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By Nick Wakeman

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Nick Wakeman

6 questions to drive the LPTA debate

In a procurement world where lowest price seems to carry the day, contractors might be tempted to focus on nothing but cost, to the detriment of everything else.

That might win you contracts, but what happens afterward? How do you stay competitive and profitable, and still deliver good solutions?

That’s going to be the heart of a roundtable I’m leading on Monday on “Surviving Lowest Price Technically Acceptable IT Projects: Maximize Your Returns and Customer Satisfaction Ratings.”

That is a mouthful of a title, but the point is clear – you have to focus on the customer and profits. Oh, and by the way, you have to have a lower price than your competitors.

The two speakers I’ll be hosting are Shamun Mahmud from DLT Solutions, and Paul McCloskey of SolarWinds. Each will make a presentation, and then I’ll jump in with questions.

So, here are some of the questions I’ve been thinking of, and I encourage you to send me suggestions, or tell me where I'm off base.

Is there a difference in how LPTA is applied by contract type – fixed price, time and material, cost plus?

I don’t think I’ve heard anyone talk about contract type with LPTA. Maybe this isn’t an issue, but I’d like to find out.

How is LPTA affecting partnerships between primes and subs?

This could be interesting because I’ve heard some good and bad things; on the bad side, the pressure on the prime gets passed to the subs, so the pricing squeeze is on. Primes also are getting stingier with the work they share with subs.

On the good side, LPTA is pushing the need for innovation, which can drive a closer relationship between the prime and its teammates, especially for teammates that have a unique solution or process that can save money.

Should more companies offer to put some skin in the game, and pay more upfront costs?

I wonder if this is even possible in the LPTA world, and if it is, can enough contractors afford to do it?

How is LPTA affecting customer expectations? More demanding, less demanding, more flexible?

My thought here is whether customers are more willing to try new approaches, or are they more risk adverse than ever before?

How can companies differentiate themselves in an LPTA world?

I think this might be the toughest thing to do in the current market. The technology playing field is pretty level, so it’s your strategy, your processes, and the stuff in your head that’s going to set you apart. Articulating and even quantifying that is very difficult in a market driven by price.

Have you started to see issues from the customer, i.e., not getting what they want from a project, because it was procured as an LPTA?

It might be too soon to answer this, but I keep waiting for the audit reports that criticize agencies for failed projects that can be tied back to LPTA.

It’s not that I think the more expensive the project, the better it is, but it’s the emphasis on price as the deciding factor that worries me. Where’s the cost-benefit or risk analysis? Where’s the focus on outcomes?

My fear is that LPTA does nothing to solve the long-standing problem of IT projects that don’t deliver.

Posted by Nick Wakeman on Mar 21, 2013 at 9:49 AM

Reader Comments

Sat, Mar 23, 2013 Candice Paul

Isn't winning a bid to supply people at a rate lower than Market Rate a violation of "Technically Acceptable"? Lower than market means the Client will have to accept someone with less skill than 'ordered'; or, the position lies vacant. Putting some real teeth into Damages for not fulfilling the actual Technical Terms of a Contract would take the 'profit' out of predatory pricing.

Fri, Mar 22, 2013 Richard

Contract type is important. For FFP the vendor has the risk of a low bid. With cost plus contracts, your bid rate does not matter. The customer has to pay your invoice regardless of how far off it is from your bid rates. The government should do an independent estimate of "should cost" and no one should be able to win with a price far off that estimate, since the customer bears the risk of a bad price when the contract type is Cost Plus. Often the customer has teh same type of people and should know the reasonable cost of a category (e.g. Certified network professional with a CISSP) Even with the new "Tripwires", by the time you trip the wire for a few months (blaming start-up challenges), then a few more months (blaming the customers ordering of categories is different than you expected (of course since you skewed the hours toward the lower range to lower your price), then a few more months with no excuse at all, you get a cure period. By that time the previous good performers are gone or forced to work for less money and benefits.

Fri, Mar 22, 2013

Cost realism seems to be non-existent for government evaluators on LPTA bids. What will it take for the government to reject aggressive low-ball bidders in LPTA bids? How can industry mitigate against such irrational behavior?

Fri, Mar 22, 2013 mark colorado

In our DoD market, the government contracting entities have combined LPTA with Firm Fixed Price. We find this a "toxic" combination because those same government contracting entities then overrule the government customer and do not allow that customer to establish or even reference minimum acceptable specifications for the requirement such as defining historical labor hours needed to meet requirements, or historical FTE. The contracting entity forcibly asserts that FFP precludes government expectation of evaluating labor hours or FTE but instead only focuses on deliverables for a price. This lack of details in the solicitation (in spite of industry ASKING the government to specify what minimums would look like..)results in industry "diving for the deck" with approaches that are Minimally Technically Acceptable, since Minimally Technically Acceptable equals Technically Acceptable. On a somewhat humorous, bitterly-ironic side note, at a recent quarterly performance review (contracting entities chairing the meeting, government customers present, and our contract team present), the contracting entities announced that "Higher Headquarters" was requiring that the performing contractors report numbers of FTE and labor hours to the contracting entities as part of the analysis for dealing with Sequestration and concerns over the CR. The more-informed government customers almost exploded because they said that the government was now requiring to know that which they had previously not been allowed to know (FTE and Labor Hours) during competition!!!!!!

Fri, Mar 22, 2013

In LPTA environment, there is a tendency to put lesser qualified folks on evaluation panels. Eval panels just assume all bidders are "acceptable" and rarely look at anything but price. Further contract folks don't like to write justifications for selecting a vendor who is not lowest price. These scenarios are killing the Army at places like Ft Bragg but nobody will admit it openly.

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