Lockheed Martin and other defense contractors won’t be able to bill the government for more than $693,951 a year in total salary and compensation for any executives under a proposal headed for congressional approval. The Senate is mulling an expansion to all executives from current rules limiting the cap to contractors’ top five executives. The House has approved a cap on all employees of defense vendors. While the full Senate has yet to vote on its committee-approved version, and the two chambers must still reconcile their differences, the expanded executive pay limit has a good chance to survive.
Total compensation includes wages, salaries, bonuses and deferred compensation.
“There is no logic in having a cap on executives one through five, and then executives six through whatever can make more than the statutory cap,” said Mike Steen, a government contracting consultant with the Huntsville, Ala., law firm Beason & Nalley.
The House-passed version of the 2012 defense authorization bill would apply the cap to all employees of contractors who do business with the Pentagon. The Senate Armed Services Committee’s version would apply the cap only to managers and executives.
The change, which would only affect Defense Department contracts, would have little effect on salaries at major vendors, according to the head of a firm that specializes in accounting for defense contractors. It only means the vendors can’t submit claims for compensation above that amount.
“You can pay yourself what you want,” said Veronica Eyenga, president and CEO of VBP Outsourcing, a Glen Burnie, Md., accounting firm.
