Senate Bill Lowers Contractor Compensation Cap Nearly $300K

A Senate bill would reset the maximum amount taxpayers pay government contractors for their employees’ compensation back to its original level, adjusted for inflation, and would change the formula for determining future increases in this level. This is commonly referred within government and contracting circles as the contractor compensation cap.

The Senate Armed Services Committee publicly released its version of the Fiscal Year 2014 National Defense Authorization Act (NDAA) on Tuesday.

The wide-ranging bill departs from its House counterpart on the contractor compensation cap issue by significantly lowering the amount of the cap from its current level and by applying it across the board. The House version of the NDAA would not reduce the cap and would create huge loopholes that would mean the cap would not apply to many contractors.

Since 1998, “the cap has more than doubled to $763,029 for 2011 and 2012, and is expected to increase to more than $950,000 in 2013,” according to the Senate Armed Services Committee report that accompanies the legislation. “By contrast, if the original cap had been adjusted for inflation it would now be only $487,325.”

“The committee concludes that the growth of the cap by almost $300,000 more than the rate of inflation cannot be justified.”

While the Senate Armed Services Committee proposal does not go as far as legislation by a bipartisan group of senators or a parallel proposal by some House Democrats – plans that would set the cap at the vice president’s salary ($230,000) and save hundreds of millions each year – the Senate committee’s bill would save far more money than the current House version of the NDAA.

“At a time when most Americans are seeing little or no increase in their paychecks and budget constraints require the Department of Defense to find efficiencies in all areas, the committee concludes that increases of this magnitude are unsupportable,” the Senate committee report adds.

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