Congress has cleared the way for a $633 billion defense policy bill that includes mandated reductions to the Defense Department’s civilian and contractor workforces.

Leaders of a House-Senate conference committee, tasked with reconciling competing versions of the 2013 National Defense Authorization Act, included in the final report the automatic workforce reductions that opponents say would result in about 36,000 job losses. But the conference committee’s version gives Defense officials significantly more flexibility than the original bill did.

Civilian workforce cuts

The committee report calls on the defense secretary to develop an efficiencies plan for reducing the civilian and contractor workforce but stipulates that the defense secretary “shall ensure that the civilian personnel workforce and service contractor workforce … are appropriately sized to support and execute” the Pentagon’s military strategy.

The White House had threatened to veto the Senate’s version of the bill, in part, because of the workforce reductions. But Sen. Carl Levin (D-Mich.), the chairman of the Senate Armed Services Committee, said the changes made in conference had defused the threat of a veto.

Still, the American Federation of Government Employees decried the workforce reductions.

“Arbitrary cuts are contrary to law and common sense,” AFGE President J. David Cox said in a statement. “DoD has three distinct workforces — military, civilian and contractor — each with its own unique mission. Just because one workforce is being cut by a certain amount doesn’t necessarily mean that the other workforces should also be cut by the same amount, as both the White House and the Pentagon have pointed out repeatedly.”

Cox said conferees had initially agreed to exempt certain positions, which would blunt the cuts. “However, in conference, behind closed doors, the language governing those exceptions was changed from mandatory to discretionary so that the hit can be the full 5 percent — or 36,000 positions,” Cox added.

Contractor salary cap watered down

The conference committee stripped from the final report a provision cutting the amount defense contractors could charge the government to pay for executives’ salaries. The Senate version capped taxpayer-funded contractor compensation at $230,700 — equivalent to the salary drawn by the vice president. Currently, government-backed compensation limits cap salaries at more than three times that amount.

Instead of a hard salary cap, the conferees included a measure requiring the Government Accountability Office to review the number of contractor employees whose compensation costs would exceed the Senate’s proposed limits and to study what effect such a cap would have on contractors and the Pentagon.

The Professional Services Council, an industry group, cheered the committee’s revisions.

“Throughout this debate, PSC has called for a comprehensive analysis of the impacts of moving the contractor compensation cap from the formula in current law to an arbitrary limit that does not reflect the commercial value of the critical skills contractor employees hold,” said PSC President and CEO Stan Soloway in a statement.

Other contracting provisions

Another provision included in the final report limits the Defense Contract Audit Agency’s access to internal company audits unless the agency can show it’s necessary to complete its required evaluations of contractors’ business systems.

The report also specifically states DCAA cannot use internal company audit reports “for any purpose other than evaluating and testing the efficacy of contractor internal controls and the reliability of associated contractor business systems.”

Soloway said his organization disagrees with providing DCAA unlimited access to companies’ internal audit reports “because systems can and have been effectively evaluated without such intrusions into privileged information.” But he said the bill’s limits on DCAA access would safeguard companies from unfair audit practices.

Conferees also directed DoD leaders to take a look at the Pentagon’s small-business contracting practices. Within two months of the bill being signed, the defense secretary would be required to conduct an independent review of DoD’s small-business contracting, including the department’s adherence to small-business goals and how often teaming agreements are maintained throughout the performance of contracts.

The conference report also includes a provision instituting a procedure for cleared DoD contractors to report cyber intrusions into their networks. The bill leaves it up to the Pentagon to establish criteria for which networks and information should be covered by the rapid reporting system.

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