Procurement Information Circular

July 30, 2008



PURPOSE:  To provide guidance on the revised limitation on executive compensation.


BACKGROUND:  Based on 10 U.S.C. 2324(e)(1)(P) and 41 U.S.C. 256(e)(1)(P), FAR 31.205-6(p) limits the amount of allowable compensation under Government contracts for senior executives to the benchmark amount determined by the Administrator, Office of Federal Procurement Policy (OFPP).  The limitation became effective for civilian agency contracts commencing January 1, 1998.


GUIDANCE:  The OFPP Administrator issued a memorandum for the Heads of Executive Departments and Agencies via Federal Register Notice (Vol. 73, No. 58), dated 25 March 2008, revising the benchmark limitation on executive compensation under Government contracts for contractor fiscal year 2008 from $597,912 to $612,196.  The $612,196 amount is to be used for contractor fiscal year 2008 and any subsequent contractor fiscal years unless and until revised by OFPP. This amount is based on data from commercially available surveys of executive compensation.  The data used the median (50th percentile) amount of compensation accrued over a recent 12-month period for the top five highest paid executives of publicly traded companies with annual sales over $50 million.  The limitation applies to the five most highly compensated employees at each home office and segment of a contractor.  The limitation amount applies to contract costs incurred after January 1, 2008, under defense and civilian agency contracts, whether or not the contract was previously subject to a statutory limitation on compensation.  Compensation in excess of the benchmark limitation is unallowable.


CANCELLATION:  This PIC supersedes PIC 03-13 dated May 22, 2003.


EFFECTIVE DATE:  This PIC is effective as dated and shall remain in effect until canceled or superseded.


HEADQUARTERS CONTACT:  Bill Roets, Office of Procurement, Contract Management Division, (202) 358-4483, email:




James A. Balinskas

Director, Contract Management Division




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