“Buying In” Now Effectively Policy Across Government

In a recent breakfast hosted by the Coalition for Government Procurement, Office of Federal Procurement Policy Administrator Joe Jordan effectively punted on the notion of best value versus the realities of federal procurement; lowest priced offers win contracts.

…Generally speaking, he said industry likes best-value procurements. They allow companies to propose higher prices, since officials will consider other evaluation criteria beyond price. On the other hand, the government is pushing low price and not always fully analyzing the entire lifecycle of a project, Jordan said. Both sides have good arguments, so the contracting officer’s judgment is the final arbiter….

Due to the intense focus on budget cuts, and sequestration still casting a very ominous shadow on the federal government, price has become the most important factor in any source selection, and will remain so for the foreseeable future.
Any talks of best value are out the window, so agencies should state as such in their solicitations. The issue really is about how do determine technical acceptability, given the foundations of what are normally poorly defined requirements.
Firstly, requirements for proper use of Lowest Price, Technically Acceptable (LPTA) should be very standardized, commodity based purchases that require no other factors other than price. That means just the commodity itself through very rigid, specific, and accurate requirements. No opportunities for customer service, shipping, transport, customization, etc. These requirements require the use of best value, and the ability to offer better service.
You get what you pay for. There lies the rub.
Often times, the government simply does not know what it wants. It thinks it does, so it puts horribly written Requests for Proposal on the street, that result in dozens and dozens of questions, since the requirements are either redundant, confusing, circular logic, not achievable, unrealistic, boilerplate and not applicable, etc. Further exacerbating the problem is the lack of engagement with industry during the pre-acquisition phase, assuring poor requirements. Lack of leadership, poor capabilities, and the excuse of lack of time are the usual suspects.

The pressures to save money are overwhelming, so prices are driven downward to unrealistic levels. Is anyone still doing cost realism assessments? You know the answer.

How often does the Government Accountability Office sustain a protest where the losing offeror, and often an incumbent, claims they lost to a competitor who underbid them by 40%, even though the incumbent knows exactly what the real cost of doing, at a satisfactory level, entails?

This vicious circle ensures performance will fail, and it is the lack of a long-term focus that is troublesome. Poor leadership, combined with continued declines in the skills and capabilities of the acquisition workforce (I include PMs in that bunch) have created a perfect storm of continued poor performance and waste. Just look at the fiasco that is the System for Award Management (SAM) for a perfect example of this.

The General Services Administration can claim SAM was best value, but price is kingmaker. “Buying In” is seen as an improper business practice per Federal Acquisition Regulation 3.501, but it seems to be standardized now.

Investment analysis is a foreign concept, since saving a few bucks today will lead to inevitable rise in costs tomorrow, failed programs, and poor performance.

Awarding to the lowest bidder is a disaster waiting to happen. Only when innovation is desired, through the use of performance-based contracting, combined with properly written requirements and effective contract management and execution, can best value be realized.

That is the best outcome for the taxpayer. Easier said than done.

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Chris Hamm

We take great strides to encourage high quality proposals, and use a few specific tactics to dissuade contractors from “buying in”. Unfortunately, for the acquisition professional, there is a negative feedback loop.

When the the low price proposal is not selected for award, that company protests. The Contracting Officer has to then articulate that another offer was better and worth the extra price. It can be done, but expensive lawyers have had great success overturning, or at least delaying, awards.

This makes the easier path to just award to the low price, at the expense of the mission and outcome.

Peter G. Tuttle

Earlier, in another posting, Jaime made a great comment in regards to cost realism analyses. With continuing budget pressures, proposals that appear to exceed requirements at lower costs will be extremely attractive to cash-strapped Agencies. We all know that buying-in can be an effective strategy to “get in the door” and the way to make up the $$ difference is to up-sell once you have the account. This “win” strategy can be countered, in part, by good cost realism analyses, well-defined requirements and a coherent evaluation conducted by savvy professionals who can discern the difference between fluff and truth. Obviously, what I say here is an oversimplification, but there is some ring of truth to it. Where do we really stand as an acquisition profession on cost realism? Do we still retain the expertise to conduct such analyses in-house (since these analyses really require in-depth understanding of the market, technology, implementation strategies, cost, etc. all rolled into one), or do we have to rely on 3rd parties such as FFRDC’s to help us gain those insights? I ask these questions since over the last few years the feedback I see (when we actually receive any at all – that’s another topic) from proposal evaluations is almost entirely limited to very general “take another look at your costs” statements from the CO. There is little to no meaningful push-back from Agencies regarding unrealistic costs or any discussions about what was proposed. At least in my world Feds tend to award without discussions which (to quote Dan Gordon) “leaves money on the table” and pretty much ensures that neither party has a firm understanding of the other upon award. Yeah, I know, who has time for these things nowadays. Cheers and Happy Wednesday to all of you. Pete

Jaime Gracia

The protests that I have seen sustained as of late have poor documentation, combined with insufficient or inappropriate justification for a trade-off decision. If the CO does his/her job properly, and provides the losing/low-bid offeror the transparency and confidence in the award decision, then it is a sour grapes protest that is a delaying tactic. That should go to my advocacy about protest accountability.

Nonetheless, it is the “cost reasonableness” analysis that is the shield of program. The weapons are the IGCE, and the higher, more value-added proposals. If one proposal is significantly less, how could it be technically acceptable? If it was, it would win?

Defense is also calling for more thorough “should cost” analysis, which should be part of an Acquisition Plan per FAR 7.105, and analyzed per FAR 15.407.4 (as appropriate for the requirement). This analysis can also be part of the source selection to make the argument for the trade-off analysis.

Who has the time, or the skills and capabilities in-house to do that? With the enormous pressures of savings and contract reductions, low-cost is the path to least resistance.

Bjorn Miller

Why is “awarding to the lowest bidder a disaster waiting to happen”? The lowest price, technically acceptable (LPTA) technique is but one method in achieving best value (see FAR Section 15.101). The technique should meet the requesting activity’s needs. There are several instances where LPTA would be the appropriate technique in achieving best value. Other times, a trade-off technique would be more appropriate. The government is finding great cost savings in reverse auctions, another method in achieving best value.

Contracting Officers need to engage the requesting activity in the planning phase to better understand the bona fide need, develop the acquisition strategy, choose the appropriate contract type and procure using the most effective and efficient method.

Jaime Gracia

…Contracting Officers need to engage the requesting activity in the planning phase to better understand the bona fide need, develop the acquisition strategy, choose the appropriate contract type and procure using the most effective and efficient method…

If procurement officials were doing this appropriately, then outcomes would be much better. Perhaps you misunderstood the post Bjorn.

LPTA, when used appropriately, is a great method of contract award. However, it is not being used properly, due to poor requirements, inconsistent application, and unrealistic pricing that is substituted for “best value.”

I also question the real cost savings of reverse auctions, as proper analysis at VA indicated that perhaps the savings are not so great. Reverse auctions can also lead to absurd buying in, as prices can be driven to below cost for vendors at unrealistic prices. How can a business deliver? There is a reason businesses shun reverse auctions, especially small businesses.

Nonetheless, when used properly, reverse auctions, like LPTA, are all part of the toolkit in an acquisition strategy. However, they need to be used properly.

What success have you had using these techniques?