lowest price technically acceptable (LPTA)

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As I’ve covered here before, low-priced, technically acceptable procurements (LPTA) shine a light on a contractor’s ability to provide the required services at the lowest possible cost to the government.  Leave your style points at home.  It is all about getting lean to win the award.

But when the evaluation is that simple, is there any room to challenge an LPTA award decision?  The answer is Yes — and a recent GAO protest offers some important insights into best practices.

The protest concerned an Air Force contract to provide tactical recovery kits.  Covering both LPTA bases, the protester argued that the agency (1) unreasonably found the awardee technically acceptable and (2) conducted inadequate discussions concerning price.

On the first question, GAO disagreed that the agency erred in evaluating the awardee’s proposal.  Stated differently, the agency determined that the awardee’s proposal was technically acceptable and GAO found no basis for overturning that conclusion.

With the technical acceptability side settled, only the question of the lowest price remained.

The protester argued that the agency held inadequate discussions, but GAO would not consider the issue because it lacked a key allegation.  Specifically, the protester never alleged that it would have lowered its price if the discussions had been adequate.  Without that allegation, GAO found there could be no prejudice.  The awardee remained technically acceptable and offered the lowest price.

Although it was unsuccessful, this protest nevertheless offers a great roadmap for firms considering an LPTA protest.  If possible, the protest should identify that the awardee was not, in fact, technically acceptable.  In that case, the award should skip over that offeror and proceed to the next in line.

In the alternative, the protest should identify a procurement error resulting in a misevaluation of your firm’s price (i.e., the missing element of the protest examined in this post).  It only makes sense that a LPTA protest should take a stance on your firm’s ability to offer the government the lowest price.

 

 

In a recent post, I discussed new legislation that could signal an uptick in Best Value procurements for complex service-based contracts.  In the view of many (including me), more Best Value RFPs is a win/win for both contractors and the government.

As a quick refresher, Best Value procurements utilize a Best Value Tradeoff Analysis, which gives the agency the ability to weigh proposal costs and benefits and award the contract to the offeror that will provide the “best value” to government – even if that comes at a higher price than another acceptable offer.  By contrast, Lowest-Price Technically-Acceptable (LPTA) awards can be challenging on complex service-based contracts, where skilled performance is often not suited to a lean or even shoestring budget.

Contractors bidding on Best Value procurements need to think strategically and be mindful of both price and technical excellence.  Having the lower price or exceeding the RFP requirements – independently or even in tandem – may not be enough.  A recent GAO decision highlights how mastering the interplay of these two factor is the key to sustained Best Value success.

The protest concerns the Department of the Interior’s decision to award an FSS task order to a higher-priced offeror on a Best Value basis.  GAO denied the protest, finding that the agency reasonably documented the relative strengths of the proposals and weighed them against the quoted prices.

Digging deeper into the protest, the protester argued that the agency did not reasonably take into account the qualifications and experience of its proposed personnel – noting that its proposal exceeded the RFP requirements in a variety of ways.  In response, the agency noted that it did, in fact, give the protester credit for its solid experience, including assigning a “high confidence” rating to its past performance proposal.

However, for a Best Value award – meeting or (in this case) even vastly exceeding the RFP requirements in one area is often not enough.  The agency performed a detailed review of the offerors’ strengths and compared them in the context of their respective prices.  Based on this proper tradeoff analysis (according to GAO), the agency found the higher priced offer provided better value to the government and made the award.

GAO’s decision offers an important lesson to government contractors competing Best Value procurements – don’t get complacent!  Unlike LPTA procurements (where the RFP sets the bar), RFP requirements should not be viewed as anything other than the baseline.  Contractors should parse those requirements for areas where it can add value and then highlight all of those betterments in its proposal.

For government contractors frustrated by Federal agencies’ use of Lowest-Price Technically-Acceptable solicitations on complex services contracts – help may be on the way.

As I’ve discussed before, LPTA procurements can have a chilling effect on contractors that are able to provide increased technical benefits to the government – but at an increased price.  LPTA solicitations encourage contractors to get as lean as possible – focusing on price and only minimum technical competency.

A Bill currently before the U.S. House of Representatives proposes to limit the use of LPTA and leave it to the agency to weigh the “benefits of cost and technical tradeoffs in the source selection process.”  In other words, a Best Value Tradeoff approach.

If passed into law, the Bill would appear to been a boon for highly-skilled contractors capable of providing Federal agencies with great value at an increased (but still reasonable) price.  The Bill specifically earmarks certain industries where Best Value solicitations would take precedence over LPTA contracting:

  • Information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, or other knowledge-based professional services;
  • Personal protective equipment; and
  • Knowledge-based training or logistics services in contingency operations or other operations outside the United States, including in Afghanistan or Iraq.

