Contractors can breathe a little easier now that the Defense Department will only be resorting to lowest price, technically acceptable procurements under clear criteria designed to ensure the process is used appropriately.
Last month, DOD issued a long-anticipated rule implementing statutory restrictions on the use of LPTA. The purpose of LPTA is to achieve the lowest possible price while still ending up with a solution that arguably gets the job done.
One major problem with this approach, according to many contractors and industry groups, is it only works well for relatively simple procurements with well-defined requirements. LPTA doesn’t allow for innovative, and potentially more expensive, solutions often best for complex procurements over the long term.
DOD’s use of the LPTA process has not always well-defined or predictable. Contractors thus are welcoming the rule, which implements criteria for using LPTA found in the Fiscal Year 2017 National Defense Authorization Act.
“This is the latest step in PSC’s multi-year crusade to ensure proper use of LPTA contracts,” Professional Services Council President and CEO David Berteau said in a press release. “We are encouraged to see DOD initiate this long-awaited action, and … we look forward to the rule being followed and for DOD to focus on value and results as well as cost.”
Under the act, an LPTA source selection process may only be used when:
- DOD can clearly describe the minimum requirements in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers.
- DOD would realize little or no value from a proposal exceeding the solicitation’s minimum technical requirements.
- DOD would realize little or no additional innovation or future technological advantage by using a different methodology.
- The proposed technical approaches can be evaluated with little or no subjectivity as to the desirability of one versus the other.
- A review of technical proposals other than that of the lowest-price offer probably would not identify factors that could provide other benefits to the government.
- The contract file includes a written justification for the use of the LPTA process.
- For procurement of goods, the goods being purchased are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life.
- The lowest price reflects full life-cycle costs, including for operations and support.
‘Best Value’ Procurements Often Better for Everyone
LPTA doesn’t allow for the creativity required to meet complex government needs, Coalition for Government Procurement President Roger Waldron told WashingtonExec.
“If you’re looking for a solution to a difficult problem, you want to have incentives for companies to provide innovative solutions,” he said. “LPTA isn’t going to get you where you need to go because it limits the options a company has for crafting a solution.”
For these types of procurements, especially in critical areas such as national security and cybersecurity, Waldron said a traditional “best value” process is the better choice. This approach allows the government flexibility to determine the best mix of price and capability, rather than merely accepting the lowest bid that meets minimum criteria.
LPTA presents other problems from a contractor’s perspective, Waldron said. For one, it cuts into profit margins and doesn’t allow for creative solutions that ultimately could benefit the company as well as the government. LPTA also reduces profit margins, which are often already thin, and limits a contractor’s ability to differentiate itself in the market.
The bottom line is, LPTA frequently isn’t the best option for the government or contractors, and limitations on its use are long overdue.
“The government should be able to make good business decisions and get the best value for the money and get the technical solutions it needs,” Waldron said. “LPTA may initially appear to save money, but over the long term it reduces access to new technologies and capabilities and the commercial marketplace.”
Rule Follows GAO Report
The rule comes after the Government Accountability Office issued a report in November 2018 calling on DOD to clarify its use of LPTA contracts.
According to the report, about 26 percent of DOD contracts and orders valued $5 million and above in fiscal year 2017 were competitively awarded using the LPTA process. DOD used it to buy such things as equipment, fuel, IT services, and construction services.
Although DOD had not yet issued regulations implementing LPTA restrictions in the FY 2017 NDAA, GAO found contracting officials “generally considered” the first five of the law’s eight LPTA criteria for the 14 contracts reviewed for the report. However, it said last three of the criteria were not generally considered.