Is LPTA here to stay?
- By Matthew McKelvey
- Jan 07, 2019
It’s an acronym well-known across the government contracting space - LPTA, short for “Lowest Price Technically Acceptable,” as an evaluation method for cost/price proposals.
In our work with contractors in the departments of Commerce, Defense, State, Homeland Security, and Veterans Affairs, as well as independent agencies, such as the FTC, EPA, GSA, NASA, and intelligence agencies, we have seen LPTA from several key angles - the good, the bad, and the ugly.
So, what can you realistically expect related to LPTA going forward into 2019 and beyond?
Many procurement officials in the government continue to perceive LPTA as a ‘safe’ approach for proposal review, mostly for its objective evaluation criteria. The belief is, with the objective criteria of lowest price, the risk of a protest is minimized. They also view it as a way to drive prices down. Unfortunately, that “objective” evaluation criteria can, and often does, lead to less-than-ideal awards.
So, to put it simply, LPTA isn’t going anywhere yet. It’s here to stay for now, but it is likely to experience some adjustments in usage going forward, largely as a result of increased availability of funds in some government agencies which don’t require them to be so focused on lowest cost.
Additionally, an interesting development in the government cost proposals realm is a renewed discussion on the benefits versus limitations between the LPTA and best-value evaluation methods. Today, we’re seeing modifications of LPTA usage, resulting in “LPTA Light” or “LPTA Similar” approaches which allow for additional subjectivity for cost/price proposal evaluations.
In fact, DOD over the past two years has issued more restrictive guidance on the use of LPTA as the evaluation methodology. Specifically:
“The Department of Defense shall not use a lowest price technically acceptable source selection process for the engineering and manufacturing development contract of a major defense acquisition program.”
–2018 National Defense Authorization Act Section 832
These changes are being driven by the unintended (but not altogether unexpected) consequences that can sometimes result from an inappropriate use of LPTA, such as cost overruns, recurring scope changes, early contract completion due to funding limitations, and more frequent recompetes due to early contract terminations.
When LPTA is used to award complicated programs where the contractor is ultimately unable to deliver the job at the price initially quoted, government contracting officers are stuck with few options. They can require the contractor to be forced to ‘live with’ lower-than-market pricing - which is demotivating and can affect the quality of the work product delivered. Or they can fight for the additional funds from other programs. Even worse, the government may have to decide whether to end the contract (with the work incomplete), or go back to the procurement ‘drawing board’ to find another bidder who can satisfactorily come through.
This can be expensive and time-consuming, affect quality, and create significant delays. In the end, these additional “costs” are often much greater than the initial “savings” of using LPTA versus Best Value. Essentially, the critical decision for the government is WHEN it makes sense to use LPTA or Best Value as the evaluation method.
The only real defense against LPTA is to get involved with the procurement way in advance of the RFP release. Your best option is to work with the government procurement team to determine if LPTA is really the right evaluation criteria for the program. Ask the following questions, and based on the answers you just might be able to encourage a new perspective from the government:
- Is the scope of the program defined with crystal-clear precision? If it isn’t, LPTA is a significant risk.
- Is past performance really important for the program? If so, LPTA doesn’t allow for that evaluation. Or the past performance evaluation is combined with the technical evaluation on a pass/fail scale.
- Does the work require highly skilled personnel who are in demand in both the government and private sectors? If so, the cost of that labor will likely go up over time, and unless the government wants to have the least-skilled of these personnel, LPTA will not allow for hiring competitively in the market.
- Is the work primarily a commodity-like service or product? If not, LPTA doesn’t allow the government to choose the solution they may most likely desire.
- Does it meet agency methodology criteria for using LPTA? Often procurements are in process when changes occur. It doesn’t hurt to help the government by letting them know about the changes (see the DoD guidance above).
- Does this program or do similar programs have a recent track record of issues/failure when awarded under LPTA? The best ammunition is often experience on other programs (whether it was your experience or someone else’s).
Having said all of this, you are probably asking what the bottom-line is?
Well, LPTA is here to stay, and while it does have its merits in certain cases, it will still likely be used in some wrong situations as well. That is probably good news if your company has been built to be a lean, commodity-like business. It’s probably not good news if your company provided services based on a value-added model.
So, unfortunately, be prepared to keep seeing LPTA procurements for the next few years as the government continues to work through its benefits and limitations. But do what you can to get ahead on individual procurements by working with the government to help determine whether an LPTA evaluation is the right one to use.
Matthew McKelvey is the president of the McKelvey Group, a financial consulting firm in Gaithersburg, Md.