Government Contracts Professional Compensation Evaluation Provision Misinterpreted
Monday, February 25, 2019

Professional Compensation Evaluation Provision Misinterpreted

By Government Contracts Editorial Staff

The Court of Federal Claims sustained a pre-award protest of the government’s decision to not conduct a realism analysis of professional compensation rates because the decision was inconsistent with the solicitation’s FAR 52.222-46 professional compensation evaluation provision. The requests for revised quotes for a data services hub stated the government “will not be conducting price realism analysis on the entire quote as this is a firm fixed price contract.” However, the RFQ stated the compensation for professional employees would be evaluated pursuant to FAR 52.222-46, which states “[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.” In response to a request for clarification, the government stated the professional compensation evaluation requirements applied only to the information submitted directly as part of the professional compensation plan, not the entire business volume, and FAR 52.222-46 “speaks only to how the professional compensation plan information will be evaluated” rather than the entire price of the contract. The protester argued the government’s announced refusal to conduct a realism analysis was “inconsistent with the requirements of the [RFQ] and create[d] a patent ambiguity in the RFQ.” The government maintained the protester’s interpretation was unreasonable because “[t]he FAR does not mandate a price realism analysis before the award of [an FP] contract” and FAR 52.222-46 only applies to the professional rates paid by the offeror to its employees, not the professional labor rates charged to the government.

Mandatory Provision. The court ruled in favor of the protester. The solicited contract was priced almost entirely on an FP basis, which meant the government would pay a flat fee for the services provided, regardless of the hours worked, and since the RFQ included FAR 52.222-46, the government had obtained the proposed hours for each employee type, the proposed professional compensation ranges for each employee type, and the fringe benefit amount, which was all of the information it needed to generate a realism analysis. Further, in response to an earlier request, another offeror had lowered its quoted price by almost 31 percent. This gave the government reason to conduct a realism analysis because the great bulk of the contract was FFP and it appeared the offeror reduced its price by cutting into professional compensation rates, expected hours, and its own profit. FAR 22.1103 requires FAR 52.222-46 to be inserted in “solicitations for negotiated contracts when the contract amount is expected to exceed $700,000 and services are to be provided which will require meaningful numbers of professional employees.” Here, the contract would exceed $700,000 and be mostly for professional employee services, so the inclusion of, and compliance with, FAR 52.222-46 was mandatory. The government could not disavow a mandatory RFQ provision through contrary statements or claims of differences in interpretation. (Sparksoft Corp. v. U.S., et al., FedCl, 63 CCF ¶81,580).

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