Analysis of FAR Subpart 22.11 - Professional Employee Compensation

Overview

FAR Subpart 22.11 establishes the policy that professional employees working on government service contracts must be compensated fairly and properly. It specifically addresses employees who are exempt from the Service Contract Labor Standards (formerly the Service Contract Act) and requires agencies to evaluate an offeror's ability to maintain a stable and competent workforce through a Total Compensation Plan.

Key Rules

• Definition of Professional Employee: Refers to individuals defined in 29 CFR 541 who work in "bona fide professional capacities" requiring prolonged study and recognized status (e.g., engineers, lawyers, scientists, and accountants).
• Exclusion from SCA: This subpart clarifies that while the Service Contract Labor Standards cover blue-collar and certain white-collar workers, they do not cover professional, executive, or administrative employees.
• Mandatory Provision: Contracting Officers must include FAR provision 52.222-46, Evaluation of Compensation for Professional Employees, in solicitations for negotiated contracts when:
  1. The contract value is expected to exceed $900,000; and
  2. The services require a "meaningful number" of professional employees.
• Total Compensation Plan: Offerors are required to submit a plan detailing proposed salaries and fringe benefits.
• Evidence of Realism: Offerors must support their compensation structures using recognized national or regional compensation surveys from professional, public, or private organizations.
• Adverse Assessment: Proposed compensation plans that are "unrealistically low" can be assessed as a negative factor in the award decision, as they indicate a risk to quality and staff retention.

Responsibilities

• Contracting Officer (CO):
  • Determines if the $900,000 threshold and "meaningful number of professionals" criteria are met.
  • Ensures provision 52.222-46 is included in the solicitation.
  • Evaluates the submitted Total Compensation Plans for realism and consistency.
• Offerors (Contractors):
  • Must identify which employees qualify as "professional" under 29 CFR 541.
  • Must draft and submit a comprehensive Total Compensation Plan, including fringe benefits.
  • Must provide data (surveys/studies) to justify that their proposed pay is competitive and sufficient to recruit/retain competent staff.
• Evaluation Team:
  • Analyzes the impact of proposed compensation on the contractor’s ability to perform the work without high turnover or degraded service quality.

Practical Implications

• Anti-Wage-Busting: This subpart serves as a deterrent against "wage busting"—the practice of a successor contractor winning a contract by drastically lowering the salaries of the incumbent's professional staff.
• Risk Mitigation: From a government perspective, a contractor who pays significantly below market rates for engineers or scientists is a performance risk. High turnover or the inability to hire qualified experts can lead to project delays or failure.
• Data-Driven Bidding: Contractors cannot simply "pick a number" for professional salaries; they must be prepared to defend their pricing with objective market data (e.g., Radford or Mercer surveys).
• Technical vs. Price Tradeoff: Even if a contractor offers the lowest price, they may lose the award if their professional compensation plan is deemed inadequate to ensure mission success.