Army tries to up pay to contractor staff
In a recent article in Washington Business Journal, I wrote about the federal government’s growing influence over contractor pay through labor-rate freezes. Interestingly, an award decision by the Army reaffirmed that intended influence, but with the opposite result: Denying a contract win to a company based on the belief that the employees were not going to get paid enough.
Here’s what happened: Military Professional Resources Initiative Inc., an Alexandria-based subsidiary of L-3 Services Inc., bid as the incumbent for a contract to provide mentoring, training, subject-matter expertise and program support to the Afghan military, in the ongoing effort to prepare its troops to take over its own security. Stating in its proposal that it was updating salaries based on the current market conditions, MPRI proposed a significant reduction in direct labor rates to its employees relative to those under its incumbent contract.
As submitted, this did give MPRI a more cost-competitive bid than DynCorpDynCorpFollow this company International LLC, the Falls Church-based company that eventually won the contract (MPRI bid $212.7 million for the contract, while DynCorp bid $249.1 million). But the Army changed that, stating that MPRI “grossly underestimated” its labor costs, which would result in high turnover, a lack of qualified personnel, and high risk of performance disruptions or failures. It then increased MPRI’s labor rates to the current levels under its incumbent contract.
Warranted argument by the Army? The Government Accountability Office didn’t think so, sustaining a protest filed by MPRI and stating in the decision that the Army’s analysis was not reasonable, and resulted in an excessive upward adjustment to MPRI’s proposed labor rates.
Perhaps MPRI’s employees are less than satisfied with that decision, given that they’d receive a pay cut if awarded the contract after the proposals are reevaluated, but this may actually be deemed a victory for contractors that prefer agencies leave compensation decisions up to company managers and executives.
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