The federal government has exhibited an increased use of the “lowest priced technically acceptable” (or LPTA) approach for awarding complex contracts.  Earlier this month, the Under Secretary of Defense for Acquisition, Technology and Logistics, Mr. Frank Kendall, issued a memorandum on this point – discussing appropriate use of LPTA source selection processes and associated contract types.

The LPTA approach is simple and straightforward.  The federal agency identifies the lowest priced offeror.  If that offeror submitted a technically acceptable proposal, it would be awarded the contract.  There are no trade-offs or rankings, and any non-price factors are evaluated only for acceptability (i.e. no scaled scoring system).  For this reason, the LPTA approach provides a streamlined solution for procuring certain commercial and non-complex supplies and services.

However, where the federal government employs the LPTA source selection process to procure complex contracts, it may miss out on more innovative solutions.

Mr. Kendall noted this concern – emphasizing that LPTA should be used “only when there are well-defined requirements, the risk of unsuccessful contract performance is minimal, price is a significant factor in the source selection, and there is neither value, need, nor willingness to pay for higher performance.”  Where the federal government can pay more for higher performance standards and could benefit from innovative or superior solutions, a trade-off source selection process between cost and non-cost factors is both appropriate and optimal.

The memorandum further discusses the importance of selecting a contract type that best meets the agency’s needs.  For instance, a Cost-Plus-Fixed-Fee, Term, Level of Effort (or CPFF LOE) is well-suited for professional and management services because it obligates the contractor to perform a set number of hours over a stated period of time, to earn a fixed fee.  Unlike a Time and Materials (or T&M) contract, direct labor rates are not fixed.  So the government can share in the contractor’s savings, where the contractor is able to reduce skill mix and level while still meeting the contract requirements.

Overall, it is encouraging to read Mr. Kendall’s guidance regarding appropriate use of LPTA source selection processes and associated contract types.  While his memorandum is addressed to Department of Defense leadership, perhaps other federal agencies will also heed his advice.