by Paul Verdile, Senior Government Contracting Benefits and Compliance (SCA / DBA) Specialist at Axim Fringe Solutions Group Market Connections and Deltek/Centurion Research Solutions released a report (Oct. 2013) on the impact Lowest Price Technically Acceptable (“LPTA”) is having on government contracts. More than 700 government contractors and federal employees were surveyed about solicitations and contract awards. Key findings:
- The average contract length of an LPTA contract is 3.6 years with an average annual contract value of $18 million;
- The average length of a ‘Best Value’ contract (based on cost and non-cost factors) is 4.1 years with a $38.8 million average annual contract value;
- 65% of contractors believe that LPTA procurements sacrifice long-term value for short-term cost savings;
- 71% contractors see the potential for contracts to be awarded to less qualified companies;
- 43% of contractors feel that LPTA contracts lower a contractor’s standard of performance and ability to be innovative.
- Decisions based solely on price instead of ability to perform;
- Contractors offering lower price solutions (that aren't in the government’s best interest) in order to remain competitive;
“The real problem is not just the impact on the contracting community to include reduced revenue and profits. The real problem is that misuse of LPTA hurts the industry’s ability to best serve our customers. The downstream effect on government success is significant – missed deadlines, poor quality by unqualified contractors, restarts and clean-ups. Why? Because for all but the most commoditized and easy to specify products or services, the LPTA model specifically prevents the government from considering qualitative and often attractive factors that could significantly improve the likelihood of a successful contract.”Ed Spitler, president of Astrium Services Government, spoke on LPTA at a Washington Space Business Roundtable (WSBR) lunch in downtown Washington (Feb. 2014) citing the Market Connections and Deltek/Centurion Research Solutionsstudy.
“Sometimes (past performance) is not even recognized by the government because they just don’t care, they’re looking at price point. More often than not, LPTA procurement practices have essentially defaulted to the lowest-priced bidder independent of quality.”
“Any idea or innovation…you may have written the best proposal of your life and sent it in for that requirement, but it will never be read by the government because of the LPTA practices happening right now. It’s a shame because there’s no room for innovation when they do that.”
“Part of the problem is that technically acceptable means different things to different people, and the government doesn’t always clarify what it means by this.”Moe Jafari, president and CEO of HumanTouch, recently wrote an article, A race to the bottom: How lowest price, technically acceptable is shortchanging agencies, onwww.federalnewsradio.com (Feb. 2015).
“Unfortunately, the federal government is heading down a very similar path, with respect to the constant push for lowest-price, technically-acceptable (LPTA) contracting. The policy essentially forces agency purchase decision-makers to get the best price possible, assuming that the hired company is capable of at least meeting the minimum requirements of a project."
"I've spoken to many program managers about this, and they feel like they're in a boat without an oar, especially because their leadership wants to keep pushing LPTA to new levels. Those managers have seen enough to recognize that LPTA is a race to the bottom, as quality and functionality rarely meet at the absolute lowest rung of pricing."
"When LPTA is the sole evaluation, the government loses. Programs face unforeseen hits because the managers are left to deal with the ensuing mess created by a contracting business that doesn't understand the mission and/or lacks the vision to get the job done.”While LPTA does create more issues to Mr. Tolbert's points, we are beginning to see contractors create better models in order to compete in the current environment. The years of excess and bloat are over. Companies must develop strategic plans (and partnerships) to thrive in government contracting today. Since LPTA doesn’t look like it is going away any time soon, contractors must review their models and look to non-traditional options like Joint Ventures (JV’s) or trimming their BD efforts to focus on core specific and strategic opportunities. These options could help companies best align capabilities with costs and keep the contractor at their best price without sacrificing quality (or innovation). Hopefully, we are in a learning curve of how we need to adapt to a new way of doing business as opposed to an official downgrade in services contractors provide due to lower prices. We feel the responsibility is on both the contractor and contracting officer to be sure the overall value of price and quality is taken into consideration for preparing and awarding LPTA projects. So what can you do to remain competitive without sacrificing performance? Teaming with the right partner can add value and improve your top and bottom lines.Axim Fringe Solutions Group helps government contractors find cost-effective and competitive solutions to employee benefits and corporate insurance that meet the needs of their business:
- Capitalize on Set Aside Credits - As an SDVOSB, our partners benefit from dollar for dollar small business credits for all H&W funds spent.
- Maximize Fringe Spend – Our Benefits Administration will offset your HR costs with proper rates and customized programs.
- Compliance Assurance – Full DoL compliance and auditable record keeping. No penalty incurred by partners in the event of a DoL audit.
- Three Common Service Contract Act Compliance (SCA) Stumbling Blocks
- How Cash-in-lieu Opt-Outs Increase Costs for Federal Contractors
- The Government Contractor’s Guide to Service Contract Act (SCA) Compliance
- How “No Change” to the SCA Health & Welfare Benefit Rate Impacts Government Contractors
- SCA Compliance Checklist Part 8: Fringe Benefits
- SCA Compliance Checklist Part 7: ACA Compliance
- SCA Compliance Checklist Part 6: Subcontractor Compliance
- SCA Compliance Checklist Part 5: Fringe Rate
- SCA Compliance Checklist Part 4: Base Wages
- SCA Compliance Checklist Part 3: Labor Categories