Executive Compensation Limit for 2023

December 8, 2022

Executive Compensation Limit for 2023

The Executive Compensation limit for government contractors, as established by Section 702 of the Bipartisan Budget Act of 2013 (BBA; Pub. L. 113-67, December 26, 2013), for the year ending December 31, 2023, is $619,000. The calculation for the allowable compensation limit is based on the Prior Year’s Compensation limit times the change in the Employment Cost Index prepared by the Bureau of Labor Statistics (BLS), illustrated by the formula and calculations below:

Executive Compensation for Government Contractors
(Based on the 12 months ending September 30th and rounded to the nearest thousand)

The BBA cap replaced the previous statutory formula cap for contracts awarded as of June 24, 2014. This cap limited the total compensation costs that can be reimbursed or claimed not only for executives but for all contractors’ employees.

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 submits an annual report to Congress on any waivers of the BBA cap amounts that are in effect for the fiscal year.

Any compensation cap amount provided by statute, does not limit the amount of compensation that a contractor executive or employee may otherwise receive. The compensation costs in excess of the compensation cap amount are unallowable costs for Government contract reimbursement purposes. Without regard to compensation cap amount, the allowable compensation costs for each affected executive or employee are still subject to the Federal Acquisition Regulation cost principles and the Cost Accounting Standards, as applicable and appropriate to the circumstances, e.g., reasonableness and allocability.

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