As a Federal Employee and Taxpayer – I’m Tired of Paying for Your HIGH Salaries!

For 2011, the allowable costs were set at $763,029!

The allowability of the compensation costs for the senior executives of Government contractors is capped by statute (10 U.S.C. 2324(e)(1)(p)  and 41 U.S.C. 256(e)(1)(p)) at a benchmark executive compensation amount.  The benchmark amount does not limit the amount of compensation that an executive may otherwise receive.  However, the compensation costs in excess of the benchmark amount are unallowable costs for Government contract purposes.  While the benchmark executive compensation amount is the maximum allowable amount of compensation costs for certain executives of Government contractors, the benchmark amount as applied to a particular executive is not necessarily a safe harbor.  Without regard to the benchmark compensation amount, the allowable compensation costs for each affected executive are still subject to the Federal Acquisition Regulation and the Cost Accounting Standards as applicable and appropriate to the circumstances, e.g., reasonableness and allocability.  The Executive Compensation Cap is implemented at FAR 31.205-6(p).

The Administrator, Office of Federal Procurement Policy, (OFPP), determines the benchmark executive compensation amount as required by Section 39 of the OFPP Act, as amended (41 U.S.C. 435).  The benchmark amount applicable for a fiscal year is the median amount of the compensation provided for all senior executives of all benchmark corporations per commercially available surveys for the most recent year for which data is available at the time the OFPP Administrator determines the amount.  The data used is the median (50th percentile) amount of compensation (total amount of wages, salary, bonuses and deferred compensation) accrued over a recent 12-month period for the top five highest paid employees in management positions at each home office and each segment of publicly traded U.S. companies with annual sales over $50 million.  Once a benchmark compensation amount is established for a fiscal year, it is applicable for that fiscal year for a contractor and subsequent fiscal years, unless and until revised by OFPP.

The benchmark executive compensation amount for a fiscal year as determined by the OFPP Administrator applies to contract costs incurred after a stated date.  If the contractor’s fiscal year does not coincide with the fiscal year for the benchmark compensation amount as determined by OFPP, the benchmark compensation amount as determined by OFPP is adjusted for the contractor’s fiscal year, and the benchmark amount, as adjusted, is applicable to the contractor’s fiscal year.    The sum of the pro-rata portions of the benchmark compensation amounts for the fiscal years straddled by the contractor’s fiscal year is the benchmark amount, as adjusted, applicable to the contractor.