The following is an installment in Crowell & Moring’s 2023 Bid Protest Sustain of the Month Series. All through 2023, Crowell’s Government Contracts Practice will keep you up to date with a summary of the most notable bid protest sustain decision each month. Below, Crowell Partner Cherie Owen and Summer Associate Riley Flewelling discuss GAO’s decision sustaining the protest of Veteran’s Management, Inc. (“VMI”).

May closed with an impressive number publicly released GAO sustain decisions, but one stood above the rest. In Veteran’s Management, Inc., GAO clarified the requirements of agency evaluations under FAR 52.222-45, and revisited the definition of a “professional employee” discussed in GAO’s Sabre Systems, Inc. decision released earlier this year.

As background, the United States Department of Agriculture (“USDA”) issued a request for quotations—set aside for service-disabled veteran-owned small businesses—for acquisition support services for the USDA Forest Service’s Special Project Operations Center. The bids were to be evaluated on price and technical factors. USDA received 8 quotations.  In evaluating proposals, the agency found VMI’s total compensation plan was “unrealistic, not in reasonable relationship to job complexity, and may impair the [vendor’s] ability to attract and retain competent professional service employees.”  Ultimately, USDA issued the task order to Stafford Consulting Company, Inc. VMI protested, arguing that the agency’s evaluation of professional employee compensation under FAR 52.222-45 was incorrect for two reasons.

First, VMI argued that 52.222-46 required the USDA to look to the contractor’s proposed compensation as the basis of its evaluation, rather than evaluating only the vendors’ total evaluated prices and fully burdened labor rates.  GAO agreed, noting that an agency must consider all of the information it possesses regarding professional employee compensation – if a solicitation required the submission of only burdened labor rates and the agency does not possess other compensation data, an agency’s use of burdened labor rates in evaluating total compensation can be found reasonable.  However, here, since the agency requested and obtained salary and fringe information, it should have considered this data for its 52.222-46 evaluation alongside burdened labor rates. The GAO held that USDA’s evaluation was improper on this ground.

Second, Veteran’s Management asserted that it was competitively prejudiced because USDA’s evaluation of professional employee compensation considered all labor categories identified in the solicitation and failure to accurately identify which labor categories met the definition of a “professional employee.”  In response, USDA argued that Veteran’s Management was not competitively prejudiced because the company actually benefitted from the way USDA classified the labor categories.

This issue connects to a significant decision that came out earlier this year. In Sabre Systems, GAO found that the definition of “professional employees” under 29 C.F.R. § 541.300(a) for compensation evaluations generally does not apply to “occupations in which most employees have acquired their skill by experience rather than advanced specialized institution.” The CFR offers paralegals as examples of employees who are not “professional” in this context, as an advanced specialized degree is not a prerequisite to become a paralegal.

In Veteran’s Management, GAO identified three labor categories that had been included in USDA’s analysis but did not constitute “professional employees.”   GAO quickly brushed off the agency’s arguments that Veteran’s Management was not prejudiced by this mistake. It noted that the agency had not fully explained why a proper evaluation would have led to a decreased level of confidence in the quotation, and that this demonstrated “at least a reasonable possibility of prejudice.”

Overall, Veteran’s Management serves as a useful reminder of the importance of carefully reviewing a solicitation’s requirements regarding the documentation required with respect to professional employee compensation and the importance of raising challenges to the agency’s evaluation when it fails to comply with the solicitation’s terms.