Decided: June 1, 2022
Agency: Department of the Navy
Disposition: Protest Sustained
Keywords: Evaluation Criteria, Price Evaluation, Cost Evaluation
This case offers guidance on GAO’s interpretation of FAR 52.222-46 and who is considered a “professional employee.” At issue here was the proper interpretation of the provision defining who qualifies as a “professional employee.” GAO held that if a proposed employee meets the definition of a “professional employee” as defined in subpart D of part 541, they are considered a professional employee, regardless of whether the employee also meets another part 541 labor category definition. Here, the agency failed to evaluate price reasonably under FAR 52.222-46 by excluding professional employees’ compensation as part of the cost analysis, as required under the regulations. GAO concluded that the proposed employees here did qualify as “professional employees,” due in part to the solicitation’s education requirements for those employees.
Companies should thoroughly evaluate the potential for success with any protest situation. The time, expense, and negative consequences associated with challenging your Government customer warrants a strategic evaluation between your executive leadership, capture, proposal, and legal teams. General Counsel has the experience and drive to assist clients with assessing award decisions, developing legal courses of action, filing as an unsuccessful bid protestor or the awardee intervenor, litigating the protest, and developing post-decision lessons learned for more effective future business development practices.
Summary of Facts
Sabre Systems, Inc. protests the award of a contract to American Systems Corporation under RFP No. N00421-20-R-0127, issued by the Department of the Navy, Naval Air Systems Command, for mission system software engineering, development, integration, testing, and in-service support for U.S. Naval aircraft major defense acquisition programs. Proposals would be evaluated on the basis of three factors, including price/cost. Under the solicitation, offerors were required to provide, as part of the price/cost volume of its proposal, a total compensation plan “for each proposed professional employee” in accordance with FAR provision 52.222-46, including the proposed direct labor rate and total cost of the proposed fringe benefits package for each professional employee proposed. The RFP stated that the agency would evaluate total compensation plans in accordance with FAR provision 52.222-46.
The agency received timely proposals from four offerors, including Sabre and American Systems. During the evaluation of proposals, the agency determined that the most probable cost of Sabre’s proposal was $211,471,556 and American System’s was $190,126,983. The agency ultimately concluded that the proposal submitted by American Systems represented the best overall value to the government, finding that the benefits offered by the “slight technical and past performance advantages” of Sabre’s higher priced proposal did not merit the $21 million price premium. Sabre filed this protest.
Basis of Protest
Sabre contends that the agency’s evaluation of American Systems’ total compensation plan and its cost realism assessment were unreasonable, because the agency failed to evaluate American Systems’ total compensation plan as required by FAR provision 52.222-46 by excluding a large number of labor categories from its professional compensation evaluation.
FAR provision 52.222-46 states that the “[r]ecompetition of service contracts may in some cases result in lowering the compensation (salaries and fringe benefits) paid or furnished professional employees.” The provision also notes that such a lowering of compensation “can be detrimental in obtaining the quality of professional services needed for adequate contract performance” and that it is in the government’s best interest that “professional employees, as defined in 29 CFR 541, be properly and fairly compensated.” The provision instructs offerors to “submit a total compensation plan setting forth salaries and fringe benefits proposed for the professional employees who will work under the contract.” Under the provision, agencies are required to “evaluate the plan to assure that it reflects a sound management approach and understanding of the contract requirements,” and to assess the offeror’s “ability to provide uninterrupted high-quality work” by considering the proposed professional compensation “in terms of its impact upon recruiting and retention, its realism, and its consistency with a total plan for compensation.”
“Professional employees” are defined as “any employee: (1) Compensated on a salary or fee basis . . . at a rate of not less than $684 per week . . .; and (2) Whose primary duty is the performance of work: (i) Requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or (ii) Requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.”
GAO found that the record, here, shows that the agency, in its evaluation of offerors’ total compensation plans determined that only a small subset of four labor categories required by the solicitation were “professional employees” as defined in 29 C.F.R. part 541. GAO found that the applicable FAR provision “unambiguously requires the agency to evaluate the compensation plan for all proposed employees meeting the definition of ‘professional employees’ as defined in subpart D of part 541, regardless of whether the employee also meets another part 541 labor category definition.
GAO emphasized that a professional employee is someone whose primary duty is “the performance of work . . . [r]equiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” Here, the statement of work required minimum levels of higher education in the specified field of science or learning related to the duties of the position for many of the labor categories. GAO held that, based on the solicitation’s education requirements, a portion of the employees the agency excluded from its analysis of professional compensation qualified as professional employees.
GAO concluded that the agency failed to reasonably evaluate offerors’ proposed total compensation plans in accordance with FAR provision 52.222-46 when it unreasonably excluded from its analysis certain proposed employees who met the definition of a professional employee as defined in subpart D of part 541. GAO sustained the protest on that basis.
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