FAR 22.11: Professional Employee Compensation

Comptroller General - Key Excerpts

New SEC argues that the agency’s price evaluation was flawed because the Air Force failed to evaluate ERC’s proposed professional employee compensation plan in accordance with FAR provision 52.222-46, which was incorporated into the solicitation and formed part of the section M evaluation. SEC Comments at 14; RFP at 178. In this regard, SEC contends that the agency did not evaluate ERC’s complete plan or compare the proposed salaries to incumbent salaries, and that this failure allowed the agency to find ERC’s proposal to be acceptable under this analysis despite low salary rates. Id.

The purpose of a review of compensation for professional employees is to evaluate each offeror’s ability to provide uninterrupted, high-quality work, considering the realism of the proposed professional compensation and its impact upon recruiting and retention. FAR § 52.222-46(a); MicroTechnologies, LLC, B-413091, B-413091.2, Aug. 11, 2016, 2016 CPD ¶ 219 at 6. In the context of a fixed-price labor hour contract, our Office has explained that this FAR provision anticipates an evaluation of whether an awardee understands the contract requirements and has proposed a compensation plan appropriate for those requirements, in effect, a price realism evaluation regarding an offeror’s proposed compensation. L-3 Nat’l Sec. Sols., Inc., B-411045, B-411045.2, Apr. 30, 2016, 2016 CPD ¶ 233 at 7-8. Our review of a price realism analysis is limited to determining whether it was reasonable and consistent with the terms of the solicitation. Smiths Detection, Inc.; Am. Sci. & Eng’g, Inc., B-402168.4 et al., Feb. 9, 2011, 2011 CPD ¶ 39 at 17. Where a solicitation requires an agency to conduct a price realism analysis, and the evaluation record does not demonstrate whether the agency reasonably conducted such an analysis, we will sustain the protest. L-3 Nat’l Sec. Sols., Inc., supra, at 9; Logistics 2020, Inc., B-408543, B‑408543.3, Nov. 6, 2013, 2013 CPD ¶ 258 at 7-8.

As relevant here, the RFP required proposals to include a professional employee compensation plan, as prescribed in FAR provision 52.222-46. RFP at 126. This FAR provision calls for an evaluation of each offeror’s compensation plan, defined as “salaries and fringe benefits,” to ensure that the plan reflects a sound management approach and understanding of the contract requirements. FAR § 52.222-46(a). Offerors are advised that “[t]he professional compensation proposed will be considered in terms of its impact upon recruiting and retention, its realism, and its consistency with a total plan for compensation.” Id. Additionally, proposals envisioning professional compensation levels lower than those of predecessor contractors for the same work were to be evaluated on the basis of maintaining program continuity, uninterrupted high-quality work, and availability of required, competent professional service personnel. FAR § 52.222-46(b). The provision cautions offerors that “lowered compensation for essentially the same professional work may indicate lack of sound management judgment and lack of understanding of the requirement.” Id.

ERC submitted a professional compensation plan showing salary ranges by labor category and fringe benefits. AR, Tab 12, ERC Proposal at 64-72. The agency noted ERC’s stated “intent to pay incumbent SEMATS 1 employees to whom we make offers the same salaries they earn at the end of SEMATS 1 on Day 1 of SEMATS 2,” and ERC’s “intent to offer a benefits package that is substantially equivalent in value to the benefits package provided to SEMATS 1 employees.” AR, Tab 23, ERC Initial Technical Worksheet, at 24; Tab 12, ERC Proposal, at 9.

The agency found ERC’s fringe benefits to be “standard” for the “market and region.” AR, Tab 23, ERC Initial Technical Worksheet, at 24. However, ERC’s initial proposed compensation was so far below “Government estimates” that the agency concluded it represented a “material failure in the Offeror’s proposal.” Id. During discussions, the agency advised ERC that its below-market compensation represented a “deficiency” in its proposal. AR, Tab 43, ERC Evaluation Notice with Response, at 9. In response, ERC defended its rates, but advised that it was raising its journeyman salaries to a minimum of the [DELETED] percentile, and that it was raising other salaries to a minimum of the [DELETED] percentile. Id. at 10. The agency concluded that the positions with minimum salaries in the [DELETED] percentile were “within the incumbent and Government salary range estimates for these positions.” Id. at 11. The agency noted ERC’s commitment to “materially preserve the incumbent salaries and benefits of the SEMATS 2 workforce” and concluded that ERC’s revised salary ranges were satisfactory. Id. at 10.

Under FAR provision 52.222-46(b), offerors are advised that, in recompetitions, “proposals envisioning compensation levels lower than those of predecessor contractors for the same work” require additional evaluation. Thus, in order for an agency to determine whether to perform this additional evaluation in a recompetition, it must first conclude whether a proposal “envision[s] compensation levels lower than those of predecessor contractor” by comparing the incumbent rates and the proposed rates. FAR § 52.222-46(b). Here, the record does not reflect that the agency compared ERC’s labor rates to those paid to incumbent personnel.[5] Although the record contains a list of the agency’s estimated labor rates by labor category, there is nothing in the record documenting how these rates were compared to ERC’s rates. AR, Tab 15, Estimated Direct Labor Rates; COSF at 45 (“The Government evaluation team determined the risk of each proposed Professional Compensation Plan by comparing the labor rates proposed to that of the Government established rate.”). The evaluation notice discussions show that the agency concluded that some of ERC’s initial proposed rates were so low as to rate a deficiency. However; the record is silent as to whether, in the end, any of ERC’s rates were lower than incumbent rates but nevertheless acceptable to the Air Force.

In sum, the record does not demonstrate that the agency considered ERC’s proposed compensation plan under FAR provision 52.222-46(b). Specifically, the Air Force did not reasonably compare ERC’s salaries to incumbent salaries, a necessary step to determine whether the proposed salaries are lower than incumbent salaries. Id. Accordingly, we find that the agency failed to reasonably evaluate whether ERC offered “lowered compensation for essentially the same professional work,” as envisioned by FAR provision 52.222-46. We therefore sustain this aspect of SEC’s protest. L-3 Nat’l Sec. Sols., Inc., supra, at 9; see also Wackenhut Int’l, Inc., B-286193, Dec. 11, 2000, 2001 CPD ¶ 8 at 7 (sustaining protest where RFP language contemplated reviewing compensation plans in comparison to current wages and the agency failed to perform such a review).  (SURVICE Engineering Company, LLC B-414519: Jul 5, 2017)

Comptroller General - Listing of Decisions

For the Government For the Protester
  New SURVICE Engineering Company, LLC B-414519: Jul 5, 2017




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