May 24. 2012 | Rebecca Kehoe
What’s A Government Contractor Worth?
Are you worth $340 an hour? Or more like $192 hourly? Makes $96 an hour almost seem low, doesn’t it? There is currently a lot of debate over how much the Government should reimburse its federal contractors for their executive’s compensation.
According to the Office of Federal Procurement Policy (OFPP) in its memo dated April 23, 2012, the upper limit on the amount of executive compensation that will be reimbursed to federal contractors as allowable costs for Fiscal Year 2011 (Jan. 1, 2011 to Dec. 31, 2011) is $763,029, which is approximately $340 per hour. This amount is up from $693,951 for FY 2010 per the requirements of the formula in section 39 of the OFPP Act. The FY 2012 Defense Authorization Act extends the reimbursement cap to any federal contractor employee performing under a “covered contract” and not just the top five executives.
However, there has been much posturing on just how high the compensation ceiling should be. The Obama administration has called for a cap tied to the level of the salaries of Cabinet officials, which is around $200,000 or $96 per hour; the Senate has introduced legislation S.2198 limiting it to $400,000 or $192 per hour and apply it to all prime contractor employees; on the other hand, the House seems to agree with the President and would set a $200,000 limit under H.R. 2980 and apply it not just to all federal prime contractor employees, but to their subcontractor employees too. And it is not just the federal government that is imposing compensation caps, State governments are doing likewise. New York Governor Andrew Cuomo signed an executive order in January of this year limiting the maximum contractors can charge New York state agencies for their executive’s compensation to Level I of the federal government’s executive pay schedule, or about $200,000. It appears that federal and state contractors are going to be worth less in years to come.
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