The Senate approved a $631 billion annual defense policy Tuesday that would require the Defense Department to reduce its civilian workforce by 5 percent over the next five years and impose a strict cap on government-funded contractor salaries.

The Senate voted 98-0 Tuesday to approve the National Defense Authorization Act. With the White House threatening to veto the Senate version its current form, the bill now heads to a House-Senate conference committee where differences between the two chambers’ bill will be hammered out.

The bill includes $526 billion in base defense spending and $88 billion for the war in Afghanistan and includes a 1.7 percent pay raise for military personnel. The bill is also chock-full of provisions and amendments affecting the defense workforce and contractors.

Workforce cuts

The bill sets the stage for a 5 percent reduction in the Pentagon’s civilian and contractor staff over the next five years. Sen. John McCain (R-Ariz.), who introduced the provision, said it didn’t make sense to mandate troop cuts — as the Pentagon’s budget request does — and not take similar steps to reduce the civilian workforce.

Sen. Ben Cardin (D-Md.) had introduced an amendment seeking to strike the measure saying it would lead to “arbitrary” workforce caps and would amount to a “second sequestration,” referring to the automatic across-the-board budget cuts set to take effect next month.

But the Senate defeated Cardin’s amendment in a roll-call vote.

Contractor pay cap

The bill also included a proposal, introduced by Sen. Joe Manchin (D-W.Va.), capping taxpayer-funded compensation for contractor salaries at $230,700 — the amount earned by the vice president.

The current formula for government-backed compensation limits contractor salaries to $770,000.

Manchin also joined with fellow Democrat Barbara Boxer of California and Iowa Republican Chuck Grassley in offering an amendment to the bill that requires the Pentagon’s inspector general to issue a report on the increase in recent years of contractor compensation costs footed by taxpayers.

A contractor pay cap was also included in last year’s defense bill, but didn’t make it through the conference-committee process intact.

Contracting oversight

The Senate also voted to approve a number of amendments introduced by Sen. Claire McCaskill (D-Mo.), to reform wartime contracting.

McCaskill’s amendments, which she also introduced last summer in a stand-alone bill, beef up the oversight role of the Pentagon’s inspector general in overseas contingency environments and limits the growth of excessive pass-through contracts.

The Senate bill also requires the Pentagon to produce an annual report on federal contracting fraud. The provision, introduced as an amendment by Sen. Bernie Sanders (I-Vt.), directs DoD to identify companies that have received defense contracts “after they were previously sanctioned for defrauding the Pentagon,” according to Sanders’ office.

Another Sanders amendment approved by the Senate would require the Pentagon to make public a database of DoD employees seeking employment in the defense industry. Sanders pointed to a study by watchdog group Citizens for Responsibility and Ethics in Washington that found 70 percent of recently retired three- and four-star generals took jobs with defense contractors between 2009 and 2011.

Also included in the final bill was a measure requiring contractors to report to DoD cyber penetrations of their networks and information systems.

Introduced by Sen. Carl Levin (D-Mich.), the amendment calls on DoD to establish a “rapid reporting” system for contractors to report data breaches, including a description of the technique used to the penetrate the network and any samples of malicious software. The amendment also allows DoD to conduct forensic analysis on contractor equipment in order to determine if information was improperly exfiltrated.

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