All one has to do is read a recent article written by David Cox, President of the American Federation of Government Employees (AFGE), to derive the answer to this question, and the answer is that contractor employee compensation should be brought in line with the salaries that public sector employees (e.g., federal civilian personnel) are paid. 

redstone government consulting, cost and pricing and budgeting

The lengthy July 15 2013 article written by Mr. Cox, and published within the Bloomberg BNA on-line Federal Contracts Report, does correctly acknowledge that the OMB is revisiting its benchmark data to determine if the underlying compensation wage survey information, as well as the approach used to project reasonable future year contractor executive employee ceilings, are accurate. 

And the article narrative also walks the reader through four contactor compensation reform measures “pending before Congress” which offer remedies to the “outrageous and unnecessary premiums” paid for contractor services.  The impact of the four proposals on reductions to allowable contractor compensation ceilings range from modest adjustments in calculation strategy, which would result in a small deduction to existing compensation caps, to more draconian measures, the most dire of which would dispense with using commercial market-place wage surveys in gaging reasonable compensation ceilings and thus relegate ceiling benchmarks to public servant compensation levels (e.g., annual base salaries paid to heads of Executive Department Agencies, the President, or Vice-President).  This latter bi-partisan proposal, according the Mr. Cox, “rejects the proposition that private sector executive compensation should determine how much taxpayers must contribute to the yearly compensation of the federal government’s richest contractors”. 

In case you have not figured out which of the four proposals Mr. Cox believes is best for our country, it is the latter—measurement of annual compensation to our senior government leaders and ostensibly to that leadership’s effectiveness in running our country.

The article is anything but objective and is obviously crafted in a manner to draw empathy for the plight of federal workers and their dilemmas with frozen pay levels and furloughs due to huge budget deficits.  Were it not, however, for the continuous and redundant interjection of clichés intended to seek pity for the working person (this includes everyone but contractor personnel) who have made sacrifices during periods of budget reductions, a reader could, in a very few instances, take the article’s discussion more seriously. 

The article overpowers logic with hyperbole, one example of which is a badly worded metaphor suggesting that routing Forest Service aircraft to release “lovely fragrances” over Washington (in lieu of fire retardants) would not be enough to “conceal such an appalling stink (e.g. trends in excessive compensation for contractors) especially when working and middle-class Americans are making significant sacrifices in order to reduce the federal government’s deficit.”   The AFGE’s attempt to connect legitimate wage dilemmas facing federal employees to selecting a reasonable method for measuring contractor executive commercial-based salary ceilings, in this writer’s opinion, fell short of that objective, and such a connection is obviously irrelevant to the necessity of ensuring FAR Part 31 Cost Principles ensure reasonable benchmarks for allowable contractor employee compensation in a commercial market environment.


 

Sustainment and Cost Savings Initiatives

 

Written by Darryl Walker

Darryl Walker Darryl Walker is a Senior Director for Government Compliance with Redstone Government Consulting, Inc., and formerly served as an Owner and Technical Director for the Beason & Nalley Government contract consulting group for over ten years. He provides content for our Government Insights Newsletter, provides training courses to government contractor and business community leaders, and consults with government contractors regarding a vast range of issues including cost proposals and presentations, internal controls, proposal preparation, compliance with the FAR and Cost Accounting Standards, litigation support, specialized claims, defective pricing issues, liaison with procurement and DCAA audit officials, and accounting and management systems compliance. Prior to joining Redstone Government Consulting, Darryl worked with the Defense Contract Audit Agency (DCAA) for almost 34 years in a variety of technical and management capacities. During his tenure with DCAA, Darryl provided audit services to a wide range of government agencies, including the Department of Defense, NASA, Department of Energy, Department of Interior, General Services Administration, and Department of Justice. During his experience with DCAA, Darryl audited over 3,000 government contractors throughout the Southeastern United States, Europe, and the Middle East. Education Darryl is a graduate of Texas Wesleyan College with a major in accounting and minor in economics.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Cost and Pricing and Budgeting, Contractor Employee Compensation