GAO Issues Report on Defense Contractor Compensation Cost Cap

A recent Government Accountability Office report concludes that lowering the cap on employee compensation for Department of Defense contractors would reduce contract costs by $180 million if set at the Presidential rate of $400,000, and $440 million at the Vice Presidential rate of $230,700.

GAO found that most government representatives generally favor reducing the cap to cut contract costs, and that employee compensation levels have outpaced inflation and growth of federal employee salaries.

Although industry associations and contractors acknowledged that lowering the cap would not prevent them from compensating employees at a higher level, they expressed concern that doing so would reduce profits, and negatively impact their ability to raise capital.  They also noted that compensation costs are generally based on market surveys of compensation paid by the private sector, and a lower cap could negatively affect their ability to attract and retain top talent.

Defense Contractors: Information on the Impact of Reducing the Cap on Employee Compensation Costs http://www.gao.gov/assets/660/655319.pdf, GAO-13-566, June 19, 2013.

This entry was posted in General. Bookmark the permalink.

Leave a Reply

Your email address will not be published.