WASHINGTON – Legislation pending in the U.S. Senate includes a reform sought by Senator Barbara Boxer of California and Senator Chuck Grassley of Iowa to dramatically lower the compensation cap on taxpayer reimbursements for top executives of government contractors.
The legislation also would apply limits for the first time to all contractor employees, not just a few at the top, and require an independent assessment of previous reforms achieved by the senators in this area.
The changes are part of the Senate’s version of the National Defense Authorization Act, which must be passed each year to reauthorize spending programs for the Department of Defense.
Grassley and Boxer have been working for several years to curb excessive taxpayer-funded salaries for government contractors. The senators secured limits in last year’s defense bill and introduced additional reforms in a new, freestanding bill (S.2198) introduced in March. With help from Senator Joe Manchin of West Virginia, their lower reimbursement limit and requirement that the limit apply to all employees of a contractor were included in the defense authorization bill approved by the Armed Services Committee in June.
In addition, a Boxer-Grassley amendment (#2980), approved last night during Senate debate on the defense legislation, would require the Inspector General for the Department of Defense to issue a report to Congress on how the contractor compensation cap has been implemented in previous years. The Inspector General would report on how many contractor employees received compensation in excess of the cap as it increased over the years, and how many employees were classified by their contractor employers as targeted exceptions under last year’s authorization language, among other things.
“It’s important to know if these reforms are, in fact, taking hold and not being undercut by abuse of the targeted exceptions provision,” Grassley said. “I appreciate the Senate Armed Services Committee including our proposal to lower the compensation cap to a commonsense level. The changes represent and big step forward in the reform effort.”
“It is long past time that we reined in exorbitant taxpayer-funded salaries for defense contractors,” Boxer said. “This measure will help ensure that contractors are not exploiting loopholes to avoid the new common-sense limits on taxpayer-supported pay.”
Under current law, government contractors can charge taxpayers as much as $763,029 for salary reimbursements, far in excess of the current salaries of the President of the United States and cabinet secretaries, and an increase of $70,000 from 2011. The Senate’s action in the defense bill would lower the salary reimbursement cap from $763,029 to $230,700 annually.
From 1998 to 2010, contractor salary benchmarks have grown 53 percent faster than the rate of inflation. According to a study from New York University, in 2005, the most recent year for which statistics have been compiled, there were 7.6 million government contractors, including 5.2 million defense contractors.
The House of Representatives has passed its version of a National Defense Authorization Act. The Senate bill is expected to pass next week and will need to be conferenced with the House-passed bill.