OFPP determines this limit based on surveys of executive compensation of large publicly-traded companies. This limit may not reflect reasonable compensation for small contractors. For small to midsize companies the ceiling on executive compensation is going to be proportionately lower than the $693,951 benchmark. They will need to be substantiated based on “relevant business” such as, firm size, industry, geographic area, and if engaged in non-government work (FAR 31.205-6(b)(2) &/or (FAR 31.205-6(p).
Aronson & Company can answer your executive compensation questions and can help defend DCAA executive compensation challenges, contact Donna Dominguez at email@example.com
The Defense Contract Audit Agency (DCAA) conducts its own executive compensation reviews and considers such factors as size, industry, geographical region, and compensation of those engaged in similar non-government work. DCAA can challenge executive compensation amounts under the maximum for reasonableness.
Additional information is available here:
- OFPP, Executive Compensation, Benchmark Maximum Allowable Amount, 2004 – 2010:
- OMB Memorandum – Determination of Benchmark Compensation Amount for Certain Executives:
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