by Paul Verdile, Senior Government Contracting Benefits and Compliance (SCA / DBA) Specialist at Axim Fring A report (Oct. 2013) by Market Connections and Centurion Research Solutions titledThe New Reality: The impact of LPTA Procurements on Government Contracts and Solutions polled 375 government contractors and 360 civilian and defense decision-makers on Lowest Price Technically Acceptable (LPTA) contracts. Among the study findings...
Contractors and feds believe LPTA procurements will increase in the next three years (59 percent contractors vs. 42 percent feds), driven primarily by federal budget restrictions.While LPTA contracts are less complex and have easier criteria to follow, they also tend to be less profitable. In an environment where competition is based primarily on price, there is greater "potential for contracts to be awarded to less qualified companies that sacrifice long-term value for short-term cost savings." This has proven to be detrimental, catastrophic in some cases, because the low cost provider is not able to supply the services needed. Often times this causes the government to find new, more expensive providers to fix the problems created by the initial contractor. Contractors have a difficult time gauging indirect costs (Fringe, Overhead, G&A, etc) in order to build proper wrap rates while trying to stay cost-competitive. When government spending was almost unlimited, contractors built massive infrastructures to meet the demands they created for themselves. In the LPTA world, such frameworks are cost prohibitive and doing more with less has become the new norm. Unfortunately, a large number of contractors do not understand how to build out new models.
How to make it in the LPTA world...Companies like Axim Fringe Solutions Group, LLC can help all contractors (small and large) to reduce overhead by building more cost effective fringe benefit rates. This allows them to be more competitive during the RFP process creating lower costs without eating into contract margin. It also supports better planning year over year while receiving more return from each award. Large and small contractors also partner with Axim Fringe Solutions Group, a CVE certified SDVOSB, as a sub-contractor not only to receive small business and SDB set aside credits, but to also provide the government with an outside party that certifies compliance. In addition, they can manage fringes and reduce administrative overhead to further increase profit margins. Follow our LinkedIn company page for government contracting info and news. Image Credit: Pixabay
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