I will continue to track the progress of this Bill as makes it way towards becoming law.  It should certainly be on the radar for Department of Defense contractors providing any of the broad range of services outlined above.

 

We often discuss the need for government contractors to Read and React when responding to a solicitation:  (1) Read the RFP and understand all of the requirements and limitations and (2) React to the RFP’s evaluation scheme by playing the appropriate strengths and minimizing weaknesses.  And sometimes, the best reaction is knowing the value of beefing up your proposal in the right areas — even when it will increase your overall price.

The best example when it comes to shifting proposal strategies is Lowest Price Technically Acceptable (LPTA) vs. Best Value.

The goal on an LPTA procurement is to achieve technically acceptability while keeping price as lean as possible.  On the other hand, when responding to a Best Value procurement, the game changes dramatically.  The Agency is looking at the intersection of technical competency and price in order to maximize the benefit to the government.  The award can go to even the highest priced offeror – provided that the higher price can be justified through additional benefits to the agency.

A recent GAO decision highlights the tightrope that government contractors must walk when responding to RFPs.

The protest concerns the National Institutes of Health’s award of a contract for event management and video production services.  The RFP called for award on a Best Value basis, considering the following three factors:  (1) technical, (2) price, and (3) past performance.

The protest challenged the agency’s decision that the unsuccessful offeror’s proposal created a “potential risk” based on its option year pricing.  Specifically, the agency concluded that the offeror’s decision to decline any increases in option year pricing jeopardized the company’s ability to retain qualified personnel on the job (because, presumably, those employees would not be in line for compensation increases year over year).

The protester disagreed and presented some compelling facts to support its position.  The protester argued that it maintains a robust employee retention program and cited statistics regarding its favorable retention record.  Moreover, the protester noted that its competitive compensation plan undercuts the agency’s concerns.

The agency chalked all of this information up as “mere disagreement” with the agency’s reasonable concerns and dismissed the protest.

There was nothing “wrong” or non-responsive about the offeror’s proposal.  But with Best Value evaluations, the agency has the ability to dig into the numbers and uncover what it believes is the most advantageous offer.  In this case, the agency determined it was worth the extra bump in option year pricing to ensure employee retention.  That kind of value judgment (when properly documented by the agency) is difficult to overcome as part of a bid protest.

The key for contractors responding to a Best Value RFP is to anticipate what is important to the agency and reinforce your business’s unique ability to satisfy those needs — even if it means a higher overall price.

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.

Sequestration.  Budget cuts.  Reduced spending.  Federal contractors know that these are challenging times – but is your business adapting in time to keep pace?

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One consequence of the shrinking federal marketplace is a noticeable shift away from “best value” procurements and towards awarding contracts to the “lowest price, technically acceptable” (LPTA) offeror.  In other words, rather than looking to contractors to demonstrate in detail what they can add to a project (based on past performance, subject matter expertise, management capabilities, etc.), agency decision making is being driven exclusively by the bottom line price – even on complex professional services contracts.

While there is certainly an argument to be made that the LPTA decision making model simply does not work on services contracts – the reality is that LPTA awards are here to stay for the foreseeable future.

So the question is – how should contractors alter their approach to compensate for this movement in agency decision making?

1. Understand the Solicitation.  Pretty basic, but totally necessary if you are going to develop an effective procurement strategy.  Understand exactly what the government is purchasing and how it will evaluate your proposal to provide those services.

2. Adapt the Proposal.  One size does not fit all in proposal writing.  When responding to an LPTA solicitation, a proposal that highlights all of the additional bells and whistles that your company can add misses the mark.  In fact, any extras or perks will likely increase your price and take you out of the running for the award.  An LPTA proposal should be looking to “hit all the wickets” required to be technically acceptable, nothing more.

On the other hand, a best value solicitation is asking you to put your best foot forward and go beyond the basics.  Although you’ll want your proposal to check all the boxes required to be technically acceptable, you also need to look for areas where your company can provide better value than your competitors – even if it means offering a higher price.

The key for proposal writing is to “know when to say when.”

3. Massage Your Price.  Unsurprisingly, how you approach your price will often make all the difference in winning a contract award.  For best value solicitations, this involves a carefully balanced assessment of the level of services being offered vs. the overall price.  However, no such considerations apply in the LPTA-world.  The offer is essentially a hard bid – and your strategy should revolve around creative ways of driving down your price as low as possible while still meeting the minimum requirements (such as merging management responsibilities and effectively utilizing subcontractors).

4. Get the Award.  You did your homework and tailored the proposal perfectly, but still did not win the contract.  Why?  It could be that the agency improperly applied its own decision making criteria.  The Government Accountability Office and Court of Federal Claims routinely grant bid protests where the agency fails to properly apply the proper decision making basis.  Know your rights and act quickly!