Rule will implement contractor pay cap

The administration has published an interim rule to implement a law imposing a new employee compensation cap on federal contractors.

The interim rule, issued by the Defense Department, General Services Administration and NASA, amends the Federal Acquisition Regulation to implement the pay-cap measure, which was contained in the Bipartisan Budget Act of 2013 enacted last December.

That measure sets the initial limitation on contractor and subcontractor employee compensation at $487,000 per year, adjusted annually to reflect the change in the Employment Cost Index for all workers, as calculated by the Bureau of Labor Statistics. The previous cap on annual compensation for top federal contract employees was $952,000.

According the interim rule published in the June 24 Federal Register, the new cap applies to compensation for all contractor and subcontractor employees for contracts awarded, and costs incurred, on or after June 24, 2014.

The rule also implements the portion of the Budget Act that authorizes the heads of executive agencies to establish “one or more narrowly targeted exceptions for scientists, engineers, or other specialists upon a determination that such exceptions are needed to ensure that the executive agency has continued access to needed skills and capabilities.”

Labor groups such as the American Federation of Government Employees have long advocated a lower pay cap for contractors.

“AFGE appreciates that the administration has issued the rule in timely fashion and looks forward to providing helpful advice to ensure that the cap applies to all relevant contracts,” said AFGE National President J. David Cox Sr.

Among other things, the union maintains that the final rule, when it is issued, "must explicitly state that the cap applies to fixed-price contracts for which cost analysis is performed." AFGE cites statistics that show the federal government in fiscal 2012 spent $340 billion on fixed-price contracts and $180 billion dollars on cost-reimbursement contracts.

“Failing to include relevant fixed-price contracts under the compensation cap would arbitrarily exclude tens of billions of dollars spent each year on government contracts,” Cox said.

Reader comments

Fri, Jun 27, 2014 James Wash DC

Another well intentioned but idiotic rule. So if the Gvt buys Apple products or services, they will decide what is a reasonable amount to pay for? Who cares how much the CEO of Apple is being paid? If the product or services are competitively priced for the value they offer, then that should be it. So now we have to burden businesses that do business with the gvt to have another bureaucratic hurdle. It is no surprise the IRS loses its email and Healthcare.gov is a debacle. Soon no one in private industry will want to work with the gvt.

Fri, Jun 27, 2014

Eric's comment is interesting. However, at the same time there will be a rise in salary for many many of the governments underpaid employees based on education and job requirements.

Thu, Jun 26, 2014 Eric

I think all federal employees, including contractors, should be capped at no more than the median wage for their jobs in the private sector for their working location. It would save the taxpayer a bundle of money and be totally fair.

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