Contractor Employee Compensation Cap per BBA

Contractor Employee Compensation Cap per BBA

Section 702 of the Bipartisan Budget Act of 2013 (BBA; Pub. L. 113-67, December 26, 2013) deleted the section 1127 statutory formula cap for new contracts awarded as of June 24, 2014. It made the last amendments to the statutes on costs that are not allowable under a covered contract. Section 702 establishes a $487,000 cap on the reimbursement of compensation costs for contractor employees, adjusted annually to reflect the change in the Employment Cost Index for all workers, as calculated by the Bureau of Labor Statistics. The BBA cap applies to limit the reimbursement of compensation costs for all contractor employees on all contracts awarded by all executive agencies of the Government on or after June 24, 2014. See 10 U.S.C. 2324(e)(P) and 41 U.S.C. 4304(a)(16), both in effect as of June 24, 2014.

Section 702 also provides for a waiver of the BBA cap amount by the head of an executive agency. One or more narrowly targeted exceptions for scientists, engineers, or other specialists may be established upon a determination that such exceptions are need to ensure that the executive agency has continued access to needed skills and capabilities. The Director of the Office of Management and Budget shall submit an
annual report to Congress on any waivers of the BBA cap amounts that are in effect for the fiscal year.

Section 702(e) directs the Office of Management and Budget and the Department of Defense to report to Congress “on alternative benchmarks and industry standards for compensation, including whether any such benchmarks or standards would provide a more appropriate measure of allowable compensation for the purposes” of the BBA cap. OMB and DOD published a Federal Register Notice on September 16, 2014 (79 FR 55507) to seek public input for consideration in the development of the Report to Congress on alternative measures of allowable reimbursement for the costs of compensation of contractor employees.

Table of BBA Compensation Cap Amount