Lisa Pafe

COMMENTARY

Is LPTA finally dead?

Federal contractors may be getting a welcome holiday gift. The National Defense Authorization Act of 2017 directs more limited use of Low Price Technically Acceptable (LPTA) procurements. The bill, which is now with the president for signature, legislates a Defense Federal Acquisition Regulation (FAR) Supplement revision which would limit the use of LPTA to only the most straightforward commodity procurements.

This legislation is a logical follow on to Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall’s March 4, 2016 memo, which stated that LPTA “has a clear, but limited place in the source selection best value continuum” and narrowly defined when LPTA is appropriate for Department of Defense procurements.

The March memo was part of DoD’s Better Buying Power acquisition reforms based on data analysis that showed LPTA, while resulting in short-term savings, often cost agencies more money in the long term.

LPTA avoidance

The new legislation not only limits use of LPTA but establishes that it is completely inappropriate “in circumstances that would deny the department the benefits of cost and technical tradeoffs in the source selection process.”

In fact, NDAA 2017 specifically recommends avoiding LPTA for the following procurements:

“(1) information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, or other knowledge-based professional services;

(2) personal protective equipment; or

(3) knowledge-based training or logistics services in contingency operations or other operations outside the United States, including in Afghanistan or Iraq.”

Good news for contractors

Washington Technology had previously reported that 68 percent of federal contractors believed that LPTA had negatively impacted their business. NDAA 2017’s proposed changes are indeed good news for the contracting community, signaling an end to price as the deciding factor. The change allows and encourages companies to discriminate their bids based on proven technical expertise or innovation.

In best value trade-off procurements, bidders win by proposing strengths that the government is willing to pay for. What is a strength? Source selection guidance shows that the government recognizes a strength as a feature that:

  • Exceeds a contract requirement in a way beneficial to the customer;
  • Increases the likelihood of successful contract performance and/or mission accomplishment;
  • Mitigates risk; and/or
  • Provides a benefit the customer would pay extra to receive.

 

The good news is that contractors can finally focus on their value proposition versus the competition, rather than slashing prices while sacrificing quality.

Good news for government

It is also good news for the government. LPTA began to gain popularity in 2009 in response to tight agency budgets. According to Bloomberg Government, the use of LPTA grew to become the most often used DOD source selection methodology (60 percent of procurements) and also gained in popularity in the civilian space. LPTA was supposed to be a way to streamline the acquisition process while saving money.

However, requiring price to be king eliminated much-needed discretion on the part of the Source Selection Authority (SSA) in making a trade-off decision based on proposed strengths. Pricing pressure on contractors resulted in lowball bids (even on best value trade-off procurements), which in turn created a situation where quality suffered.

LPTA created major changes in the marketplace, driving some companies out of business and resulting in consolidation through mergers and acquisitions. LPTA also did nothing to simplify the acquisition process, as evidenced by no reduction in the number of protests.

A toast to 2017!

Despite GAO’s recent decision to uphold the use of LPTA on ENCORE III, with the expected passage of NDAA 2017 the pendulum is again swinging—this time in a positive direction. Let’s all make a New Year’s Eve toast to the return of best value trade-off!

 

Reader Comments

Thu, Feb 9, 2017 Mack Luster Japan

LPTA has been murder on our personnel/technical support contracts. We're losing talented and experienced people and replacing them with persons of dubious credentials just to hit that rock bottom price. LPTA has it's uses indeed, but not on these service contracts that depend on having a knowledgeable talent-pool.

Wed, Jan 18, 2017

BV has largely become a joke in many areas outside of major systems where clear technical trade-offs can be defined. As the contracting community has gotten younger they see their primary mission to get things at the lowest price possible and often challenge the establishment of trade-offs before solicitation and ignore evaluations after using perfunctory measures of price difference to state that even Marginally rated proposals can be awarded. This has occurred even in set-aside procurements where it isn't just large versus small business competitors, Frankly, I see this as the most sweeping return to common sense in a decade. I'm tired of recompeting contracts every couple of years after marginal competitors with cheaper prices can't reliably perform the work. This is the true cost to government and the tax payer and is never captured.

Tue, Jan 10, 2017

Unfortunately this change will cost the tax payer more. Contracting Officers will be forced to use BV-Trade Off even though LPTA would be a better strategy. The minute a multi-million $ contract is solicited LPTA the large DoD firms will put their lobby machine in motion - protest, congressional inquiries, personal letters/office visit to acq executives, etc. Why? Because they know they can't compete with smaller firms that provide smaller compensation packages and have lower overhead, yet can provide just as good (if not better) services at a lower cost. LPTA does NOT mean lowest price…it means "Technically Acceptable" then lowest price. Most acquisitions (other than weapon systems) do not have anything of "value" to trade-off, so now requiring activities will be "inventing" something of "value". This change is not a good change to the american tax payer, but it is a seen as a great change for the large defense firms, e.g. BAH, NG, GD, etc. that have expressed to senior military leaders their distain for LPTA. Now the contracting process just became more cumbersome and the tax payer will pay for it. I hope someone keeps a metric to see if contracts awarded under LPTA that are re-competed as BV-Trade Off…cost more or less.

Mon, Jan 9, 2017

This will be extremely beneficial to the DoD and small businesses as LPTA as been detrimental to long-standing programs. Please provide an update as the National Defense Authorization Act for 2017 has been signed into law.

Mon, Jan 2, 2017 Sharif Jameel Maryland

I worked as a contractor in the IT field for about 7 years and one of the reasons I left for the private industry was because of LPTA. Lowball bidding pushed individual salaries down as much as 30% below market value resulting in positions being filled by substandard candidates while those with the strongest skills left for the private world where their skill sets were correctly compensated. This of course had a very negative affect on contract performance and on the reputation of the contracting companies who built their business model around LPTA. I’m curious as to how those companies plan to adjust to new requirements now that they have the reputation of being low-pay employers and cannot attract top candidates for new contract awards.

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