Bipartisan Effort to Call on OMB to Act on Government Contractor Executive Compensation

By on September 16, 2011 in Current Events with 3 Comments

U.S. Senator Barbara Boxer (D-CA), Senator Chuck Grassley (R-IA) and
Congressman Paul Tonko (D-NY) recently called on the Office of Management
and Budget (OMB) to ensure transparency in government contracting by
issuing a determination on the maximum allowable compensation for
government contractor senior executives before the end of the current
fiscal year. OMB is required by law to issue such a determination, but
has yet to do so this fiscal year.

The executive compensation benchmark was first instituted in 1998 to
limit the amount the top five executives of a government contractor can
charge taxpayers for their salary. Currently government contractors can
charge taxpayers $693,951 for their top employees’ salaries, an amount
that has nearly doubled in the last twelve years. The benchmark does not
in any way limit compensation for those executives from non-government
revenue streams, nor does it affect employees at the contracting firms
outside of the top five executives.

In their letter, the legislators wrote, “At a time when millions of
Americans are unemployed, and millions more are taking home paychecks
that don’t go as far as they used to, we ask you to determine the
executive compensation benchmark for 2011.  The American people deserve
to know exactly how much government contractor executives will charge
the taxpayer for their salaries this year.”

The full text of the letter is below:

September 15, 2011

The Honorable Jacob J. Lew, Director
Office of Management and Budget
725 17th Street, NW
Washington, DC 20503

Dear Director Lew:

As you know, the Office of Federal Procurement Policy (OFPP) has not yet
determined the maximum amount of allowable compensation for senior
executives of government contractors (the “executive compensation
benchmark”) for 2011.  With the end of the federal government’s fiscal
year fast approaching, OFPP has been silent on this year’s increase in
the executive compensation benchmark, despite the fact that since 2004
Federal Register notices increasing the maximum amount have been
submitted as early as March 25th, but never later than May 14th.

The executive compensation benchmark was created to limit the amount
government contractors can charge taxpayers for the salaries of their
top executives.  In 1998, when it was first determined, the executive
compensation benchmark for the top five employees of a government
contractor was $340,650.  In the last 12 years that amount has more than
doubled, and today government contractors can charge taxpayers $693,951
for their top employees’ salaries.  From 1998 to 2010 the benchmark has
grown 53 percent faster than the rate of inflation.

As you know, the executive compensation benchmark only applies for the
five most highly compensated executives for each contractor, each of
whom often earn total yearly salaries in the millions from other company
revenue streams.  In addition, the benchmark does nothing to stop other
contractor employees (those not in a company’s top five highest paid
employees) from earning more than the $693,651 limitation directly from
taxpayer funds.

At a time when millions of Americans are unemployed, and millions more
are taking home paychecks that don’t go as far as they used to, we ask
you to determine the executive compensation benchmark for 2011.  The
American people deserve to know exactly how much government contractor
executives will charge the taxpayer for their salaries this year.

Sincerely,

Barbara Boxer
United States Senator

Chuck Grassley
United States Senator

Paul Tonko
United States Representative

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