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Congressman Paul Tonko today joined U.S. Senator Barbara Boxer (D-CA), and Senator Chuck Grassley (R-IA) in calling on the Office of Management and Budget (OMB) to ensure transparency in government contracting by issuing a determination on the maximum allowable compensation for government contractor senior executives before the end of the current fiscal year. OMB is required by law to issue such a determination, but has yet to do so this fiscal year.

The executive compensation benchmark was first instituted in 1998 to limit the amount the top five executives of a government contractor can charge taxpayers for their salary. Currently government contractors can charge taxpayers $693,951 for their top employees’ salaries, an amount that has nearly doubled in the last twelve years. The benchmark does not in any way limit compensation for those executives from non-government revenue streams, nor does it affect employees at the contracting firms outside of the top five executives.

In their letter, the legislators wrote, “At a time when millions of Americans are unemployed, and millions more are taking home paychecks that don’t go as far as they used to, we ask you to determine the executive compensation benchmark for 2011.  The American people deserve to know exactly how much government contractor executives will charge the taxpayer for their salaries this year.”

The full text of the letter is below:

September 15, 2011 

The Honorable Jacob J. Lew, Director

Office of Management and Budget

725 17^th Street, NW

Washington, DC 20503

Dear Director Lew:

As you know, the Office of Federal Procurement Policy (OFPP) has not yet determined the maximum amount of allowable compensation for senior executives of government contractors (the “executive compensation benchmark”) for 2011.  With the end of the federal government’s fiscal year fast approaching, OFPP has been silent on this year’s increase in the executive compensation benchmark, despite the fact that since 2004 Federal Register notices increasing the maximum amount have been submitted as early as March 25^th, but never later than May 14^th.

The executive compensation benchmark was created to limit the amount government contractors can charge taxpayers for the salaries of their top executives.  In 1998, when it was first determined, the executive compensation benchmark for the top five employees of a government contractor was $340,650.  In the last 12 years that amount has more than doubled, and today government contractors can charge taxpayers $693,951 for their top employees’ salaries.  From 1998 to 2010 the benchmark has grown 53 percent faster than the rate of inflation. 

As you know, the executive compensation benchmark only applies for the five most highly compensated executives for each contractor, each of whom often earn total yearly salaries in the millions from other company revenue streams.  In addition, the benchmark does nothing to stop other contractor employees (those not in a company’s top five highest paid employees) from earning more than the $693,651 limitation directly from taxpayer funds.  

At a time when millions of Americans are unemployed, and millions more are taking home paychecks that don’t go as far as they used to, we ask you to determine the executive compensation benchmark for 2011.  The American people deserve to know exactly how much government contractor executives will charge the taxpayer for their salaries this year. 

Sincerely,

Barbara Boxer

United States Senator

Chuck Grassley

United States Senator

Paul Tonko

United States Representative

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