By Michael Ipsaro, Technical Director, PMP, CCE/A
A recurring supply of widgets or routine services is obtained using a Best Value approach. The delivery is delayed months and when combined with the final price of the contract…..results in avoidable costs of millions.
The lesson: Not knowing or misapplying source selection approaches in acquisition can cost millions. Knowing when to apply Best Value vs. LPTA source selection approaches.….priceless.
With budgets shrinking and resources more constrained, Lowest Price Technically Acceptable (LPTA) is becoming a more widely used technique for source selection. However, it isn’t always the right fit. It can be risky to eschew the importance of past performance and other considerations such as flexibility, to indiscriminately use LPTA because it seems fast, cheap, and obvious in delivering the most attractive total price.
Below I make several suggestions on steps to take when deciding which source selection approach to use, but first it’s worth reviewing the factors laid out in FAR Part 15 that make Best Value or LPTA appropriate to evaluate proposals for negotiated procurements.
For Best Value, non-cost factors such as past performance, risk aversion, reliability, or innovation are weighted as equally important if not more important relative to the price. This permits the Government flexibility to trade off between non-cost factors and price/cost factors and award to the offeror that does not have the lowest price or does not rate as the highest technically.
This approach allows for consideration of the past as a reliable predictor of the future. It also permits a more holistic view for comparison, emphasizing areas such as innovation, ability to respond to unclear or complex requirements, or risk management that may lead to greater overall ROI.
With LPTA, the Government evaluates the price of the proposals solicited and identifies the lowest one. Next, it evaluates its technical approach against a bar for “acceptability.” When used appropriately this approach can be speedy. The bar consists of evaluation factors pertaining to non-cost factors; however there is no discrimination among offerors regarding them. In a binary way, offerors either clear or don’t clear the bar.
Not having any past performance may be deemed “acceptable,” so an offeror’s excellent past performance provides no relative advantage. If you think history is a reliable predictor of the future, then excluding past performance from the evaluation may be too risky. Further, if the bar is lower than it should be due to factors such as unclear or incomplete requirements for a service more complex than previously assumed, it may lead to unexpected results, such as numerous change orders and cost overruns.
When to Use Them
Knowing when to use LPTA and when to use Best Value is key. This should be considered early in the acquisition value chain and may be recalibrated as the acquisition strategy evolves. I recommend these steps before deciding any approach will deliver the “best value.”
- Create a scorecard for analyzing the costs, benefits, and risks of alternative approaches (LPTA and Best Value) against a requirement
- Provide results of scorecard as part of solicitation review board
- Vet proposed source selection approach with program requirements review board
- Discuss specific aspects of requirements such as degree of complexity, uniqueness; actual/historical performance against similar requirements
- Provide Source Selection Training and requirements definition training earlier in Acquisition Planning process to increase odds of effective requirements definition and effective selection of source selection approach
- Create a repository of Source Selection Plans and scorecards for acquisition personnel to reference when evaluating the most effective approach to use in a given situation
The Shakespeare quote, “Discretion is the better part of valor” comes to mind. Exercise caution before declaring a one-size-fits-all source selection approach. What do you think?
(Article republished from the Integrity Matters acquisition and program managment blog)