April 24, 2012
Enid Doggett
(202) 639-6419

Union Blasts 10% Hike in Salaries for Government Contractors

WASHINGTON – The nation’s largest federal employee union today expressed profound disappointment over the Office of Management and Budget’s announcement of a 10 percent increase in the salaries that federal contractors can charge taxpayers.

The American Federation of Government Employees for years has been calling attention to runaway contractor payments. In a notice issued Monday in the Federal Register, OMB increased the maximum annual salary that government contractors can charge taxpayers for each of their five most highly paid executives from $693,951 in 2010 to $763,029 in 2011. Other non-Defense contractor employees are not subject to the cap and can earn far larger salaries that are subsidized by taxpayers.

The compensation cap has tripled since 1995 and will continue to grow unless the statutory formula used for determining the cap is revised.

“Current federal employees have had their own salaries frozen for two years and new employees will have to pay four times as much in retirement contributions, saving the government $75 billion. Yet nothing is being done to trim out-of-control contractor spending,” AFGE National President John Gage said. “Taxpayers should not be on the hook for these outrageous salaries that no one in government earns – not federal employees, not members of Congress and not even the President of the United States.”

In March, a bipartisan group of senators led by Senator Barbara Boxer of California introduced a bill that would cap the reimbursement rate at the president’s salary, currently $400,000, and apply it to all contractor employees. Lowering the cap would not limit how much these contractor employees can earn, only how much can be charged to the government.

A similar bill introduced in the House by Representative Paul Tonko would lower the cap to $200,000 and apply it to all contractors.

OMB itself noted that increase in the compensation cap “has far outpaced the rate of inflation, the rate of growth of private-sector salaries generally, and the rate of growth of Federal salaries – forcing our taxpayers to reimburse contractors for levels of executive compensation that cannot be justified for Federal contract work.”

Unfortunately, OMB has not endorsed extending the cap to all contractor employees, proposing instead to lower the cap to $200,000 for only the five most lavishly compensated employees at each government contractor.


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