Bob Lohfeld

Is DOD moving away from LPTA?

Industry has long objected to the use of lowest priced, technically acceptable procurement strategies for technical/professional services and complex solution procurements, and it now appears that DOD is moving away from this practice.

Narrowing the use of LPTA

Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall, issued a memorandum on March 4 to clear up confusion about when LPTA is appropriate as a source selection process. His memo states LPTA “has a clear, but limited place in the source selection best value continuum” and narrowly defines when LPTA is appropriate for DOD procurements. This memo signals a shift away from the LPTA source selection process.

Download a copy of Kendall’s memo titled, “Appropriate Use of Lowest Priced, Technically Acceptable Source Selection Process and Contract Type.”

According to Kendall, LPTA should only be used when procurements meet four specific conditions:
  1. The requirements are well defined;
  2. The risk of unsuccessful contract performance is minimal;
  3. Price is a significant factor in the source selection; and
  4. There is neither value, need, nor willingness to pay for higher performance.

For technical service and solution bids, I would argue that none of these four conditions can be met. In most technical bids, requirements cannot be defined to a standard of acceptability that is understood by government and industry and that can be expressed in terms of performance measures that can be evaluated on an acceptable/unacceptable basis. It is hard enough to define the work, let alone a pass/fail standard that can be applied in proposals. Generally, the risk of failure in technical bids is other than minimal, and the consequences of failure can be hugely detrimental to DOD and the warfighter. This is especially true in IT service and solution bids.

Finally, in every technical services or solution bid, increased performance generally provides additional value to the government, and the government should strive to achieve an innovative, cost-effective solution to meet mission needs and maintain our technological advantage.

When LPTA is appropriate

LPTA procurements are appropriate for non-technical services or commodity bids and are an effective way of driving down these costs. In these instances, the LPTA source selection process can provide best value when combined with effective competition and proper contract type.

In his presentation at a Bloomberg Government event on March 12, Kendall gave an example of a service bid that in his opinion met the four tests. Lawn mowing services are a good example, he said, of the type of services where LPTA would be appropriate. In lawn mowing, the requirements are well defined, the risk of unsuccessful performance is minimal, additional value is not gained from higher performance than specified, and price is appropriately a significant factor in the selection.

This kind of procurement is the antithesis of where we have seen DOD use LPTA as its source selection process. Hopefully, this example will make it unambiguously clear that LPTA and technical service and solution bids don’t mix.

Why LPTA became popular

LPTA as a source selection process became popular with procurement officials for all the wrong reasons. First, it was an overreaction to budget reductions brought about by sequestration and budget caps. In austere times, procurement officials overemphasized the importance of cost in the source selection process—often to the detriment of technical performance. What we have learned is that overemphasizing cost causes bidders to be much more aggressive at risk taking, and bidders will understate their cost of performance in an effort to be the lowest priced, technically acceptable bidder. In the long run, expected cost savings are erased by cost overruns, contract modifications, show cause letters, and even contract terminations.

LPTA also proved to be an easier and quicker process for evaluating proposals, making source selections more streamlined, and avoiding protests. When proposals are evaluated on a pass/fail basis, there is a tendency to give every bidder a passing grade. After all, in technical services bids, it is very difficult to define standards of acceptability, and consequently, technical acceptability has no floor. With all bidders receiving a passing grade, the LPTA process mandates an award to the lowest priced offer—assuming there is no adverse responsibility determination.

With all bidders passing and award going to the lowest priced offer, there is nothing for disgruntled bidders to protest. It seems like the perfect approach to procurement if you ignore for a moment that it puts bidders in a death spiral, stripping away every performance advantage as they race to the bottom to be the lowest priced offeror.

LPTA looking forward

With higher budgets for DOD being debated in the congress, I hope that LPTA procurements will be relegated to commodity and non-technical buys and that the urgency to build the cheapest solutions or provide minimalist services to DOD will give way to the idea that military superiority goes to the country that provides the best solutions, not the cheapest.

About the Author

Bob Lohfeld is the chief executive officer of the Lohfeld Consulting Group. E-mail is robert.lohfeld@lohfeldconsulting.com.

Reader Comments

Wed, Apr 15, 2015 Richard Tovo California

We, contractor employees, are not protesting the government savings. It's my tax money as well. We are loudly protesting the diminishing quality of workmanship brought on by the "lowest price, get in and get out" mentality. The long-run pain is the mess the government will be stuck with in the mix of improperly finished products, incomplete work because critical tasks not included in the 'line-item' budget. When we ask our program directors about resources (people and materials) to do the job right the first time, the answer is usually: "it's not in this new contract budget". Funny, because there's always a budget to do a poor job over agin.

Fri, Apr 10, 2015 John weiler United States

Making matters worse are some FFRDCs who are pushing free and open source software (FOSS) that opens up huge cyber threats to our enemies who have deeper insights into weaknesses of this unsupported s/w. It is promoted by those who need to justify their costly "analysis/paralysis" acquisition support services. We all know who these actors are! The former CIO, Vivek Kundra called them the IT Cartel, as they control 95% of all procurements and are hostile to the innovators.

Fri, Apr 10, 2015 CJ

GREAT article, very objectively stating the issues associated with LPTA contracts. I've sat on both sides of the fence (govt requesting services and vendor bidding on the opportunity). People forget that for every contract awarded there is a large number of vendors who did NOT win. Those salaries of corporate staff (HR, Payroll, Sales, Pursuit/Capture, etc) and facility/utility still need to be paid. LPTA bids are priced to the requirements and NOTHING MORE. If the customer wants something later that wasn't within the original requirements, the LPTA winner will be very quick to say "sorry, can't do that; it's out of scope".

Fri, Apr 10, 2015 David Mischbuccha

I am for more propagation of LPTA because it helps control the out-of-control concentration of our industry. Time to stop feeding the whales. They deliver little or no more value for all of their bloat

Thu, Apr 9, 2015 Andre Washington, DC

If companies would stop protesting so much, contracting officers would not demand LPTA so much.

Show All Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Our databases track awards back to 2013. Read More

  • Navigating the trends and issues of 2016 Nick Wakeman

    In our latest WT Insider Report, we pull together our best advice, insights and reporting on the trends and issues that will shape the market in 2016 and beyond. Read More

contracts DB

Washington Technology Daily

Sign up for our newsletter.

I agree to this site's Privacy Policy.