Over the last year, particularly on federal contracts, I’ve been seeing the rise of a very disturbing procurement process. It’s “Brooks Act” compatible. It is a safe method for procurement professionals to use. And it actually puts the incumbent at a disadvantage. What is it?
It is called Lowest Price Technically Acceptable (LPTA for short).
Wait a minute, hasn’t this been around forever? Yes, it has. But, based on what I’m seeing, reading and hearing, the use of this procurement method has dramatically increased since 2013. And it’s now being used to procure everything from construction management, design, consulting, and even training services.
What Is The Lowest Price Technically Acceptable Process?
Here’s how this works (at least from what I’ve seen and been told). The buyer/procurement team identifies technical and qualification requirements that the proposers must meet. For example, they might ask for a project manager with a degree in civil engineering and 10 years experience managing federal construction projects.
Then it provides a scope and asks for a price.
Once you submit your proposal, it goes to a procurement officer. The procurement officer sends the lowest priced proposal to the decision maker(s). The decision maker(s) determines whether that proposal meets the technical and qualification requirements.
If it does, the contract is awarded. If it doesn’t, the decision maker(s) will receive the next lowest priced proposal. Rinse and repeat.
But here’s the kicker. After you win one of these procurements, your price will be communicated to everyone who proposed. And it is possible that you will never be told when your pricing was sent out or who it was sent to.
Therefore, when the contract is reprocured, the incumbent is at a direct disadvantage. Everybody knows their price. But they do not know who proposed on the previous contract and what the losing proposers’ pricing was. Nor do you know how many other firms met the technical requirements.
It would be basically insane for the incumbent to use the same pricing the next time around, since every single competitor knows it. So, the only strategy I know of is to price even lower and hope that you can again “out price” your competitors.
The Basic Flaw With That
Here’s the problem with that strategy. Let’s say you had the contract for three years. The people who worked on it, the people who meet the technical requirements, now cost you more. Theoretically, they did a good job and you gave them raises.
Now, you will have to pay more for them while charging less to the client. I’m no math or economics expert, but that just doesn’t seem like it’s sustainable for the incumbent.
Another Challenge With The Lowest Price Technically Acceptable Process
A key component of the success for any LPTA process is the correct identification of technical criteria. I have to imagine this can be a challenge.
For example, let’s say I’m using this method to procure a brain surgeon to perform surgery on me. What do I know about brain surgery? Nothing. I don’t know what separates a good brain surgeon from an incompetent brain surgeon. So, I have to pull technical criteria out of the air and hope (pray) that I got it right.
Think for a minute about how tough this is. I can require that the brain surgeon have a medical degree, spend 2 years studying under a brain surgeon, and have performed 10 similar brain surgeries. But think about it, the absolute worst brain surgeon in the world probably meets those criteria, right!?! If you don’t know what separates a good brain surgeon from a bad one, it’s essentially a shot in the dark coming up with technical criteria.
Why In The World Would Anyone Use That Procurement Method?
There are two scenarios where Lowest Price Technically Acceptable procurements make a lot of sense.
- Reducing the prices the government pays for services.
- Covering the procurement official’s butt.
What I think people who submit proposals sometimes don’t fully appreciate is that procurement officials who break the rules can be charged with a crime, like this guy or this lady. So, their decisions are often based on their interpretation of, sometimes nebulous, procurement laws and their tolerance for personal risk.
LPTA procurements are great for people who have no tolerance for personal risk because it takes all the qualitative factors out of the decision process. In a way, it takes all the judgment out of the decision. It’s also transparent because you provide everybody who proposed with the final price.
The Lowest Price Technically Acceptable Debate
In January of this year, David Cox, the president of the American Federation of Government Employees defended its use in Government Executive Magazine. He said, among other things, that contractors hate this process because it reduced their profits. That their “bowls of caviar are not quite as full.” He described it as part of the Pentagon’s “war on profits” and explained there is nothing wrong with trying to get the best price for tax payers.
You can imagine the responses to this. Eric Crusius, of Fed Nexus Law shared an opposing view stating that LPTA procurements have severe limitations, are often used when it shouldn’t be, and end up costing the government more. He said the LPTA is “simply a road leading to mediocrity.”
Then in March, the Department of Defense sent out a memo warning of the overuse of LPTA. So, at this point, it seems even the Feds are recognizing that LPTA’s use has exploded.
How This Affects You
Even if you don’t work in the federal market, rest assured that what happens in the federal market often finds a way to trickle down to the state and even local level. Just ask yourself whether you’ve filled out any SF330s for state and local agencies.
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