LPTA puts the screws to subcontractors
The prevalence of lowest price, technically acceptable contracting is hard enough on incumbents and prime contractors, but it is worse for subcontractors.
That was one of the main takeaways I pulled from a panel discussion at an event on LPTA put on by Market Connections and Centurion Research Solutions.
The two companies worked together on a research project and survey looking at the impact of LPTA from both the contractor and government perspective. The survey results drove home the point that lowest price contracting is here to stay.
“It’s the world we live in,” said Lisa Dezzutti, president and CEO, of Market Connections.
The panel consisted of Deb Alderson, CEO of Sotera Defense Solutions, Michael Fischetti, executive director of the National Contract Management Association, George Obertubbesing, vice president of business development for Harris IT Services, and Ray Whitehead, vice president of business development and strategic planning, General Dynamics IT.
They voiced some familiar complaints about LPTA and government contracting in general, namely that the government is horrible at writing requirements. And without good requirements, LPTA is a risky proposition.
As the primes adjust to LPTA bidding, most are looking for ways to move more of the work in-house instead of relying on subcontracts.
Even if you are a subcontractor on a team, the pressure continues after the award.
Alderson related the story of how Sotera was a sub on a winning team, and “then the prime decided to compete all the billets,” she said. So, for each task order that went out, Sotera and three other subcontractors would have to propose how they could support the task.
The prime said that if they can’t respond in two days, they would do it themselves, she said.
“As a subcontractor you need to be more aggressive on the teaming and subcontracting agreements,” she said.
“There is definitely more pressure on subs,” Harris’ Obertubbesing said. “The primes have to keep their growth engines funded.”
GD’s Whitehead said he is always trying to strike a balance between what to keep in-house and when to use subcontractors.
The key, he said, is working with trusted subcontractors.
Whitehead talked about GD’s recent small business awards ceremony. A common thread that ran through the award winners was their ability to deliver great services at low prices.
“You need great talent, but you need to figure out how to deliver that at competitive prices,” he said.
Alderson said that’s she’s always look for subcontractors with strong technical skills and strong relationships with the target customer.
“You need to become that must-have sub,” she said.
Those comments really popped like a bright light for me because, here at Washington Technology, we are in the home stretch of finishing our second Insider Report exploring the prime-subcontractor relationship. It should be out next week.
The panelists’ comments echoed precisely what our research found.
In part of the study, we asked prime contractors to rank the importance of attributes such as technical expertise, teamwork, customer knowledge, industry perception and process.
We also asked them to rank the performance of the overall group of subcontractors and to rank their single best subcontractor.
The performance of the overall group consistently ranked below the value the primes placed on those attributes.
But the single best subcontractor performed better than the value the primes placed on the attributes.
To me, that reinforces the point the panelists were trying to make, and points toward an opportunity for subcontractors. If you want to survive in the current market, you can be a preferred partner if you focus on those key attributes, particularly technical expertise, teamwork and customer knowledge.
It doesn’t mean that the market will be easier; it’s a tough market and will continue to be.
As Harris’ Obertubbesing said, “This market is a little mindboggling.”
Posted by Nick Wakeman on Oct 24, 2013 at 9:50 AM