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