U.S. Senators Barbara Boxer (D-CA), Chuck Grassley (R-IA), Joe Manchin (D-WV) and Congressman Paul Tonko (D-NY) today introduced the Commonsense Contractor Compensation Act of 2013, bipartisan, bicameral legislation that would cap the maximum amount taxpayers reimburse all government contractors for their salaries at the same amount as the Vice President's salary, currently $230,700.
In a report released on Wednesday, the U.S. Government Accountability Office (GAO) found that reducing this cap to $230,700 would have saved at least $440 million annually for the years 2010-2012 just among the 27 contractors that provided data to the GAO -- companies that together accounted for just 7 percent of Defense Department contract obligations for 2012.
"This stunning GAO report shows that thousands of government contractors are raking in taxpayer-funded salaries that are significantly more than what the Vice President of the United States and members of the President's Cabinet make," Senator Boxer said. "Taxpayers should not be on the hook for exorbitant government contractor salaries, and this bill will crack down on this waste of taxpayer dollars."
"The direct taxpayer-funded salaries of contractors government-wide clearly need to be contained, and this legislation is designed to do so in a comprehensive way," Senator Grassley said. "There's no justification for taxpayer-funded payments to be higher than the salary of the President's cabinet members."
"To the people of West Virginia, it doesn't make any sense that taxpayers are paying executive contractors almost four times as much as we pay the Vice President or the Secretary of Defense," Senator Manchin said. "This commonsense proposal does not prevent contractors from earning higher salaries than this limitation; but now, taxpayers won't foot the bill. I am encouraged that this bill shares bipartisan support and will continue to work with both Democrats and Republicans to finally cap the compensation of executive contractors."
"When taxpayer-funded federal contractors take home up to four times the amount our military leadership earns, it is a problem that needs to be addressed," Congressman Tonko said. "This legislation is well overdue and the recently released report from the GAO that our bill will save taxpayers billions of dollars every year only reinforces the need to act now. I thank Senators Boxer, Grassley and Manchin for their leadership on this issue and look forward to continuing our work to put a stop to this wasteful and inefficient spending in Washington."
The Obama Administration recently came out in support of efforts to limit excessive pay for federal contractors, and predicted that it would save taxpayers hundreds of millions of dollars.
Right now, government contractors can bill taxpayers as much as $763,000 to pay for the salaries of their top five executives -- an increase in real terms of 63 percent since the cap was set in 1998. Unless Congress acts soon to rein in these limits, the salary cap for top executives is expected to rise again -- to $950,000 later this year.
The Commonsense Contractor Compensation Act would not only lower the salary cap to $230,700 -- it would also extend the cap to cover all defense and civilian contractor employees. Currently, the $763,000 cap applies only to the salaries of defense contractors and the five leading executives of non-defense government contractors. Other employees of non-defense contractors can and do earn taxpayer-funded amounts in excess of the current benchmark.
The legislation includes a narrow exemption to the cap for scientists, engineers and other specialists if an agency determines it is necessary to ensure access to individuals with specialized skills. Additionally, the measure would only limit what an executive or other employee is paid by the federal government -- the employee could still receive additional compensation from the contractor's other revenue streams.
Boxer and her colleagues have been working for several years to curb excessive taxpayer-funded salaries for government contractors. The new bill builds on their previous measures to limit taxpayer-funded salaries for defense contractor employees, which were included as part of the Senate-passed defense authorization bills in 2012 and 2011.