The House has voted to repeal the 3% withholding requirement for government contractors. The provision was included in the Economic Recovery and Reinvestment Act. The legislation is pending in the Senate.

The requirement calls for federal, state and local agencies to withhold 3% of their payments to contractors starting in 2011, for income tax purposes. Government and industry critics have denounced it as unduly burdensome.

Connecticut Sen. Joe Lieberman, chairman of the Homeland Security and Governmental Affairs Committee, announced he is creating a new subcommittee to oversee federal contracting. Sen. Claire McCaskill, D-MO, will chair the Ad Hoc Subcommittee on Contracting Oversight.

McCaskill is a former Missouri state auditor who has taken an interest in procurement issues. “We all know that outrageous contracting abuses occur in every facet of government,” she said in a statement. “I can’t wait to get to work saving huge money for taxpayers.”

McCaskill sponsored legislation last year that created a Wartime Contracting Commission to explore lessons learned in Iraq and Afghanistan. She has introduced legislation to curtail compensation for executives of companies that accept federal bailout money. Following reports of huge bonuses paid to Wall Street chieftains, McCaskill said, “These people are idiots. You can’t use taxpayer money to pay out $18 billion in bonuses.” Her bill would cap executive compensation in those companies at $400,000, the same as the President Obama’s salary.

President Obama has named a GSA veteran, Paul Prouty, as the agency’s acting administrator. There was no word on whether Prouty would be nominated for the permanent job.

Prouty most recently served as acting regional administrator in Denver, but he has spent most of his career in GSA’s Public Buildings Service. That unit would play a large role in the president’s proposed economic stimulus, which includes funding for energy improvements in federal buildings.

Bipartisan leaders of the Senate Small Business Committee renewed their call for President Obama to elevate the SBA administrator to cabinet-level status.

In a letter to the president, Chairwoman Mary Landrieu, D-LA, and the ranking Republican, Olympia Snowe of Maine, wrote, “If empowered by a return to the cabinet, the SBA Administrator can be a more effective champion for our small businesses.”

The SBA administrator held cabinet rank in the Clinton administration, but not under President Bush.

When President Obama nominated Karen Mills for the job in Decermber, he did not mention the cabinet issue.