In the late 1980s, when my daughters were in elementary school, I worked at a large government professional services provider. Like many other contractors, we were forced to create separate organizations and cost centers to compete for an increasing number of Lowest Price Technically Acceptable (LPTA) contracts. It started with less skilled tasks but eventually expanded to encompass even high-end consulting and technical support contracts. Naïve me – I thought we buried this practice with procurement reform in the nineties.
Now comes the news that a major contractor is restructuring — perhaps in response to this same phenomenon. I’m also seeing a disturbing trend of incumbent contractors losing re-competes to lower priced competitors who are bidding as much as 40% to 60% reduced fully burdened labor rates and less than a sufficient number of staff to perform the work. Is anyone still doing cost realism assessments? And, who is making these awards and why?
Here are five possible explanations and reasons why government executives should discourage this practice before it becomes a tidal wave:
Number Five: Would you interview and then hire the job candidate who just barely meets your minimum requirements? Well, that is what you’re doing when you establish LPTA evaluation criteria. Taxpayers deserve the best value for a reasonable amount of money. Not the least value for the least money.
Number Four: There is no such as thing as “non-mission critical services.” Are you really wilingto trust your your productivity to a network maintained by twenty college graduates or your safety to a building designed by an apprentice architetect? Every agency’s mission depends on these services.
Number Three: What is more important? Mission success or cost savings? How many of the major program failures and cost overruns of the 80’s and 90’s could have been prevented if contractors were allowed to provide the best available qualified staff?
Number Two: Buying a pencil? Get the lowest price. Buying program support or information technology solution design? Hire the best and brightest. Don’t settle for less.
Number One: This one is for Congressional, OMB and agency executives. Even source selection officials don’t have the necessary clout to overrule dictated overall budget reductions. Everyone is running scared. The required fiscal prioritization and cultural change has to start at the top. With you and your staff.
Let’s not kid ourselves. The last time this happened there were serious repercussions. Higher contractor attrition rates. Lower past performance. More business failures. Loss of corporate & agency knowledge. So, share your concerns with Agency executives and make sure Congressional, Senate and OMB staffers understand the negative impacts of LPTA.
To quote Yogi Berra, this is just “Déjà vu all over again.”
– Reprinted from Centurion Research Solutions business development (BD) tip by Mike Lisagor, Centurion BD subject matter expert and Celerity Works founder
This is why best value is, in my opinion, always the best way to go. LPTA is a slippery slope, as you rightly point out, Mike.
I really have mixed feelings about this entire subject. I’ve seen “best value” awards for double or more than what the next closest offeror proposed when the technical and management evaluations were essentially similar (negligible differences between the #1 and #2 vendors). Of course, an agency is provided great discretion in determining what is “best value,” but sometimes the value decision is totally out in left field and based on inappropriate behind-the-scenes pressures such as political, preferred providers, etc. Come on…we know this happened sometimes…all of us are human. Additionally, in actual practice a “best value” sometimes does equate to whatever the lowest cost is due to budget realities. LTPA has its own set of issues but I am wondering if using it might not eliminate some of the evaluation games and award shenanigans that seem to be creeping into our fair and unbiased Federal procurement process. Maybe the answer is to use the available purchasing strategies only when they are appropriate. One method does not apply across the board. Cheers. Pete
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 GAO 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 the work, at a satisfactory level, entails?
LPTA is a losing proposition, a path that often leads to waste, schedule delays, and poor performance. Just look at the fiasco that is the System for Award Management (SAM) for a perfect example of this. GSA will claim it was a “best value,” but price is the kingmaker.
Peter – I understand your comments. We’ve all experienced the system being gamed. There is no one acquisition solution that can guarantee a totally unbiased evaluation and source selection. “Aint gonna happen! One possible compromise solution is for the evaluation guidelines to be established such that a higher priced bidder in a best value acquisition must still be within a certain percentage of the competitive range – for instance, 10% or 20%. In other words, there are creative ways to put boundaries on the potential abuse of “best value.” I still believe LPTA is a more pervasive problem, especially in terms of the government getting not just the best value for the dollar but also the value that is needed to ensure mission success.
Mike, as a Contracting Officer I would hate to have executives discourage the use of LPTA. In fact, LPTA is but one technique in the best value continuum (see FAR Section 15.101). The decision to use one technique(s) over another should be based on the bona fide need. Yes, budgets become a factor but they should not determine a Contracting Officer’s decision to choose one over another. Your second point illustrates this: if the need is a commercial-off-the-shelf item that is readily available by multiple sources and no variation is required by the government, LPTA would be the best way to go. On the other hand, if the government requires innovation and has performed its due diligence to qualify the trade-off variables, the trade-off method may be the appropriate technique to use.