All contractors, whether production, services, R&D or otherwise, that charge to a federal contract should be earning no more than an equivalent GS employee. For example, when I was a brand new GS-13 earning $81K/yr, including all locality pay, my job was to negotiate federal contracts with a person, with the same qualifications, at a large contractor who earned $250K/yr plus bonuses and stock options, as verified with Defense Contract Management Agency (DCMA). The highest salary of any GS employee is $155.5K/yr from what Office of Personnel Management (OPM) publishes. Even the highest Senior Executive Service salary is $199.7K/yr.
The acquisition community strictly adheres to Defense Contract Audit Agencies (DCAA)’s forward pricing rate recommendations or appriovals (FPRR/FPRA) so it is not as if I, or any other contract negotiator, have leverage to negotiate a lower salary for the contractor. Good luck finding someone that has accomplished that successfully!
Another example is that a common rate I see quite often proposed for a mid-level engineer or program manager is $65/hr before burdens. For the most part, DCAA approves this rate. An equivalent Government engineer or program manager earns $40-55/hour (mid-level GS-13/14). Why?
Also, it is well known in the acquisition community that DCAA is overworked and understaffed. If contractors were required to use the GS scale for direct rates, it would greatly reduce DCAA’s workload and result in another savings.
Exorbitant salaries and bonuses should be left to those who earn it commercially. When a contractor is funded by the taxpayer, there should be a standard rate of pay. If a bill is signed into law where contractors must pay employees according to the GS pay scale for work performed on all federal contracts, the Government would realize tremendous savings! At a minimum, all contractor employees should be earning less than SES pay. Otherwise, the salary expense should be unallowable.