Boxer, Grassley Criticize Failure to Limit Exorbitant Taxpayer-Funded Salaries for Defense Contractors

Press Release

U.S. Senators Barbara Boxer (D-CA) and Charles Grassley (R-IA) today criticized the language on taxpayer-funded salary reimbursements for defense contractors that emerged in the House-Senate conference report on the National Defense Authorization Act.

Senator Boxer said, "It is outrageous that under this bill, defense contractors can continue to charge taxpayers $700,000 a year for their salaries. We will keep fighting to rein in exorbitant taxpayer-funded salaries for contractors."

Senator Grassley said, "There's no justification for high six-figure salary subsidies from the taxpayers. At least the bill closes a loophole by applying the taxpayer salary subsidy cap to all contractor staff and not just the top five. In that way, Sen. Boxer and I moved the outcome in the taxpayers' favor. We have more work to do to whittle down the cap of the salary subsidy to something a lot more reasonable than $694,000 or even higher under the current formula left in place under the language. The high cap is very disappointing."

Currently government contractors can charge taxpayers $693,951 for the salaries of their top five employees, based on an executive compensation benchmark last amended in 1998. Employees of government contractors outside of the top five can and do earn taxpayer-funded amounts in excess of the current benchmark.

Earlier this month, the Senate approved an amendment by Senators Boxer, Grassley, Rockefeller and others that would have significantly reduced the amount defense contractors can charge taxpayers in salary -- to $400,000 per year, the salary of the President of the United States -- and extended this limit to all defense contractor employees.

Unfortunately, the final defense authorization bill would keep the cap at the current level -- $693,951 -- although it would extend the cap to all defense contractor employees, not just the top five employees. The measure also includes a significant loophole by exempting scientists and engineers from the cap, and would also allow the Defense Department to consider whether additional employees could be exempted from the cap.

According to a study from New York University, in 2005, the most recent year for which statistics have been compiled, there were 7.6 million government contractors, including 5.2 million defense contractors.

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