Tuesday, July 3, 2012

DCAA Using Free Internet Surveys to determine Compensation Reasonableness

Yesterday we wrote about SAIC's appeal of the award of a contract to Lockheed on the basis that the Government's cost-reasonableness analysis was inadequate. SAIC lost the appeal. There was another aspect to this case that we found interesting, especially in light of two recent ASBCA decisions regarding employee compensation (see J.F. Taylor and Metron).

When the Navy was performing its cost-reasonableness analysis, they asked DCAA (Defense Contract Audit Agency) for information on direct labor rates for Lockheed and its proposed subcontractors. Since DCAA had no direct rate information for Lockheed's proposed subcontractors, it relied on, among other things, free internet surveys. Specifically, the decision reads:

To evaluate the realism of these subcontractor rates, the agency with respect to [REDACTED],  reviewed USA jobs.gov for comparable labor rates and found that for two of the three proposed categories the rates were the same; for [REDACTED] , the agency compared the quoted labor rates to the federal government’s General Schedule (GS) rates, and found that the rates were realistic for the Millington, Tennessee area where the contract will be performed; and for [REDACTED] , the contracting officer reviewed information at salary.com for similar labor categories to be performed in Millington. (For the fourth subcontractor, [REDACTED], the Defense Contract Management Agency reported that it took no exception to the proposed rates based on information from DCAA and various salary websites.) The agency determined that the subcontractors’ rates were realistic.

So you see, the Navy determined that Lockheed's proposed labor rates were reasonable based on information pulled off the internet.

Here's what DCAA's guidance states concerning information pulled off the internet (refer to DCAA Contract Audit Manual 5-808.8). When evaluating compensation:

Do not use free internet surveys. They are not considered independent or objective.

And if a contractor uses free internet surveys:

If a contractor uses free internet surveys to support proposed or incurred compensation costs, request assistance from the field or regional compensation technical specialist to perform an independent market analysis.

Just saying.


  1. Do you know of any DCAA "approved" sources for developing rates? When you have to take into account various labor categories, years of experience and education (specifically in the IT field) sources such as BLS fall short.

  2. DCAA does not "approve" any particular salary survey. They purchase surveys for in-house use. A number of years ago, DCAA was using surveys published by Watson Wyatt extensively.

    FAR does not require contractors to purchase expensive survey data. Contractors might be able to support the reasonableness of their rates by other means.