OMB Increases Executive Compensation Benchmark By Nearly $190,000

Today’s advance Federal Register contains an Office of Management and Budget/Office of Federal Procurement Policy notice setting $952,308 as the maximum executive compensation benchmark amount allowable under government contracts for Fiscal Year 2012.

The benchmark compensation amount limits the allowability of compensation costs under government contracts in accordance with FAR 31.205-6(p), but does not limit the compensation an executive may otherwise receive. The benchmark compensation amount applies equally to both defense and civilian procurement agencies.

Included with the notice is a memorandum to the Heads of Executive Departments and Agencies providing more information on this compensation cap.

The memorandum notes that when the cap was raised to $693,951 for FY 2010, President Obama called on Congress to repeal the current statutory formula and replace it with a lower limit that is on par with what the government pays its own executives and employees. However, Congress has not revised the cap amount or the formula for adjusting the cap and made only a modest change that expanded application of the statutory cap
on defense contracts from the contractor’s senior executives to all of its employees.

As a result, the Obama Administration is compelled by statute to raise the cap for another year in accordance with the formula in 41 USC 1127,

About William Van Huis

Bill Van Huis is a Senior Writer/Analyst for Wolters Kluwer Law & Business who tracks and analyzes new regulations impacting federal government contracting. He also follows court decisions involving bid protests and contract disputes. You can find his work in WK publications like Government Contract Reports and the FAR and DFARS Matrix Tools. Bill is a licensed attorney and a Certified Professional Contracts Manager. Prior to joining WK, Bill worked both inside and outside state and local government in the areas of procurement and municipal finance. Bill also worked as a staff attorney for the Illinois Supreme Court.
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