Complications Ahead as Executive Compensation Level Reset to $487,000

Arlington, Va., January 3, 2014—The Professional Services Council (PSC) warned a provision in the recently signed Bipartisan Budget Act of 2013 (BBA) that will lower the compensation cap reimbursement for contractor employees to $487,000 could cause significant complications for government and contractors.

“While PSC has long felt the formula determining the reimbursement cap for contractors needed to be revised, we are concerned the new, arbitrary BBA cap will inhibit the ability of companies to attract top talent,” said PSC President and CEO Stan Soloway. “That concern is now magnified by the many complications created by the combination of laws and as yet unwritten implementing regulations.” 

PSC’s concerns are further exacerbated by the extraordinarily broad definition of “compensation” contained in the legislation. “While many have sought to portray the cap as being comparable to federal salaries, that remains a disingenuous suggestion since the current definition covers far more than just salary,” Soloway said.

The BBA, which the president signed on December 26, permits agencies to establish exemptions from the cap for positions in science, engineering, or other positions that agencies deem necessary to ensure continued access to critical skills and capabilities. “Implementing regulations that detail those exemptions will be critical in determining how detrimental the new, arbitrary cap will be,” Soloway said. 

“The FAR Council and agencies should act swiftly to propose the requisite regulatory coverage and clarify the exemptions, to ensure contractors are able to adequately respond to the new requirements,” he said. 

“The government took 18 months to issue proposed regulations to implement a 2012 NDAA provision that expanded the cap to all Defense contractors and those proposed regulations have still not been finalized,” Soloway noted. “Similar delays this time will cause contracting and accounting havoc across the government.”

On December 26, 2013, the president also signed the National Defense Authorization Act (NDAA) for fiscal year 2014. The BBA and NDAA included almost identical provisions to establish new government-wide benchmark compensation levels for all contractor employees. The BBA provision, however, set the cap lower than the NDAA provision, which would have set the cap at $625,000. Since the president signed the BBA after the NDAA, the BBA provision overrides the NDAA provision.

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About PSC: PSC is the voice of the government professional and technical services industry. PSC’s more than 370 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.