December 03, 2013
Tim Kauffman
[email protected]

President of Largest Federal Union Expresses Outrage Over Increase in Contractor Compensation Cap

WASHINGTON – American Federation of Government Employees National President J. David Cox Sr. today expressed his outrage at the news that the cap on annual compensation paid to contractor employees using taxpayer dollars has been increased to an astounding $952,000.

The new limit announced by the Office of Management and Budget reflects a one-year increase of nearly $190,000 and a four-year increase of 55 percent. The compensation cap has nearly quadrupled since the mid-1990s.

“Christmas has come early for federal contractor employees, yet the government’s own employees are looking at stockings full of coal,” Cox said.

Federal civilian employees have had their pay frozen for three straight years and incurred a week of lost wages this summer due to sequestration furloughs. Meanwhile, the Budget Conference Committee reportedly is considering cutting federal employee compensation even further by requiring employees to contribute an additional 1.2 percent of their salaries toward a retirement system that is already fully-funded.

“At the same time some in Congress are advocating an array of substantial compensation cuts for modestly-paid VA nurses and Border Patrol agents, wealthy contractors are getting a fat pay raise on the taxpayer’s dime,” Cox said. “It is the height of irresponsible governing and leadership to allow this ridiculous increase in taxpayer-funded compensation for contractor executives.”

OMB announced the new compensation cap on the same day President Obama delivered a speech decrying income inequality. Yet true inequality is taking place in federal agencies and offices across the country, where federal employees who have had their pay frozen for three years work beside contractors who are reaping excessive pay increases at the taxpayer’s expense.

“How can the President have allowed this to happen on the same day he spoke against income inequality in the nation’s heartland? Why is the Administration enriching the top 1% of the nation’s contractors but calling for cuts in compensation to the working and middle class Americans who make up the federal workforce? Administration officials could have demanded a much lower cap on contractor compensation in the budget, but they didn’t,” Cox said.

For years, AFGE has been advocating lowering the cap to the vice president’s salary, currently $230,700. Based on a limited survey of contractors conducted by the Government Accountability Office, annual savings from capping the compensation rate at $230,700 just for Department of Defense contractors would be at least $440 million per year.  But the amount that could be saved is likely to be vastly more, since GAO had such a small sample.

Lowering the cap would limit how much corporations could charge taxpayers for each contractor, although firms would be allowed to pay employees in excess of the cap out of their own profits.

“American taxpayers should be appalled by a system that encourages private-sector firms to bill the government for these outrageous salaries while Congress debates slashing food assistance for the poor, gutting Social Security and veterans benefits, and lowering compensation for the working- and middle-class employees who make up the federal workforce,” Cox said.

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