Wednesday, December 12, 2012

Compensation Plan Requirements for Service Contracts

The Service Contract Act of 1965 was enacted to ensure that Government contractors compensate their blue-collar service workers and some white-collar service workers fairly, but it does not cover bona fide executive, administrative, or professional employees. That omission is covered in FAR 22.1103.

The Government is concerned with the quality and stability of the work force to be employed on its service contracts. Professional compensation that is unrealistically low or not in reasonable relationship to the various job categories may impair a contractor's ability to attract and retain conpetent professional service employees. Recompetition of service contracts may in some cases result in lowering the compensation (salaries and fringe benefits) paid or furnished professional employees. This lowering can be detrimental in obtaining the quality of professional services needed for adequate contract performance. Therefore, it is in the Government's best interest that professorial employees be properly and fairly compensated.

FAR 22.1103 requires that solicitations for negotiated service contracts, when the anticipated contract amount is greater than $650 thousand, and the service to be provided will require meaningful numbers of professional employees, include a requirement to submit, for evaluation a total compensation plan setting forth proposed salaries and fringe benefits for professional employees working on the contract. Supporting information is also required and should include data such as recognized national and regional compensation surveys and studies of professional, public and private organizations, used in establishing the total compensation structure.

FAR 52.222-46 cautions that "low-balling" may be viewed as evidence of failure to comprehend the complexity of the contract requirements and failure to provide a compensation plan may constitute sufficient cause to justify rejection of a proposal.

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