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Flawed Price Realism and Professional Employee Compensation Plan Analysis Sink Air Force Contract Award

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In MicroTechnologies LLC, B-423197.2, et al. (March 4, 2025)​, MicroTechnologies LLC protested the U.S. Air Force’s award of a task order to Trace Systems Inc. for Combined Air and Space Center Operations Center (CAOC) communications support. The protest challenged multiple aspects of the Air Force’s evaluation, asserting that agency failed to properly assess: (1) the offerors’ professional employee compensation plans in accordance with FAR 52.222-46; (2) the realism of the offerors’ non-professional direct labor rates; (3) the price risk analysis required under DFARS 252.204-7024; and (4) a potential organizational conflict of interest (OCI) involving a former government official.

The Decision
GAO sustained the protest in part and denied it in part, ruling that:

  1. Improper Evaluation of Professional Employee Compensation Plans: GAO found that the Air Force failed to properly assess whether proposed salaries and benefits were sufficient to retain qualified personnel and maintain contract continuity, as required under FAR 52.222-46. The agency did not adequately compare proposed compensation to incumbent levels​
  2. Flawed Price Realism Analysis: The Air Force evaluated non-professional labor rates using only market data instead of incumbent rates, despite the solicitation requiring both for realism assessments. GAO ruled that this departure from the stated evaluation criteria was unreasonable​.
  3. Missing Price Risk Analysis: GAO sustained the protest on the basis that the Air Force failed to conduct the required price risk assessment under DFARS 252.204-7024. Without this analysis, the agency could not determine if the proposed pricing posed financial risks to the government​.
  4. No Unmitigable OCIs Found: GAO rejected allegations that the awardee had an unfair advantage due to social interactions with a former government official, ruling that casual relationships alone do not create an OCI.​

Key Takeaways for Contractors

  1. Agencies Must Fully Evaluate Compensation Plans: When FAR 52.222-46 applies, agencies must compare salaries and benefits to incumbent levels, not just market rates. A failure to do so can invalidate a contract award.
  2. Price Realism Matters: When required by the solicitation, agencies must properly assess whether proposed labor rates are realistic. If an agency shifts its evaluation approach mid-procurement, such as initially comparing rates to both incumbent and market data but later relying solely on market data, it risks a sustained protest.
  3. DFARS Price Risk Analysis is Mandatory: DFARS 252.204-7024 requires agencies to assess whether prices pose a risk to the government – if that analysis is missing, the agency’s award decision may be at risk.
  4. OCIs Require Concrete Proof: Claims that a competitor had an unfair advantage due to relationships with former officials must show improper access to non-public information. Unremarkable, periodic social interactions are not enough to prove an OCI.