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GAO Report May Be Scissors Needed to Cut Compensation Cap

GAO Compensation Cap Graph

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Despite tasting defeat a few weeks ago, Representatives Paul Tonko (D-N.Y.) and Jackie Speier (D-Calif.) are not giving up on their efforts to reduce the taxpayers’ burden to pay contractor compensation. That cap doesn’t limit how much contractors compensate their employees, it only limits how much of that compensation the taxpayers have to pay. After receiving the Government Accountability Office’s (GAO) contractor compensation cap report last week, Representatives Tonko and Speier are more determined than ever to reduce the cap and save the government billions. They introduced H.R. 2444, a stand-alone bill to “implement common sense controls on the taxpayer-funded salaries of government contractors by limiting reimbursement for excessive compensation.”

The GAO found that taxpayers could save approximately $180 million to $440 million each year by reducing the contractor compensation cap to the salary level of the President or Vice-president, respectively. Those savings, however, are only the tip of the iceberg, as GAO only looked at a small sampling of contractors. When applied to all contractors, savings could approach $5 billion annually. Additionally, GAO didn’t consider the impact on “forward pricing” of fixed-price contracts, which one POGO source stated “probably doubles any savings estimate.” Our colleagues at the Center for Effective Government have been out front on the fixed-price issue stating that “whenever Federal Acquisition Regulation cost principles apply to the pricing of a contract [i.e. when cost analysis is used pursuant to FAR 31.102], the caps should apply.” Unfortunately, contractors and some government officials seem to want to ignore that fact.

The Tonko-Speier bill is the companion bill to S. 1192, which is co-sponsored by Senators Barbara Boxer (D-Calif.), Chuck Grassley (R-Iowa), and Joe Manchin (D-W.V.). Both commonsense bills have our strong support.

Image from the Government Accountability Office.

By: Scott H. Amey, J.D.
General Counsel, POGO

Scott Amey Scott Amey is General Counsel for the Project On Government Oversight. Some of Scott's investigations center on contract oversight, human trafficking, the revolving door, and ethics issues.

Topics: Contract Oversight

Related Content: Competition in Federal Contracting, Contractor Accountability, Contractor Compensation, Cost Accounting Standards, Risky Contract Vehicles, Transparency in Contracting

Authors: Scott H. Amey, J.D.

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