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Cost Realism: Agency Must Evaluate Employee Compensation Rates

When an agency performs a cost realism evaluation under a solicitation involving significant labor costs, the agency must evaluate offerors’ proposed rates of employee compensation, not just offerors’ fully burdened labor rates.

In a recent bid protest decision, the GAO held that an agency erred by basing its realism evaluation on offerors’ fully burdened labor rates, without considering whether the direct rates of compensation were sufficient to recruit and retain qualified personnel.

Source: Cost Realism: Agency Must Evaluate Employee Compensation Rates – SmallGovCon

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