Contractors have frequently been heard to complain about the government’s persistent use of “Lowest Price Technically Acceptable Procurements,” or “LPTA” as a race to the bottom in both price and quality. While the Federal Acquisition Regulation (FAR) has provided that price may play a dominant role in source selection where “the requirement is clearly definable and the risk of unsuccessful contract performance is minimal,” Contracting Officers in the era of budget cuts and sequestration had greatly expanded the use of LPTA for procurements with more complex requirements that were arguably better suited for a “best value” determination with deliberate trade-offs between technical approach, past performance, and price. The use of LPTA simplifies the analysis for the source selection team but has sometimes resulted in awards to offerors ultimately unable to capably perform the work at the price offered. LPTA can result in higher employee turnover and lower productivity due to dissatisfaction as salaries and benefits costs are driven down. LPTA also removes any incentive for a contractor to propose new approaches or technology that may result in a better product because it will come at a higher cost. The GAO recently published a study that found that in FY18 DoD used LPTA in approximately 25% of all competitive procurements valued at $5 million or more, while civilian agencies used the process in just 7% of such procurements.
This week, DoD published a final rule in the Federal Register (available here) implementing direction from Congress in the 2017 National Defense Authorization Act to impose limits on the use of LPTA. The Rule goes into effect on October 1, 2019.
The stated intent of the rule is “to identify meaningful circumstances that must exist for an acquisition to use the LPTA source selection process and certain types of requirements that will regularly benefit from the use of tradeoff source selection procedures.” It specifies limitations on when LPTA may be used, sets forth situations in which LPTA should be avoided if practicable, and specifies other situations where the use of LPTA is prohibited.
Under the new rule, LPTA is only appropriate when the minimum requirements for technical acceptability can be clearly described and evaluated; there is little value to be realized from a proposal exceeding those minimum requirements; the analysis requires only minimal subjective judgement in comparing proposals; review of additional technical proposals would not identify different approaches that could provide increased value; there is no prospect of additional innovation or future technological advantage; and the products being procured are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. The Contracting Officer must document in the contract file the circumstances justifying the use of the LPTA and a determination that the lowest price reflects full life-cycle costs of the product or service.
LPTA should be avoided, to the maximum extent practicable, for procuring Information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, or other knowledge-based professional services; for procurement of personal protective equipment; or for knowledge-based training or logistics services in contingency operations.
LPTA (as well as use of Reverse Auctions) is specifically prohibited for procuring any personal protective equipment or aviation critical safety items when the level of quality or failure of the equipment could result in combat casualties. The use of LPTA is also prohibited in acquiring engineering and manufacturing development for a major defense acquisition program and for awarding auditing contracts.
For DoD procurements that appear to violate the new rule, contractors should discuss the matter with their counsel to consider whether it may be appropriate to challenge the solicitation by filing a pre-bid protest.