WH: Federal Contractor Executive Pay Higher than President Obama’s Salary Is ‘Excessive,’ Wasteful

The proposal builds on previous Administration proposals and language included in the President’s Budget, and marks another important step in our ongoing effort to buy smarter and end wasteful, fiscally imprudent contract spending.
Under current law, contractors that are paid based on their incurred costs (which represents about one-third of current contract spending) may demand reimbursement for executive salaries, bonuses and other compensation up to the level of the Nation’s top private sector CEOs and other senior executives. This taxpayer reimbursement level has skyrocketed by more than 300 percent since the law was enacted in the mid-1990s.

The Administration’s proposal calls on Congress to abolish the current formula and instead tie the reimbursement cap to the President’s salary and apply it across-the-board to all defense and civilian cost-reimbursement contracts. Tying the cap to the President’s salary provides a reasonable level of compensation for high value Federal contractors while ensuring taxpayers are not saddled with paying excessive compensation costs. 

And to be clear, nothing in the proposal limits the amount contractors pay their executives. The cap only limits how much the government will reimburse the contractors for the services of those executives. 

We hope that this Congress, unlike the last one, will heed the urgent call to restore fiscal responsibility before additional taxpayer dollars that could be used to fund critical agency mission work are wasted unnecessarily to pay for costly overhead in the form of excessive contractor compensation.