DISA loses Encore III protests but LPTA survives

The Government Accountability Office is sending DISA back to rework its solicitation for the $17.5 billion Encore III multiple award contract, but one element will remain unchanged and that’s LPTA.

GAO reached its conclusion in early August but has just now released the public version of its protest decision.

But the companies' objections in the areas of cost/price evaluation and technical evaluation were enough for GAO to tell DISA to rework the solicitation.

In the area of LPTA, the two companies argued that the awards for Encore III should have been based on a price/technical trade-off basis just as the awards for Encore II were. They said LPTA was “inconsistent with historical practices.” They also said that the use of LPTA was counter to Defense Deaprtment guidance that says LPTA should only be used when a product or service has well defined requirements.

But GAO found that DISA documented its rationale for using LPTA as the best approach for the procurement. DISA argued that Encore is a mature program with a “substantial commercial application.”

In other words, DISA says that it has been buying the same type of IT services for over two decades. The scope of the performance work statements in the solicitation didn’t contain “Objective or Threshold values” so there was nothing to conduct a cost-benefit trade off.

GAO found that while CACI and Booz Allen (and probably almost any other bidder) would disagree about the use of LPTA for Encore III, the disagreement doesn’t mean that DISA’s choice of LPTA was unreasonable.

It is interesting to me because when GAO announced the decision but hadn't released its document there was a lot of talk in the market that Booz Allen and CACI winning the protest meant that LPTA had suffered a significant blow. It appears that the opposite is true.

So LPTA is alive and well in Encore III.

As for the parts of the protest that the companies won, GAO found fault with DISA’s evaluation methodology because it didn’t provide for a reasonable basis to compare the costs of the proposals from the different bidders.

Another major bone of contention was that DISA didn’t ask for cost-reimbursable rates, only fixed price rates. GAO found fault with this because the majority of task orders under Encore III are expected to be cost reimbursement, not fixed price.

DISA also was dinged by GAO for setting a 50 percent threshold. It would reject any proposal 50 percent below the floor set by the prices for Encore II. But Encore II was conducted as a price/cost procurement, not LPTA. GAO said that DISA didn’t account for this difference in creating the 50 percent threshold.

But despite these victories for the protesters, the big takeaway for me remains the survival of LPTA for a major IT services contract. It is another sign that the government increasingly sees services as a commodity, which will further put pressure on pricing and margins.

Anyone expecting this decision to offer relief from LPTA will be sorely disappointed.