Recent GAO Decisions Show Professional Employee Compensation Challenges Remain a Successful Protest Argument

A string of GAO protest sustains this spring, most recently in Owl International Inc., d/b/a Global, a 1st Flagship Company, B-423281, B-423281.2, April 25, 2025, demonstrates that the evaluation of professional employee compensation remains a successful post-award protest argument. 

When a solicitation includes Federal Acquisition Regulation (FAR) 52.222-46, “Evaluation of Compensation for Professional Employees,” agencies must evaluate the compensation packages proposed for an offeror’s “professional employees” to assess whether compensation levels “reflect a clear understanding of work to be performed” and whether they are sufficient to “obtain and keep suitably qualified personnel to meet mission objectives.” Where the procurement is a follow-on contract and offerors propose compensation levels lower than on the incumbent contract, FAR 52.222-46 notes those new levels “will be evaluated on the basis of maintaining program continuity, uninterrupted high-quality work, and availability of required competent professional service employees” and warns that “lowered compensation for essentially the same professional work may indicate lack of sound management judgment and lack of understanding of the requirement.” In other words, FAR 52.222-46 mandates a realism analysis of proposed professional compensation levels.

In Owl International, GAO sustained a disappointed offeror’s challenge to the Navy’s failure to perform the realism analysis required by FAR 52.222-46 despite including the provision in the solicitation. The Navy argued it was not required to conduct a realism analysis because, even with the inclusion of FAR 52.222-46, the solicitation stated the Navy would evaluate labor rates only for reasonableness and balance, creating a patent ambiguity Owl failed to protest, and in any event, the solicitation did not require offerors to submit professional employee compensation packages that would allow for a realism analysis. GAO rejected both arguments, explaining that an evaluation of labor rates differed from an evaluation of professional employee compensation, and the Navy had, in fact, received all the information required to perform the required realism analysis (offerors submitted cost worksheets that included standard and overtime labor rates, percentages for the firm’s proposed fringe benefit rates, overhead rates, and general and administrative rates). As a result, the Navy could have conducted the realism analysis of professional employee compensation contemplated by FAR 52.222-46, and its failure to do so was improper. 

Owl International follows two other professional employee compensation sustain decisions issued in March: SMS Data Prods. Grp., Inc., B-423197, Mar. 4, 2025 and MicroTechnologies LLC, B-423197.2, Mar. 4, 2025. In those cases, the agency performed an evaluation of professional employee compensation, but GAO found the evaluation itself to be unreasonable because it relied upon a benchmark for compensation GAO found unsupported. 

Taken together, these decisions demonstrate that the realism of professional employee compensation remains an effective protest argument in procurements that incorporate FAR 52.222-46. When drafting proposals, companies should ensure that, where the solicitation incorporates this FAR provision, their proposals thoroughly address the basis for proposed compensation levels and why those levels are sufficient to obtain and retain the professional workforce required to support the contract. Similarly, unsuccessful offerors should consider the strength of potential challenges to the evaluation of an awardee’s professional employee compensation as part of their bid protest assessments.