Senators Introduce Bill to Reel in Excessive Contractor Compensation

Last week, Senators Barbara Boxer (D-CA) and Charles Grassley (R-IA) proposed the Commonsense Contractor Compensation Act of 2012 (S. 2198) to reduce taxpayer reimbursement of government contractor compensation. The bill would apply a $400,000 compensation cap to all contractor employees, not just defense contractors as mandated in the 2012 Defense Authorization bill (see Sec. 803).

This bill would lower from nearly $700,000 (a figure that’s expected to rise in the future), the amount contractors can bill the government for compensation. The contractor compensation cap was a hot topic in 2011, and is burning bright in 2012, with federal employees pitted against contractor employees. Even the White House has weighed in, blogging in January that the contractor executive compensation cap of $693,951 should be reduced to a "level on par with what the Government pays its own executives—approximately $200,000."

A similar bill in the House, Rep. Paul Tonko’s (D-NY) Stop Excessive Payments to Government Contractors Act of 2011 (H.R. 2980), would bring the cap under that $200,000 level.

There is no doubting that this issue is polarizing. A controversial new proposal by the House Budget Committee, doesn’t even try to hide the fact that it wants to sacrifice federal jobs in order to prop up the private sector. The Committee, chaired by Rep. Paul Ryan (R-WI) wants to control “unsustainable growth” and “privileges” enjoyed by government employees by:

[Boosting] private-sector employment by slowing the growth of the public sector, achieving a 10 percent reduction over the next three years in the federal workforce through attrition, coupled with a pay freeze until 2015 and reforms to government workers’ fringe benefits.

What that proposal doesn’t say is that the slightest uptick in federal employment is nothing more than a blip after flatlining around 1951—yes, 1951. But the blended, or shadow, workforce of contractors has been growing at an alarming rate and cost, adding millions of employees over the years at a cost of over $320 billion each year. I’m no economist or labor expert, but are we really reducing the size of the federal government if we cut federal employees and hire contractors to take their place?

The myth that outsourcing those jobs will save taxpayers money has been busted because, as POGO proved last fall, contractors often cost more than federal employees, regardless of sporadic claims that compensation for public employees outpaces the private sector. Reports by the government (Congressional Budget Office) and think tanks (The Heritage Foundation) make a lot of claims about the private sector costing less, but I have yet to see them prove that the private sector and the federal contracting marketplace are truly equal. The unsustainable growth that Rep. Ryan rails against is really the trillion dollars that the federal government hands out each year in contracts and grants.

There are many ways to solve our budget problems, but without genuine data on the size and lifecycle costs of the total government workforce, no one really knows how best to proceed. If Congress is serious about taking on unsustainable growth and equalizing the public and private sectors, they should pass the Boxer-Grassley and Tonko bills.

It appears that some Members of Congress are interested in learning more about the cost of service contracts. The Senate Subcommittee on Contracting Oversight, chaired by Senator Claire McCaskill (D-MO), is holding a hearing titled "Contractors: how much are they costing the government?" this Thursday, March 29, 2012, at 10:00 am, Dirksen Senate Office Building, SD-342.

According to the Subcommittee, the hearing will "examine whether and how cost information is used by government agencies to make decisions about whether work should be performed by federal employees or contractors. The hearing will also assess what the government is doing to improve the data available to and develop best practices to determine when using contractors to provide a given service will constitute the most effective use of taxpayer dollars. The hearing will also explore how agencies can control the costs of contracting while still maintaining effective contract management and oversight."

As exclaimed in Animal House, "Oh, boy, this is gonna be great!"