The proposal builds on previous Administration proposals and language included in the President’s Budget, and marks another important step in our ongoing effort to buy smarter and end wasteful, fiscally imprudent contract spending.
Under current law, contractors that are paid based on their incurred costs (which represents about one-third of current contract spending) may demand reimbursement for executive salaries, bonuses and other compensation up to the level of the Nation’s top private sector CEOs and other senior executives. This taxpayer reimbursement level has skyrocketed by more than 300 percent since the law was enacted in the mid-1990s.The president believes excessive compensation for executives is unnecessarily driving up costs for the government. What is excessive? Apparently, anything more than the president himself makes [emphasis added]:
The Administration’s proposal calls on Congress to abolish the current formula and instead tie the reimbursement cap to the President’s salary and apply it across-the-board to all defense and civilian cost-reimbursement contracts. Tying the cap to the President’s salary provides a reasonable level of compensation for high value Federal contractors while ensuring taxpayers are not saddled with paying excessive compensation costs.The White House is quick to point out that there is no actual cap being instituted for private sector firms:
And to be clear, nothing in the proposal limits the amount contractors pay their executives. The cap only limits how much the government will reimburse the contractors for the services of those executives.Despite the caveat, as the president likes to say, let us be clear. Firms that pay their executives more than the president makes are "[saddling] taxpayers ... with paying excessive compensation costs." IN case there was any doubt, Jordan closes with this:
We hope that this Congress, unlike the last one, will heed the urgent call to restore fiscal responsibility before additional taxpayer dollars that could be used to fund critical agency mission work are wasted unnecessarily to pay for costly overhead in the form of excessive contractor compensation.
Note: This article first appeared at The Weekly Standard.