AFGE Applauds White House for Timely Release of Rule Lowering Federal Contractor Compensation Cap

WASHINGTON, June 24, 2014 /PRNewswire-USNewswire/ -- The American Federation of Government Employees today thanked the White House for the timely release of an interim rule that will put into effect a 2013 law lowering the cap on taxpayer-subsidized compensation for federal contractor employees from $952,000 to $487,000 a year.

The provision was included in the Bipartisan Budget Act of 2013 thanks to the extraordinary leadership of Senate Budget Committee Chair Patty Murray and House Budget Committee Ranking Member Chris Van Hollen. AFGE appreciates the behind-the-scenes efforts by both lawmakers to ensure that the law is implemented consistent with congressional intent and the Federal Acquisition Regulation. 

"The message is out to the top 1% of federal contractors: your license to loot the Treasury is significantly revoked," AFGE National President J. David Cox Sr. said. "AFGE appreciates that the administration has issued the rule in timely fashion and looks forward to providing helpful advice to ensure that the cap applies to all relevant contracts."

In particular, the final rule must explicitly state that the cap applies to fixed-price contracts for which cost analysis is performed, consistent with Federal Acquisition Regulation 31.102. Many larger, fixed-price government contracts are priced on the basis of cost analysis. Forward-pricing rate agreements used to negotiate fixed-price contracts include the same elements of cost as those used on cost-reimbursement contracts.

According to the Federal Procurement Data System, the federal government spent $340 billion on fixed-price contracts and $180 billion dollars on cost-reimbursement contracts in fiscal 2012. Therefore, applying the compensation cap on fixed-price contracts as well as cost-reimbursement contracts can achieve tremendous savings to taxpayers.

"Failing to include relevant fixed-price contracts under the compensation cap would arbitrarily exclude tens of billions of dollars spent each year on government contracts," Cox said.

While looking forward to implementation of the lowered compensation cap, AFGE still believes the cap is too high. Moreover, the use of exceptions to the cap for certain specialized professions should be reviewed by Inspectors General very closely to determine whether the exceptions are being invoked legitimately and whether the work actually should be insourced so that it can be performed less expensively by reliable and experienced federal employees. 

The Government Accountability Office recently revealed to the Senate Homeland Security and Governmental Affairs Committee that "for 81 of the 102 records in our sample coded as unique (service contractor) expertise, we did not find evidence in the statements of work or other contract documents that the functions performed by the contractors required expertise not otherwise available from U.S. government civilian or military personnel." 

The American Federation of Government Employees (AFGE) is the largest federal employee union, representing 670,000 workers in the federal government and the government of the District of Columbia.

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SOURCE American Federation of Government Employees