The National Defense Authorization Act (NDAA) of 2012 set into motion a limit on the executive pay issue relative to government contractors. The NDAA resulted in an interim rule 78 FR 38535. Initially FAR Case 2012-017 extended applicability of the limit from not only the top 5 executives but further to all employees. FAR Case 2012-025 was then implemented that made this new caps retroactive to contracts issued prior to December 31, 2011 (It would affect billings on 1/1/2012 or after). These interim rules were recently finalized and will result in a change in the regulations. This rule change is applicable to all contracts with the Department of Defense, NASA and the GSA. The new rule will control not only the executive compensation limits on contractors but will control all pay levels (there may be some exceptions for certain scientist and engineers in highly specialized fields) of all employees. While I say "control compensation" it doesn't mean that the company cannot compensate individuals at levels above the limit but instead that any amount over the cap will be considered an "unallowable" expense and therefore not billable to the government.
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