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Washington, D.C.— An increase to $763,029 of the maximum reimbursement to government contractors for executive compensation underscores the immediate need for Congress to scrap the current federal mandate and install sensible limits on reimbursement rates sought by the Obama administration and the National Treasury Employees Union (NTEU), said NTEU President Colleen M. Kelley.

“There is absolutely no reason that taxpayers should fund government reimbursements for private contractor salaries that are more than three times higher than the pay of Cabinet secretaries,” said President Kelley.

The NTEU leader expressed that view in the wake of action by the Office of Federal Procurement Policy (OFPP) raising the maximum reimbursement for the top five executives of private companies performing government work under cost-based contracts. The increase is some $70,000 over the previous maximum of $693,951. OFPP is part of the Office of Management and Budget.

Contractors may pay their employees any amount they wish, but the government sets a cap—under a formula enacted into law in 1997—it will reimburse a contractor for its top five executives.

“This so-called ‘executive compensation benchmark’ is based on a survey of compensation—including salaries, bonuses, restricted stock and deferred and performance incentives—that has nothing to do with the value delivered to taxpayers,” Kelley said.

In congressional testimony earlier this spring, the NTEU leader called for sensible caps on contractor reimbursements, and expressed support for pending House legislation introduced by Rep. Paul Tonko (D-NY) that would set the limit at $200,000. Such a move, which mirrors the level proposed by President Obama, could save the government $50 billion over 10 years.

NTEU has long sought less federal dependence on private contractors, repeatedly warning that an overreliance carries the very serious risk of eroding the capabilities of federal agencies to the point where they cannot effectively perform their missions.

That is particularly dangerous, President Kelley has said, when it comes to the performance of inherently governmental work by unaccountable private contractors. “All such inherently governmental work, and work closely associated with it, should remain—or be brought back into—the hands of trained, accountable federal workers,” she said.

A companion legislative proposal in the Senate, introduced by Sen. Barbara Boxer (D-Calif.) and Sen. Charles Grassley (R-Iowa), would reduce the contractor reimbursement cap to $400,000, the level of the salary paid to the president.

NTEU is the nation’s largest independent union of federal workers, representing 150,000 employees in 31 agencies and departments.