Understand the pros and cons of LPTA solicitations to determine whether you should pursue them
From our personal experiences in the government contracting realm, we know that it can be a struggle for contractors to fully understand how the government decides which proposals win and which don’t make the cut.
Most contractors think that the proposal with the best solution or product wins the contract. They work really hard to come up with a detailed and effective solution to include in their proposal, and are shocked when they don’t win the contract. The experienced folks in government contracting know this situation all too well.
One of the types of contracts where the best solution doesn’t always win is the Lowest Price, Technically Acceptable (LPTA) solicitation.
In this article, we’ll go over the ways the government selects its contractors, what LPTA is, the pros and cons of LPTA, and how you can decide whether bidding on LPTA solicitations is good for your business.
How does the Government choose its contractors?
The government reviews and awards competitive contracts based on two primary, very different methods.
The first method is called the “Best Value” methodology.
Best Value is normally used with Federal Acquisition Regulations (FAR) Part 15 procurements, otherwise known as “Contracting by Negotiation”, and allows the government agency to select the vendor that offers the best overall value with respect to both solution and cost.
To get technical, FAR part 15.101-1(A) states that “a tradeoff process is appropriate when it may be in the best interest of the Government to consider award to other that the lowest prices offeror or other than the highest technically rated offeror.”
As such, the government agency will evaluate your proposal as a whole in accordance with Section L of the solicitation, which highlights the primary proposal evaluation factors, and Section M, which notifies the contractor of the importance of each evaluation factor. These factors typically include past performance, technical approach, management approach, cost, and others.
For example, the Army may have a solicitation for a lodging and catering requirement for a family retreat of soldiers who have returned from action. Section L will describe the technical requirements needed such as:
- How many nights of lodging are needed
- The number of meals per day required and at what time and for how many people at each sitting
- If they need conference breakout rooms
- Daycare space required
- Any other special requests
Section M will describe how the government agency will evaluate the overall ability of the contractor to meet the event requirements. They may ask the contractor for a detailed written plan of how they will provide the requests, a map of the property where the event will be held, a proposed event schedule, and anything else needed to show the government that the contractor understands and can meet the requirements of the solicitation.
For the agencies who use the Best Value methodology, the cost of the contract may not be as important as the contractor’s management or staffing approach, or their technical capability to perform the work.
Lowest Price Technically Acceptable (LPTA)
An increasingly common (but often unpopular among contractors) method for vendor selection is the aforementioned Lowest Price Technically Acceptable (LPTA) approach.
Let’s get technical again. According to FAR Part 15.101-2, “the lowest price technically acceptable source selection process is appropriate when best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price.”
What that means is that the Government will review your proposal to determine if it is technically acceptable based on the salient characteristics listed in the solicitation. These are the specifications, at the very least, that your solution must have in order to meet the government’s needs.
If you meet these minimum requirements and your cost is the lowest among all the competitors, then you will be awarded the contract.
According to FAR, the Government is only supposed to use LPTA when their requirements are clearly defined and the risk of unsuccessful contract performance is minimal. Thus, these LPTA solicitations are very common for the purchase of commodity supplies, standard services, and standard construction needs.
LPTA typically does not take into account your past performance. If your quote meets the technical requirements at the lowest cost, then you will win the contract even if you haven’t delivered this solution in the past. The Contracting Officer may check your past performance, but in most cases you won’t even need past performance to win these contracts.
However, if you do have negative past performance as noted in the Contractor Performance Assessment Report System (CPARS), then it’s possible you could be removed as the apparent awardee, depending on the reasons behind the negative rating. Having no past performance cannot be counted against you and is often times rated as neutral to the source selection agency.
The Government does have other methods of choosing contractors, but they are not categorized as competitive. These include sole source justifications, single source decisions, emergency situations, situations of urgency, among others. These can be found in FAR 6.3 – Other Than Full and Open Competition.
Pros of LPTA
The first pro of LPTA solicitations is that these proposals are relatively easy to write.
If you read carefully through the solicitation for the minimum requirements, and make sure that your bid meets or exceeds the stated characteristics, the battle is half over.
If your company’s technical approach meets or exceeds the requirement and you propose the lowest price to the government agency’s contracting officer or source selection board, you’ve won the contract. Yay!
