Office of Federal Procurement Policy Cost Accounting Standards Board Executive Compensation, Benchmark Maximum Allowable Amount

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The allowability of the compensation costs for the senior executives of Government contractors is capped by statute (10 U.S.C. 2324(e)(1)(P)  and 41 U.S.C. 4304(a)(16) at a benchmark executive compensation amount.  The benchmark amount does not limit the amount of compensation that an executive may otherwise receive.  However, the compensation costs in excess of the benchmark amount are unallowable costs for Government contract purposes.  While the benchmark executive compensation amount is the maximum allowable amount of compensation costs for certain executives of Government contractors, the benchmark amount as applied to a particular executive is not necessarily a safe harbor.  Without regard to the benchmark compensation amount, the allowable compensation costs for each affected executive are still subject to the Federal Acquisition Regulation and the Cost Accounting Standards as applicable and appropriate to the circumstances, e.g., reasonableness and allocability.  The Executive Compensation Cap is implemented at FAR 31.205-6(p).

The Administrator, Office of Federal Procurement Policy, (OFPP), determines the benchmark executive compensation amount as required by Section 39 of the OFPP Act, as amended (41 U.S.C. 1127).  The benchmark amount applicable for a fiscal year is the median amount of the compensation provided for all senior executives of all benchmark corporations per commercially available surveys for the most recent year for which data is available at the time the OFPP Administrator determines the amount.  The data used is the median (50th percentile) amount of compensation (total amount of wages, salary, bonuses and deferred compensation) accrued over a recent 12-month period for the top five highest paid employees in management positions at each home office and each segment of publicly traded U.S. companies with annual sales over $50 million.  Once a benchmark compensation amount is established for a fiscal year, it is applicable for that fiscal year for a contractor and subsequent fiscal years, unless and until revised by OFPP.  

The benchmark executive compensation amount for a fiscal year as determined by the OFPP Administrator applies to contract costs incurred after a stated date.  If the contractor’s fiscal year does not coincide with the fiscal year for the benchmark compensation amount as determined by OFPP, the benchmark compensation amount as determined by OFPP is adjusted for the contractor’s fiscal year, and the benchmark amount, as adjusted, is applicable to the contractor’s fiscal year.    The sum of the pro-rata portions of the benchmark compensation amounts for the fiscal years straddled by the contractor’s fiscal year is the benchmark amount, as adjusted, applicable to the contractor.

Benchmark
Executive
Compensation
Amount
Fiscal
Year
For
Costs
Incurred
After
Federal
Register
Notice
FR Date
Published
Metadata
 
$952,308 2012 Jan 1, 2012 78 FR 72930 Dec 4, 2013 2 pages, 177 kb
$763,029 2011 Jan 1, 2011 77 FR 24226 April 23, 2012 2 pages, 177 kb
$693,951 2010 Jan 1, 2010 75 FR 19661 April 15, 2010 1 page, 41 kb
$684,181 2009 Jan 1, 2009 74 FR 23893 May 21, 2009 1 page, 45 kb
$612,196 2008 Jan 1, 2008 73 FR 15779 Mar 25, 2008 1 page, 50 kb
$597,912 2007 Jan 1, 2007 72 FR 14300 Mar 27, 2007 1 page, 67 kb
$546,689 2006 Jan 1, 2006 71 FR 26114 May 3, 2006 1 page, 62 kb
$473,318 2005 Jan 1, 2005 70 FR 23888 May 5, 2005 2 pages, 66 kb
$432,851 2004 Jan 1, 2004 69 FR 26897 May 14, 2004 1 page, 59 kb