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November 20, 2012

GAO Asked to Review Escalating Executive Compensation of Federal Contractors

(Washington, DC) – The Ranking Member of the Committee on Science, Space, and Technology’s Subcommittee on Investigations and Oversight, Mr. Paul Tonko (D-NY) asked the Government Accountability Office (GAO) to review executive compensation costs for federal contractors with the Departments of Energy, Commerce, Transportation, and Homeland Security as well as the National Aeronautics and Space Administration, the National Science Foundation, and the Environmental Protection Agency. 

The cap on executive compensation for federal contracts is nearly $770,000, almost double the level of compensation paid to the President of the United States and up from $433,000 in 2004.  The cap on executive compensation only applies to the top five executives of each company and deals exclusively with taxpayer dollars spent to reimburse contractors, not private pay.  The amount of money the federal government spends on service contracts ALONE has more than doubled in the past ten years.  The cost of federal service contracts increased from $159 billion in 2000 to $333 billion in 2010.  This amount does not include contracts for production and goods.

“Reigning in the costs associated with executive compensation in federal contracts has the potential to save American taxpayers billions of dollars each year,” said Mr. Tonko. “The federal government is working to belt-tighten and reign in spending while making programs smarter. Examining the excessive costs of executive compensation on federal contracts is a necessary oversight role of Congress in order to make more prudent and responsible decisions going forward.”

It is unclear how much money could be saved by revamping executive compensation levels, but one recent study by the Department of the Army found they could save at least $6 billion annually by reducing the current executive compensation caps.  Applied throughout the federal government, revamping executive compensation has the potential to save tens of billions of taxpayer dollars each year.  “I look forward to the GAO getting started on this important work,” said Mr. Tonko. 

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