LPTA proposals are typically simpler and take less time to write because you aren’t required to include detail about why your product may cost more but is a better value. Proposals with higher costs may not even get reviewed.
Additionally, LPTA solicitations can be a better deal for the taxpayer, as they ensure that the government is paying the lowest possible price for the requirement they need. No bells and whistles included.
The procurement costs for the government are lower as well. A large source selection board is not needed for an LPTA proposal, and cost-benefit analyses are not performed. Instead, the technical team evaluates whether each proposal meets their requirements, and out of those that do, selects the proposal with the lowest cost. This saves a considerable amount of time and resources.
Cons of LPTA
There are some cons that come with the LPTA methodology for both government contractors, agencies, and taxpayers.
If you bid on LPTA solicitations, you’ll likely compete with scores of other contractors trying to make a small margin of profit and working on volume returns. Depending on the type of products or services you offer, you may be competing against wholesalers and firms who will stop at nothing to undercut your costs.
And even if you win these contracts, you may have to lower the salaries of your employees and work their hands to the bone in order to make a small profit margin. This will hurt your company’s reputation and make it tough to recruit smart people to join your firm.
Add to that all of the contract administration work that you’ll have to do to get paid, and that profit margin just got much smaller.
LPTA can be detrimental to government agencies and taxpayers as well.
Because LPTA procurements primarily factor price into source selection, any contractor can propose whatever product or service they choose without taking into account the quality of the product. If the product meets the minimum requirements, then it’s acceptable.
In the long run, procuring products or services of minimally-acceptable quality can lead to serious risks to the agency and government personnel. Maintenance and replacement costs may increase, and there is a risk of future re-procurement, which can be very costly. LPTA often sacrifices long-term value for short-term savings.
For example, back in 2012, the Navy wanted to create a single, secure enterprise-wide network called NGEN to better connect at-sea activities with land operations. Even though this was a highly technical project with an extremely large scope, LPTA was used to select its contractors. It isn’t hard to guess what happened – there were many project delays, cost overruns, and dissatisfied customers.
More recently, the Defense Department’s Defense Information Systems Agency has been under scrutiny for its intention to award spots on its $17.5B ENCORE III IT services contract on an LPTA basis. Two contractors have protested the decision, which the GAO has upheld.
“For that reason alone, it is troubling that a contract used to procure such complex IT services intended to support ‘information superiority’ is being awarded on price and not the qualities that would deliver a technological edge to our warfighters.”
Some LPTA contracts have gotten so bad that the National Defense Authorization Act for 2017 specifically recommends avoiding LPTA solicitations for:
- 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; or
- Knowledge-based training or logistics services in contingency operations or other operations outside the United States, including in Afghanistan or Iraq.
From our experience, we’ve often seen contractors submit a low-cost proposal, win the contract, and then fail at performing the required work. At the same time, these companies slashed the salaries of their employees in order to stay within their limited budget.
And in these cases, while the government has the right to terminate the contract for default, the re-procurement costs and the lost time value can add up significantly for the agency.
LPTA can sometimes bring out the worst in government contracts.
Should you pursue an LPTA procurement?
The short answer is “it depends.”
If your service or product is distinctly unique and warrants a higher price for its increased value and capability to the government, then you should not pursue LPTA contracts. It seems obvious, but many contractors make this mistake.
For example, most of the requirements for NASA are best value requirements because you can often prove that your technology is more beneficial to government, even at the increased cost. Most highly technical, broad scope, and large dollar amount procurements are often negotiated on a best value basis. This is due to the amount of money that could be wasted on a potentially poor performing product or service.
If the product or service you’re selling is not specialized and does not command a higher price point for the increased government benefit, then an LPTA solicitation may not be a bad idea.
If your company sells flash drives, printers, or other commodity goods or services, bidding on LPTA solicitations would be acceptable. Even better, if you can achieve economies of scale by winning multiple LPTA contracts, you can potentially cut your costs and increase margin in the long run.
The decision to bid on LPTA solicitations comes down to the type of product or service you sell, the value that it brings to the government, and the kind of company you want to run.
As with everything else in contracting, it’s all in your company’s approach.