The Defense Contract Audit Agency (DCAA) released a Memorandum for Regional Directors (MRD) dated December 3, 2024, providing the Office of Federal Procurement Policy contract compensation cap of $671,000 for costs incurred from January 1, 2025 through December 31, 2025. The new compensation cap applies to contracts awarded on or after June 24, 2014, as required by the Bipartisan Budget Act of 2013. This represents an increase of $25,000 from the 2024 compensation cap of $646,000. Combined with the $27,000 increase between 2023 and 2024 and the $30,000 increase between 2022 and 2023, this reflects an $82,000 increase in the past three years. This increase has been driven by the significant inflation experienced across the broader economy. The MRD indicates that DCAA has updated its Contract Audit Manual to reflect this change.

Contractors should be mindful that FAR 31.205-6(p) establishes/defines the compensation components that must be considered when evaluating whether an employee’s compensation exceeds the compensation cap.

The December 3 MRD can be found here.