OFPP Issues 2008 Executive Compensation Cap

On March 25, 2008, the Office of Federal Procurement Policy published the maximum benchmark compensation amount that will be allowable under government contracts during contractors' FY 2008. The new amount is $612,196, and applies to the five most highly compensated employees in management positions at each home office and each segment of a contractor. The compensation subject to this limitation includes wages, salary, bonuses, deferred compensation, and employer contributions to defined contribution pension plans. All other elements of compensation are subject to the allowability provisions of the cost principles in FAR Part 31.

This determination is required under Section 39 of the Office of Federal Procurement Policy (OFPP) Act (41 U.S.C. 435), as amended. The benchmark compensation amount applies equally to both defense and civilian procurement agencies.

You should note that this limit applies to only the largest contractors. Small and midsized contractors would not normally be able to claim compensation in this amount without being challenged by DCAA.