The time is right for bridging procurement gaps
- By Stan Soloway
- Jan 23, 2015
Are we at long last getting to the point where our government customers are starting to raise issues about the quality they are getting through lowest price technically acceptable (LPTA) procurements?
Since they are the ones who matter most and should have the greatest influence, one certainly hopes so. As customers raise objections and point to actual mission impacts these bids are having, we can finally start making the rational changes that are needed to allow for cost AND mission effective solutions.
And indeed, there are positive signs.
First, a few months ago, the acquisition team at one of the intelligence agencies was directed by its top leadership to withdraw a request for proposals and re-work it after the operational staff, the end-use customers for the services being procured, complained about the unacceptable quality of personnel they had been getting through several earlier LPTA acquisitions and that they anticipated coming via this new solicitation.
Second, defense undersecretary Frank Kendall has tasked a team to once again take a hard look at the LPTA issue for Better Buying Power 3.0. In previous versions, Kendall effectively admonished the workforce to not use LPTA for anything other than pure commodities. But he is well aware that a great deal of concern still exists about the frequency and nature of their use. That he is again dedicating some significant manpower to it reflects the fact he takes it seriously and is also a hopeful sign.
And it’s coming none too soon as the effects of LPTA awards are becoming clearer. As one example, in early January I saw a compelling analysis of work being performed at a major Navy command that showed that, through its overuse of LPTA awards, the command was now buying specialized engineering services at rates the Navy had previously said were appropriate only for administrative support.
It’s another data-driven example that makes clear the absurdity of how far things have spiraled. And, from what we hear from our hundreds of members, it is far from unusual.
The more specific examples we collect like that the better able we will be to make the case that cheapest is rarely ever best, let alone the best value.
Some argue that industry is talking out of both sides of its mouth. After all, if contracts are being awarded at such low rates someone must be willing to bid at those levels. Of course they are. Companies need to survive and are doing everything they can to find a way to do so in a market that increasingly fails to value better than average performance, let alone excellence or innovation.
We see companies across the board not just reducing overhead to improve efficiencies, but slashing it to sometimes dangerous levels just to get their cost structures low enough so that they can compete in a low price world. Of course, such strategies threaten to leave them unable to invest in future capabilities or in people, which, in the long run, is a problem as much for the government customer as it is for companies. But they aren’t being given much choice.
Yet, there are still those that believe LPTA approaches work well. In fact, in our 2014 Acquisition Policy Survey, two-thirds of the respondents (all respondents were government acquisition and technology professionals) said they believe their agencies use LPTA correctly. Oddly enough, however, some 40 percent acknowledged that they don’t do a very good job at setting technical requirements at the right levels. We have also tested that question among industry and over 80 percent say they believe LPTA is used excessively.
That there is such a disagreement between many in government acquisition and virtually all of the private sector on this issue is no surprise. But what’s missing is the perspective of the end use customer. And those perspectives are beginning to emerge. In addition, there are a few things we can do better to bridge the existing gaps.
First, let’s simply prohibit LPTA competitions for anything other than pure commodities, be they goods or services. Once a competition is deemed “LPTA” it locks the government into a rigid, legal definition that provides virtually no flexibility.
At the same time, cost-technical trade-offs offer precisely the kind of flexibility needed for smart decision making but in no way prevent the government from deciding that cost is the predominant source selection factor, if that is appropriate. But at least the flexibility window remains open.
Second, let’s stop playing guessing or word games. In an RFP, the government could and should divulge the actual weights of each award criteria so that companies are absolutely clear on the government’s thinking and source selection objectives.
Third, every significant procurement should be followed by a 360-degree evaluation. It would be relatively easy to survey all of the stakeholders, inside and outside of government, to get their perceptions of the quality of the process:
- Was it open?
- Was it collaborative?
- Was innovation encouraged or enabled?
- Did the customers get what they really needed?
These surveys, if used as performance improvement tools, could significantly help inform everyone about what is and isn’t working.
The best way to solve the LPTA debate is to engage the broad community, including the end user customers, and to create new and more relevant ways to evaluate the processes by which other than commodities are procured.
All of this is eminently doable. And given the signs that customers are beginning to get restive about the acquisition results they are being presented with, this is a terrific time to start bridging those gaps.
Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.