The organizations that run the facilities do so under strict guidelines and constraints from DOE, he added.

The situation at DOE is not the norm, which means that secretaries at the Defense or Homeland Security departments, for example, don’t have the ability to freeze contractor employees’ pay.

In general, Chvotkin said, the “government has a very limited ability to direct the contractor formally on how to manage its workforce.”

DOE's two-year contractor pay freeze was announced a few days before a two-year pay freeze for all civilian federal employees was signed into law by President Barack Obama.

DOE's freeze will affect 75,000 workers at 28 agency sites and will go into effect Jan. 1, 2011. For salary increases that have already been approved and implemented, the freeze will begin at the start of the next salary increase cycle and last two years, according to the department.