PSC: Compensation Cap Proposal 'Good Rhetoric but Naïve, Bad Policy'

Arlington, Va., April 23, 2012—The Professional Services Council today warned that a White House recommendation to arbitrarily cap contractor reimbursements at $200,000 would hurt both the government’s and industry’s ability to access critical skills.

In response to today’s Office of Management and Budget Federal Register notice stating that Congress should cap reimbursement at $200,000, rather than at the level dictated by the statutory formula used to determine a fair and reasonable compensation rate commensurate with the commercial market, PSC President and CEO Stan Soloway said:

Today’s formal announcement of the revised cap on contractor employee salaries breaks no new ground since it was first signaled several months ago. Yet, while we appreciate that OMB has followed the long standing statutory requirement to set the salary cap based on a formula that assesses average, fair and reasonable compensation for similar positions in the commercial world, it is most disheartening to see the administration continue to advocate for the elimination of the formula in favor of an arbitrary cap tied to federal employee salaries. Under the administration's proposal, “fair and reasonable” would be replaced by “arbitrary” and the competitive realities of the marketplace for talent will be rendered moot. 

While this proposal might make for good political rhetoric, it is poorly conceived and highly naïve as a framework for policy.  After all, it is widely and well documented that the federal pay scale is one of the most significant barriers to the government’s ability to recruit and retain highly skilled professionals, particularly in the technology-related fields. And since pay parity is unlikely to be dealt with in the near future, all this proposal would do is saddle the government’s contractors—currently its most reliable conduit to such talent—with the same competitive limitations that impede the government. Beyond that, it is not even representative of the actual government salary cap it claims to reflect. 

A far wiser path forward would include a focus on giving agencies more flexibility in how they hire, compensate and develop different employee groups, rather than impose sweeping pay and hiring freezes. It is the norm in the private sector to focus scarce resources, including compensation, on critical, core skills. 

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About PSC: PSC has been the voice of the government professional and technical services industry for 40 years. PSC’s nearly 350 member companies represent small, medium, and large businesses that provide federal agencies with services of all kinds, including information technology, engineering, logistics, facilities management, operations and maintenance, consulting, international development, scientific, social, environmental services, and more. Together, the trade association’s members employ hundreds of thousands of Americans in all 50 states. Follow PSC on Twitter @PSCSpeaks and @StanSoloway.