Economy slows pay increases for contractors

Pay for federal contractors increased by only 2.1 percent in 2011 compared to 2010, according to an analysis of 448 jobs reported by more than 100 government contractor companies. The salaries of 105 jobs declined, while 137 jobs increased in pay, said Alan Chvotkin, executive vice president and counsel of the Professional Services Council, discussing the annual survey of contractor pay released in September.

Chvotkin presented a few of the results from the compensation survey of Washington-area businesses. PSC cosponsors the survey on government contractors with the Human Resources Association.

“We see the effect that the economy is having on the pay for the federal contracting workforce,” Chvotkin said.

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Comparing contractor pay to that of federal employees is part of the ongoing debate over fairness in the blended workforce.

For 2011, federal employees have been stuck under a two-year pay freeze by President Barack Obama in an effort to save money. In December of 2010, he called it “a necessary first step in our effort to address the challenge of our fiscal reality.” Congress has also considered legislation to freeze pay, limit bonuses, cut the size of the workforce and require unpaid time off. Meanwhile, federal employee union leaders and other employee supporters have urged that any such measures include contractors.

Based on the HRA-PSC 2011 survey, the contractors are paid on average 7.3 percent more than federal employees. In 2010, the difference was 2.3 percent. But remove private-sector executives from the equation and the differential is 6.8 percent. In 2010, the difference was 1 percent, Chvotkin said.

Considering executives’ pay alone, private-sector executives earn 69 percent more than their counterparts in the federal workforce. In 2010, they earned 48 percent more.

Seeing the differential in executive pay, the Obama administration proposed a new formula in September for determining how much the government will reimburse a company for an executive’s salary. Officials want to tie the executive’s compensation to the top federal executive, which is roughly $200,000 annually.

Currently, the government will reimburse a company executive up to $694,000 of an executive’s salary. The formula now is based on comparable executive pay in the commercial world. Administration officials are concerned that, based on such surveys, that figure could rise to $750,000 in 2011.

“It’s that payment that strikes us as excessive,” said Dan Gordon, administrator of the Office of Federal Procurement Policy, the office that makes the pay adjustments.

Even if the contractors’ pay is going up, Chvotkin said, it’s a relatively small increase.

“While the higher technology-level jobs continue to draw higher salaries, even at that level the increases are modest,” he said.