New York Follows Feds' Lead, Caps Contractor Executive Compensation

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January 19, 2012

Section 803 of the National Defense Authorization Act for Fiscal Year 2012 (H.R. 1540) expanded the cap on contractor executive compensation to "any contractor employee" (with exceptions for scientists and engineers). There was hope that the cap would be reduced to the $200,000 range (see Recommendation 4), but in the end, the amount, which currently is $693,951, wasn’t touched. The issue is now in the hands of the Office of Federal Procurement Policy (OFPP), which decided to avoid setting a cap in 2011, and with changes in leadership, will be placed in a very uncomfortable position knowing that the Administration wanted a lower cap.

Following that lead, yesterday, New York Governor Andrew Cuomo signed an executive order to limit the amount of state funding for service providers. The Governor’s press release stated:

We must make sure that taxpayers' dollars are always used efficiently and effectively to improve the lives of New Yorkers. This Executive Order will prevent public funds from being diverted to excessive compensation and unnecessary administrative costs, and will ensure that taxpayer dollars are being used to help New Yorkers in need.

As a result, administrative costs are capped at 25 percent (15 percent starting in 2015) of operating expenses and executive compensation is restricted to $199,700 per year, subject to annual adjustments. Interestingly, the order stated that “in no event shall such figure exceed Level I of the federal government’s Rates of Basic Pay for the Executive Schedule promulgated by the United States Office of Personnel Management,” which is what POGO proposed in its Bad Business report, which documented billions in potentially excessive costs when the government pays contractors to do work.

Image via Flickr user wallyg.

Topics: Contract Oversight

Related Content: Waste

Authors: Scott H. Amey, J.D.

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