National Defense Authorization Act's Impact on Executive Benchmark Amount
The "Executive Benchmark Amount" is currently set at $763,029 as determined by the Office of Federal Procurement Policy (OFPP) for 2011 and beyond, until revised. The benchmark amount is the ceiling, beyond which Government contractors cannot bill the Government. However, it is well known and frequently discussed, that executive compensation for Government contractor employees remains a target for reduction by numerous Government officials. Several have made recommendations, so far without success, to drastically limit the amount of compensation that the Government will allow on its contracts. In late 2011, the President suggested that the formula approach used by OFPP should be set aside; and the ceiling amount should be fixed at $200,000.
The Senate Bill for the 2013 National Defense Authorization Act (NDAA) included a limitation on allowable Government contractor compensation of $230,700. The House did not accept the provision it its own Bill. Initially the House version included a proposed ceiling amount of $400,000, which is the President's salary. That ceiling amount was also not accepted in the final House Bill, which became the 2013 NDAA. The 2013 NDAA does establish the requirement for further evaluation of the impact of significant reductions in allowable Government contractor compensation. Section 864 of the 2013 NDAA, titled "REPORT ON ALLOWABLE COSTS OF COMPENSATION OF CONTRACTOR EMPLOYEES," directs the Comptroller General to, within 120 days of enactment of the NDAA, report to Congress "on the effect of reducing the allowable costs of contractor compensation of employees to the amount payable to the President under section 102 of title 3, United States Code, or to the amount payable to the Vice President under section 104 of such title." In plain language, the ceiling amounts to be considered are $400,000 (the President), and $230,700 (the Vice President). Congress is looking for the impact for imposing either amount as a ceiling. Our interpretation of this effort is that the goal is to maximize the potential contribution to budget/deficit reduction, and satisfy several political constituencies by further penalizing Government contractors. We anticipate that, if the Comptroller General doesn't reach the apparent desired conclusion, we can expect an Executive Order.