By Jack Moore
Federal News Radio

An amendment to the 2012 Defense Authorization Bill, passed by the Senate last week, caps taxpayer-funded compensation for all contracting employees at $400,000.

The Senate voted 93-7 to approve the authorization bill, which includes the contractor pay cap. The annual authorization bill lays out broad policy and spending priorities for the Pentagon.

Sponsors of the bill Sens. Barbara Boxer (D-Calif.), Chuck Grassley (R-Iowa) and Jay Rockefeller (D-W.V.) introduced the “Commonsense Defense Contractor Compensation” measure last month. The contracting pay cap lowers the maximum amount contracting employees can be reimbursed by the government.

“Taxpayers should not be on the hook for exorbitant government contractor salaries,” Boxer said in a release noting the Senate vote. “This amendment ensures that no defense contractor will make more in taxpayer funds than the President of the United States, who is the commander-in-chief.”

Fellow sponsor Grassley said the amendment would help prioritize defense spending.

“We can’t afford to waste increasingly limited defense dollars,” he said in a release. “This amendment goes after an unnecessary expenditure by containing runaway spending in a type of contract used extensively by the Department of Defense.”

The current formula for setting compensation limits, which was set in 1998, allows contractors to charge up to $698, 951 for the salaries of their top five executives. But that cap, which has grown 53 percent faster than inflation over the past 12 years, doesn’t apply to all contracting employees.

Federal unions, who have long pointed to a widening pay gap between contractors and federal employees, applauded the measure.

The American Federation of Government Employees, in a statement, said it has been calling attention to “runaway contractor payments” for years.

“Federal employees have had their own salaries frozen for two years to help reduce the deficit, yet nothing is being done to trim out-of-control contractor spending,” said John Gage, AFGE national president, in a release. “Taxpayers should not be on the hook for these outrageous salaries that no one in government earns — not federal employees, not members of Congress and not even the President of the United States.” The $400,000 limit is still higher than that earned by Cabinet-level secretaries — $200,000.

However, industry groups contend the pay cap is a wrongheaded measure that will harm contractors’ ability to do business.

The Acquisition Reform Working Group, a conglomeration of defense industry groups, sent a letter to senators last week with recommendations on various proposals, including the pay cap.

The letter said the current contractor pay formula is tied to compensation in the private sector and that limiting contractor pay would “make the defense sector less attractive to top talent, which could then negatively impact DoD missions.”

The group also said the pay cap is an “arbitrary” measure because it would encompass total employee compensation, including salary, bonuses and deferred compensation as opposed to only a contractor’s salary.

Boxer and Grassley first floated the idea of a contractor pay cap in an October letter to the deficit-cutting congressional supercommittee. President Barack Obama had previously called for a $200,000 cap, and the lawmakers’ letter called that a “good start.”

The authorization bill has drawn controversy for a host of other reasons, including a provision dealing with the military’s role in handling terror suspects. The White House has issued a veto threat over that measure.

The Senate version must also be reconciled with a House version before Congress recesses next week for the holidays.

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