Bob Lohfeld

Let's stop bashing LPTA and find an alternative

One of the things I dislike most about lowest priced, technically acceptable (LPTA) procurements is that they are so misaligned with the values we have grown up with as government contractors.

No matter how hard I try, I just cannot get excited about writing a proposal where the objective is to provide the minimally acceptable technical solution—a solution that just squeaks by the technical evaluators—instead of one that dazzles them by striving for outstanding performance and showcases good ideas and innovations. I was brought up in an industry that prided itself on striving to be the best, and not one that sought to deliver minimally acceptable work to the government.

I’m not alone in this belief. In the 2014 Washington Technology Insider Report on LPTA procurements, 89 percent of industry and government responded that they were opposed to the use of LPTA for services procurements.

Additionally, this view is shared by Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics, in his directive called Better Buying Power 2.0, which says that LPTA bids are inappropriate for procurements when the government would receive any value from proposals offering to exceed the minimum technical or performance requirements and specifically calls out professional services bids as generally falling into this category.

With such overwhelming opposition to the use of LPTA procurements, you have to wonder why they continue to show up in services bids.

While the government intended LPTA procurements to reduce acquisition costs, we’ve also seen that LPTA can reduce proposal evaluation periods and avoid protests. Proposal evaluations are being done by first reviewing price proposals to find the lowest priced offeror, and then only that proposal is submitted for technical review.

If evaluators find that proposal to be technically acceptable, the evaluation is done and the remaining proposals are never evaluated for technical acceptability. Because government awards to the lowest price offeror, there is little to protest other than the technical acceptability of that offeror. The unintended consequence is that LPTA bids are being used to sidestep protests and make awards quickly to the boldest contractor, and not necessarily the best contractor.

If we are going to move away from LPTA bids, then we must offer an alternative that helps the government achieve lower acquisition costs, while not sacrificing performance in the process. We need a bid structure that lets industry strive for excellence but also share in the government’s objective to drive down the cost of service delivery.

If industry and government can share these values, then we will get procurement back on track and LPTA will become an artifact of commodity procurements—its original intention.

Aligning industry and government values

Two fundamental values—technical and financial—must move into alignment for both government and industry to achieve their respective goals. The technical value is the easiest to align.

Let’s all agree that striving for excellence, rather than minimally acceptable performance, is a shared value and that in complex technical and professional services bids, the government always receives additional value when minimum technical and performance standards are exceeded.

Let’s continue to evaluate technical and management proposals for their excellence and award evaluation strengths as we have traditionally done in best value tradeoff procurements.

Financial objectives are a little more difficult to align since industry generally strives to increase profits, and government strives to hold down service delivery costs. However, these two values are not mutually exclusive.

Suppose your next RFP included language that required each bidder to propose a Cost Avoidance and Cost Reduction plan as part of its management approach.

The government would hold a cost reduction meeting with the contractor every 6 months to collaborate on ways to reduce service delivery costs. To make this financially meaningful for the contractor, the contractor needs to share financially in the cost reductions. Here’s an example of how this might work.

Suppose the government awards a time-and-materials (T&M) contract for IT services, and the contractor staffs the project with a specified number of people to do the work. Normally, the contractor has no incentive to reduce its project staff because any reduction would reduce its revenue and profits.

However, if the government agreed to share 20 percent of the cost reduction with the contractor, then the contractor’s profits would increase significantly for each person removed from the project and the government’s cost would go down by 80 percent of the cost each person had been billing prior to removal from the project.

Under this arrangement, financial values move into alignment; for each person removed from the project, the government’s costs go down and the contractor’s profits go up. It’s a win-win situation.

Another advantage of this approach is that it moves evaluation of the plan for cost savings into the technical and management proposals where it can be evaluated on its merit and will place emphasis on full lifecycle cost management—not just initial bid prices. This will move awards away from reckless bidders who take a deep dive on bid price, and instead, favor those bidders who offer a more thoughtful and long-term approach to reducing service delivery costs.

For those who say this cannot be done, I want to remind everyone that the most powerful statement in the Federal Acquisition Regulations (FAR) is its guiding principles in FAR 1.102(d) which reads, “The role of each member of the Acquisition Team is to exercise personal initiative and sound business judgment in providing the best value product or service to meet the customer’s needs. In exercising initiative, Government members of the acquisition team may assume if a specific strategy, practice, policy or procedure is in the best interest of the Government and is not addressed in the FAR, nor prohibited by law (statute or case law), Executive order, or other regulation, that the strategy, practice, policy, or procedure is a permissible exercise of authority.”

In other words, if it is not specifically prohibited, then it is permissible.

Let’s stop bashing LPTA and instead, let’s turn loose our collective creativity and find a way to replace it with an approach that is a win-win for everyone. I’m sure there are other ideas out there to bring government and industry values into better alignment. If you have seen them be successful, please share them with our readers in the comments section below.

Reader Comments

Fri, Sep 5, 2014 El Ric

I think Walt LaBerge had it right: "Liars' Dice".... LPTA puts the lowballers in charge and the government has to suffer when they either cannot deliver or deliver way below what was needed / expected. Sure, SOWs can be better and more specific, but that's a major problem in services such as ERPs especially when the customer is inexeperienced in the service area or type and neither it nor the providers really know what is needed or possible especially given such things as legacy systems, etc. LPTA pretty much guarentees nobody will be happy.

Fri, Sep 5, 2014 Jared Mischbuccha

Companies are dreaming if they think more than a very small minor fraction of govt services spending should be on custom work. It is almost all standard and commodities. The worm has finally turned and US Government finally gets it. Only companies that Get It will survive. The slothful behemoths who push others away from the trough will learn this hard way, in some cases. Investors beware

Wed, Sep 3, 2014 Karla

LPTA is appropriate for most buys. The government is not buying cutting edge solutions or services in the vast majority of cases. Most of the services have become commodities with the only differentiation being the name of the company that pays the employees. If I am honest about what I offer and how it compares to what my competitors offer - there really is not that much difference. The government, despite what they say, designed the system for buying services that way by laws like SCA and Davis Bacon.

Wed, Sep 3, 2014 Kelly

Streamline the bid process in terms of format requirements and dwell time. You can save money in many areas when you reduce the need for fluff, time spent, and beautiful looking resumes. The money spent on doing thee things can be placed into other areas of efficiency.

Wed, Sep 3, 2014 Louis Jurgens

Why not the old (c.60's / 70's) design to cost, DTC model? The government tells industry what they have to spend, and bidders offer their best shot. Kind of like what you do when you make any expensive purchase. Take buying a car, for example. You figure you can spend, say, $31k on a vehicle. You then shop around until you get the best bang for your buck. With DTC of course, this completely shifts the burden of cost estimations and technical proposal evaluations to the government, something they may not be equipped to do. With LPTA, the cost and technical burden falls completely on the bidders. Easy for government SSEB and evaluators. Let's change the model. --LJ

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